10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2012

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT

For the transition period from ______ to _____

Commission file number: 000-525-33

HANGOVER JOE’S HOLDING CORPORATION

 (Exact name of the registrant as specified in its charter)

Colorado	20-8097439
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

9457 S. University #349

Highlands Ranch, CO 80126

(Address of principal executive offices)

303-872-5939

Telephone number, including

Area code

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act

Yes o No R

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.  Yes o No R

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 RNo o

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 R   No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Yes o   No R

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company:

Large accelerated filer o       Accelerated filer o       Non-accelerated filer o       Smaller reporting Company R

There were 122,591,301 shares of the registrant's $0.001 par value common stock outstanding as of April 8, 2013. The aggregate market value of common stock held by non-affiliates of the Registrant as of June 30, 2012, computed by reference to the closing sales price on that date was approximately $1,667,000.  

HANGOVER JOE’S HOLDING CORPORATION

FORM 10-K

FOR THE PERIOD ENDED DECEMBER 31, 2012

TABLE OF CONTENTS

Item Number		Page Number
	PART I
1.	Business	3
1A.	Risk Factors	9
1B.	Unresolved Staff Comments	13
2.	Properties	13
3.	Legal Proceedings	13
4.	Mine Safety Disclosures	13
	PART II
5.	Market for the Registrant’s Common Equity,  Related Stockholder Matters and Issuer Purchases of Equity Securities	14
6.	Selected  Financial Data	16
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
7A.	Quantitative and Qualitative Disclosures about Market Risk	23
8.	Financial Statements and Supplementary Data	23
9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	23
9A.	Controls and Procedures	23
9B.	Other Information	25
	PART III
10.	Directors, Executive Officers and Corporate Governance	26
11.	Executive Compensation	28
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	31
13.	Certain Relationships and Related Transactions, and Director Independence	33
14.	Principal Accounting Fees and Services	34
	PART IV
15.	Exhibits	36
	Signatures	37

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Cautionary Statement about Forward-Looking Statements

This Form 10-K contains forward-looking statements regarding future events and the Company’s future results that are subject to the safe harbors created under the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based on current expectations, estimates, forecasts, and projections about the industry in which the Company operates and the beliefs and assumptions of the Company’s management. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “may,” variations of such words, and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of the Company’s future financial performance, the continuing development of the Company’s business plan operations, the Company’s anticipated growth and potential in its business, the financial performance and/or gains by companies in which the Company holds a position, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified elsewhere herein, including under “Risk Factors.” Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements.

The Company is under no duty to update any of these forward-looking statements after the date of this report. You should not place undue reliance on these forward-looking statements.

PART I

ITEM 1.  BUSINESS

Overview:

Hangover Joe’s Holding Corporation and its wholly-owned subsidiary Hangover Joe’s Inc. (collectively the “Company”) sell an all-natural two-ounce beverage shot formulated to help relieve the symptoms associated with alcohol induced hangovers – the Hangover Recovery Shot. The Hangover Recovery Shot is an officially licensed product of The Hangover movie series from Warner Brothers. The Company sells its products primarily to convenience stores, liquor stores, and grocery stores through distribution agreements, as well as through online internet sales. The Company began selling an original hangover recovery shot in February 2011 and later, with the signing of the Hangover movie license, began selling the licensed Hangover Joe’s Recovery Shot in July 2011.

Organization and Merger/Reorganization:

Hangover Joe’s Holding Corporation (“HJHC” or the “Company”) was originally incorporated in the State of Colorado in December 2005 as Across American Real Estate Exchange, Inc. (“AAEX”) to facilitate the exchange of real estate properties between individuals under Section 1031 of the Internal Revenue Code.  In February 2010, Accredited Members, Inc. (“AMI”), a provider of investor research and management services, was merged with and into a wholly-owned subsidiary of AAEX, and AMI became a wholly-owned subsidiary of the Company.  In May 2010, AAEX changed its name to Accredited Members Holding Corporation (“AMHC”).

On July 25, 2012, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Hangover Joe’s, Inc., a privately-held Colorado corporation (“HOJ”), whereby on July 25, 2012, AMHC acquired HOJ in a reverse triangular merger (the “Acquisition”).  Upon closing the Acquisition the AMHC issued 83,514,827 common shares to the HOJ shareholders in exchange for all of their ownership interests in HOJ such that the former owners of HOJ owned approximately 69% of the Company post Acquisition.  The shareholders of the AMHC prior to the Acquisition owned approximately 31% of the Company post Acquisition.  In connection with the Acquisition on July 25, 2012, AMHC changed its name to Hangover Joe’s Holding Corporation.

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The Merger Agreement further provided that within five business days after the closing of the Acquisition, the Company would sell to Accredited Members Acquisition Corporation (“Buyer”) all of the equity interests in three of the Company’s subsidiaries (the “Sale”), being AMI, AMHC Managed Services, Inc. and World Wide Premium Packers, Inc. (collectively, the “Subsidiaries”).  Buyer is a privately-held Colorado corporation owned by two former directors of the Company, JW Roth and David Lavigne.  The parties closed the Sale on July 27, 2012.  The Buyer paid $10,044 and assumed all liabilities related to the business of the Subsidiaries in exchange for all of the shares in the Subsidiaries owned by the Company.

HOJ is a Colorado corporation formed on March 5, 2012.  HOJ was formed for the purpose of acquiring all of the assets of both Hangover Joe’s Products LLC (“HOJ LLC”) and Hangover Joe’s Joint Venture (“HOJ JV”).  HOJ LLC had conducted operations through HOJ JV, with the owner of HOJ LLC being one of the same owners and control persons of HOJ JV. Effective March 30, 2012, HOJ acquired the net assets of HOJ LLC and HOJ JV through the issuance of common stock of HOJ.  Because HOJ had no significant assets or business operations prior to the merger and each of these entities were owned by the same control group, this transaction was accounted for as a reorganization of entities under common control.  Accordingly, the historical results of operations of HOJ LLC and HOJ JV prior to March 30, 2012 are included in the results of operations of the Company.

Because all of the operating businesses of AMHC were sold within five business days after the Acquisition, the transaction has been accounted for as a recapitalization of HOJ.  Accordingly, the accompanying consolidated financial statements include the financial position, results of operations and cash flows of HOJ and its predecessor entities, HOJ LLC and HOJ JV, prior to the date of the Acquisition. The historical results of operations and cash flows of AMHC and the Subsidiaries prior to the date of the Acquisition have been excluded from the accompanying consolidated financial statements. The historical stockholders’ equity of HOJ prior to the Acquisition has been retroactively restated for the equivalent number of shares received in the exchange after giving effect to any differences in the par value of the AMHC and HOJ common stock, with an offset to additional paid-in capital.  The restated consolidated accumulated deficit of the accounting acquirer (HOJ) has been carried forward after the exchange.

Product:

Our flagship product, The Hangover Recovery Shot is a patent pending liquid 2 ounce shot that contains several essential vitamins, supplements and antioxidants and was specifically designed by a laboratory chemist to help relieve the symptoms associated with an alcohol induced hangover.  The Hangover Recovery Shot was designed to be taken the morning after to rapidly replace some of the key nutrients necessary to relieve the symptoms associated with a hangover and promote recovery.  It contains a blend of B-vitamins including Vitamin B6, Vitamin B12, Niacin (B3) and Folic acid (B9).  Other key supplements and antioxidants include Taurine, Kudzu, Caffeine, Green tea leaf extract, Black pepper extract, and Picamilon.  The combination of acai fruit extract, mangosteen fruit extract, goji berry concentrate gives The Hangover Recovery Shot its unique fruit punch flavor that is considered superior to other energy shots and recovery drinks.

The Hangover Recovery Shot is an officially licensed product of The Hangover movie series from Warner Brothers and each two ounce bottle contains special images, quotes and logos from The Hangover motion picture released in 2009 and/or The Hangover Part II motion picture released in 2011.  

Our product is primarily sold to distributors in either a 12-pack display carton or 2-pack carton.  The 12-pack display carton can be positioned at the check-out counter using a company provided two-tier display unit or on a standard retail shelving unit.  The 2-pack carton comes attached to a clip strip which can be attached to a shelving unit or attached to the front of cooler door.

Industry Overview

The hangover recovery drink category is a new and emerging category within the energy drink and shot market.  The hangover recovery segment is relatively new and is primarily composed of a number of smaller manufacturers of recovery shots and drinks including NOHO, GTOX, Hangover Gone, Last Call, Mercy, and Last Round.

The energy drink and shot market is a larger more established market segment and is currently dominated by well-known companies such as, Red Bull, Monster Energy, and Rockstar Energy Drinks.  According to Mintel International, sales of energy drinks and shots in 2011 totaled about $7 billion.  Sales of energy shots are expected to grow 98% between 2011 ($1.3 billion) and 2016 ($2.5 billion), representing a compounded annual growth rate of approximately 15 percent.

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The energy shot market is primarily dominated by 5-Hour Energy with Stacker 2 6-Hour Power, and Red Bull Energy Shots all competing for a smaller stake in this market.  Beverage Digest reported that 5-hour Energy, which overwhelmingly dominates the energy shots category, grew about 23% in 2011 across all four channels: convenience stores, drug stores, mass merchandisers and supermarkets.

The Company intends to ride this significant growth trend in the energy shot market and to lead a new $200+ million recovery drink category, separate and distinct from energy shots.  The Company believes our license with the Hangover movie series provides us with a significant branding advantage.  Further, we believe our taste profile is superior to the taste profile of other energy shots and hangover recovery products.

Manufacturing and Packaging

We do not directly manufacture our products, but instead outsource the manufacturing process to third party laboratory and co-packing facility. Our co-packaging arrangements are terminable upon notice and do not obligate us to produce any minimum quantities of products within specified periods.

Manufacturing Arrangement

Our Hangover Joe’s Recovery Shot formula is currently manufactured by a third party laboratory in the United States.  The third party laboratory is responsible for purchasing all raw material ingredients for our product including flavors, dietary ingredients, special herbs and supplements.  The product is blended to our formula using specially filtered water.  Once blended, the liquid is then shipped to our co-packing facility.

Co-Packing Arrangement

Our Hangover Joe’s Recovery Shot liquid is bottled and packaged at a co-packing facility in the central United States. We generally are responsible for arranging for the purchase and delivery of labels and packaging materials to our third party co-packers.  The co-packing facility provides bottles and caps, and packages the product according to our specifications.  Finished goods are maintained at the co-packing facility until shipment to our customers.

Our ability to estimate demand for our products is imprecise and may be less precise during periods of rapid growth, particularly in new markets. If we materially underestimate demand for our products and/or are unable to secure sufficient ingredients or raw materials including, but not limited to plastic shot bottles, caps, labels, flavors, dietary ingredients, and other ingredients we might not be able to satisfy demand on a short-term basis.

We believe a short disruption or delay in production would not significantly affect our revenues; however if alternative co-packing facilities are not available for our products at commercially reasonable rates or within a reasonably short time period, if at all, a lengthy disruption or delay in production of our products could significantly affect our revenues. As we grow, we will continue to actively seek alternative and/or additional advantageously located co-packing facilities in the United States with adequate capacity and capability for the production of our various products to minimize transportation costs and transportation-related damages as well as to mitigate the risk of a disruption in production.

Distribution

During 2012, we continued to expand the distribution of our product in both domestic and international markets. With very little marketing and public relations activities to date, the Company has rapidly expanded the distribution of Hangover Joe’s Recovery Shot to over 15,000 accounts in the United States, and recently entered into distribution agreements in Australia, New Zealand and Canada. The Company has determined that convenience store distributors provide a solid foundation for building our distribution network within the United States.  In addition, liquor and tobacco distributors also provide an advantage as two distinct groups facing general volume decline in their core products (beer and tobacco), hence the need for new products which can quickly ramp sales. Concurrently, we also are pursuing relationship with mass merchandisers such as Walmart, Target, CVS, Walgreens, Kmart and national /regional supermarket chains.

The Company currently has over 40 distributors with over 15,000 retail accounts and growing.  Many of the well-known established retail chains who currently offer Hangover Joe’s include 7-Eleven, RaceTrac, Loves Truck Stops, Valero Corner Stores, Hastings Entertainment, MGM Resorts, Harrah’s, Terrible Herbst Gas Stations, Aloha Gas, Long's Drugs, Kwik Shops, select Bed Bath & Beyond, Stripes Convenience stores with more pending.

Also, based upon recent successes and increasing international distributor agreements in Australia, New Zealand and Canada, the Company believes the international markets to be a game changing opportunity. Since the original Hangover movie and the Hangover Part II movie have been shown in over 40 countries we have received several unsolicited inquiries from distributors in the European Union and South East Asia.

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We continually seek to expand distribution of our products by entering into agreements with other regional or direct store delivery distributors with established sales, marketing and distribution organizations. Many of our distributors distribute other energy shot products. In many cases, such products compete indirectly with our products.

Raw Materials and Suppliers

The principal raw materials used in the manufacturing of our products are plastic shot bottles, dietary ingredients and other packaging materials, the costs of which are subject to fluctuations.  Most of our raw materials are purchased by our manufacturing laboratory and co-packing facilities and included as part of the cost billed to the Company.  Overall, the Company did not experience any significant increase in costs charged by the manufacturing and co-packing facilities.

Generally, raw materials utilized by us in our business are readily available from numerous sources. However, the Company’s third-party manufacturer acquires some ingredients from suppliers outside of the United States.  Purchasing these ingredients is subject to the risks generally associated with importing raw materials from other countries, including, among other factors, delays in shipments, changes in economic and political conditions, quality assurance, tariffs, trade disputes and foreign currency fluctuations.  These factors could result in a delay in or disruption of the supply of certain raw materials.  Any significant delay in or disruption of the supply of raw materials could have a material adverse effect on the Company’s business.

Competition

The energy drink and energy shot market are highly competitive and the energy shot market in particular is dominated by 5-Hour Energy. The key areas of competition are pricing, packaging, development of new products and flavors as well as promotional and marketing strategies.  Our product competes directly with other emerging recovery shot products. Currently these products are produced by smaller less established manufacturers.  Our Hangover Recovery Shot also indirectly competes with other energy shot products from much larger well-known companies such as 5-Hour Energy, Stacker 2, and Red Bull. These more established energy shot companies have substantially greater financial, marketing and distribution resources than we do.

Important factors affecting our ability to compete successfully include taste and flavor of products, trade and consumer promotions, rapid and effective development of new, unique cutting edge products, attractive and different packaging, brand exposure and marketing as well as pricing. We also compete for distributors who will give our products more focus than those of our competitors, provide stable and reliable distribution and secure adequate shelf space in retail outlets. Competitive pressures could cause our products to be unable to gain or to lose market share or we could experience price erosion, which could have a material adverse effect on our business and results of operations.

We believe that our product compares favorably with other energy shot products because of our superior taste profile and powerful branding relationship with the Hangover movie series. In addition, we are one of the few recovery shots taken next day.

We have experienced and continue to experience competition from new entrants in the hangover recovery and energy shot categories.

Sales and Marketing

Our sales and marketing strategy is to focus our efforts on developing brand awareness through industry and distributor trade shows, marketing at special events, and product sampling. We utilize “push-pull” methods to enhance shelf and display space exposure in sales outlets (including advertising, in-store promotions and in-store placement of point-of-sale materials, racks, and coolers) to increase demand from consumers for our products.

Our sales and marketing efforts are primarily focused on major metropolitan areas with strong entertainment cultures including New York, Miami, San Francisco, Los Angeles, San Diego, Las Vegas, New Orleans, and Chicago.  We also are focused on leveraging the marketing and sales value of The Hangover III movie due to be released on Memorial Day weekend 2013.

Customers

As of the date of this Report, our products can be found in the U. S. and in select international markets of Australia, Canada, and New Zealand.

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Domestically, the Company sells its products primarily to convenience store, liquor store, and grocery store distributors, as well as through online internet sales. Two convenience store distributors accounted for 28% of our annual net sales during 2012.

During 2012, the Company entered into distribution agreements with international partners in Australia, Canada, and New Zealand.  Net sales to our international partners accounted for 26% of our annual net sales during 2012.

The Company plans to expand its domestic and international distribution networks during 2013 as opportunities and resources permit.

Seasonality

Sales of hangover recovery products are somewhat seasonal, with slightly higher sales volumes during the holiday season in the fourth quarter.  The Company also anticipates higher sales volume near the release of the Hangover III movie in May 2013.  Quarterly fluctuations may also be affected by other factors including the introduction of new products, the opening of new markets particularly international markets, the addition of new distributors, and increased or decreased advertising and promotional expenses.

Licenses & Royalties

Warner Bros. License Agreement

The Company’s original license with Warner Bros. Consumer Products, Inc. (“WBCP”) permits the Company to use the costumes, artwork, logos and other elements depicted in the 2009 movie, The Hangover.  This license had an initial term through January 31, 2013 and provided for certain royalties based on a percentage of products sold subject to certain agreed-upon guaranteed minimum royalty payments over the term of the license.

In January 2013, the Company extended its product license agreement with WBCP to January 31, 2016. Further, the extension added certain channels of distribution and added the costumes, artwork, logos and other elements depicted in the 2011 movie The Hangover Part II. Similar to the initial agreement, the extension required certain agreed-upon minimum royalty payments over the next three years, the first of which was paid from the proceeds from the TCA revolving credit facility in January 2013.

Royalty Agreements

The Company has a representative agreement with an individual who became a member of the Company’s board of directors in July 2012. Under this agreement, as amended, this individual is entitled to a commission of between 4% and 6% of sales made by this individual, based on the nature of the sales, and a royalty of 3% of all sales made by the Company, as defined.

The Company also has an agreement with a second individual for design services. Under this agreement, as amended, this individual is entitled to receive a royalty of 2% of net sales, as defined.

Intellectual Property

We have several registered trademarks and pending applications in various countries worldwide, and we apply for new trademarks on an ongoing basis. We regard our trademarks, service marks, copyrights, domain names, trade dress, and similar intellectual property as very important to our business.  We consider Hangover Joe’s Get Up & Go® and Hangover Joe’s® to be our core trademarks.

We protect our trademarks by applying for registrations and registering our trademarks with the United States Patent and Trademark Office and with government agencies in other countries around the world, particularly where our products are distributed and sold.  We assert copyright ownership of the statements, graphics and content appearing on the packaging of our products.

Depending upon the jurisdiction, trademarks are valid as long as they are in use and/or their registrations are properly maintained and they have not been found to have become generic.  Registrations of trademarks can generally be renewed as long as the trademarks are in use.

We enforce and protect our trademark rights against third parties infringing or denigrating our trademarks by opposing registration of conflicting trademarks, and initiating litigation as necessary.

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Government Regulation

The Hangover Joe’s Recovery Shot is categorized as a dietary supplement by the U.S. Food and Drug Administration (“FDA”) and are generally regulated under a different set of regulations than those covering "conventional" foods and drug products. Dietary supplements are regulated by the FDA under the Dietary Supplement Health and Education Act of 1994 (DSHEA).  Under the DSHEA, manufacturers of dietary supplements or dietary ingredient are responsible for ensuring that the product is safe before it is marketed and making sure that product label information is truthful and not misleading.

Generally, manufacturers of dietary supplements do not need to register their products with FDA or get FDA approval before producing or selling these supplements. Under FDA regulations, all domestic and foreign companies that manufacture, package, label or hold dietary supplements, including those involved with testing, quality control, and dietary supplement distribution in the U.S., must comply with the Dietary Supplement Current Good Manufacturing Practices (CGMPs) for quality control.

Outside the United States, the production, distribution and sale of our product is also subject to numerous similar and other statutes and regulations.

Compliance with Environmental Laws

The manufacturing and co-packing facilities that we utilize in the United States are subject to federal, state and local environmental laws and regulations. Compliance with these provisions has not had, nor do we expect such compliance to have, any material adverse effect upon our capital expenditures, net income or competitive position.

Employees

As of December 31, 2012, we employed three employees of which two were employed on a full-time basis. One employee serves in administrative and operational capacities and two employees serve in sales and marketing capacities.

Available Information

As a public company, we are required to file our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements on Schedule 14A and other information (including any amendments) with the Securities and Exchange Commission (the “SEC”).  You may read and copy such material at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, D.C. 20549.  You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  You can also find the Company’s SEC filings at the SEC’s website, which contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, at http://www.sec.gov.

Our Internet address is www.hangoverjoes.com.  Information contained on our website is not part of this annual report on Form 10-K. Our SEC filings (including any amendments) will be made available free of charge on www.hangoverjoes.com, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

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ITEM 1A.  RISK FACTORS

Our future performance is subject to a variety of risks and uncertainties. Although the risks described below are the risks that we believe are material, there may also be risks of which we are currently unaware, or that we currently regard as immaterial based upon the information available to us that later may prove to be material. The Company’s securities are highly speculative and involve a high degree of risk, including among other items the risk factors described below.

RISKS RELATED TO OUR BUSINESS

General Company Risks

The Company has a limited operating history and limited revenues from operations. The Company was formed in December 2005 and its wholly-owned subsidiary was formed in March 2012. The Company has engaged in active business operations in a limited capacity through its predecessor entities. Therefore, the Company is subject to many risks common to enterprises with limited operating history, including potential under-capitalization, limitations with respect to personnel, financial and other resources, and limited customers and revenue sources. The Company’s ability to successfully generate sufficient revenues from operations is dependent on a number of factors, including availability of funds to fund its current and anticipated operations, and to commercialize its business concept. There can be no assurance that the Company will not encounter setbacks with the on-going development and implementation of its business plan, or that funding will be sufficient to allow it to fully implement its business plan. In addition, the Company’s assumptions and projections may not prove to be accurate, and unexpected capital needs may arise. If such needs arise, the Company’s inability to raise additional funds, either through equity or debt financing, will materially impair its ability to implement its business plan and generate revenues. Further, as a result of the recent volatility of the global markets, a general tightening of lending standards, and a general decrease in equity financing and similar type transactions, it could be difficult for the Company to obtain funding to allow it to continue developing its business operations.

The independent auditors’ report on the Company’s financial statements reflects a “going concern” explanatory paragraph. As a result of losses from operations and limited capital resources, the Company’s independent registered public accounting firm’s report on its consolidated financial statements as of, and for the year ended, December 31, 2012, includes an explanatory paragraph discussing that these conditions raise substantial doubt about the Company’s ability to continue as a going concern. the Company’s ability to continue to pursue our plan of operations as described herein is dependent upon our ability to increase our revenues and/or raise the capital necessary to meet our financial requirements on a continuing basis.

We identified material weaknesses in our disclosure controls and procedures and our Internal Controls Over Financial Reporting.  Section 404 of the Sarbanes-Oxley Act of 2002 requires management to assess our internal controls over financial reporting (“ICFR”) pursuant to a defined framework.  In making that assessment, management identified a material weakness in our disclosure controls as a result of several material weaknesses identified in our ICFR as described in Item 9A below.  There are inherent limitations in the effectiveness of any system of internal control, and accordingly, even effective ICFR can provide only reasonable assurance with respect of financial statement preparation and may not prevent or detect misstatements.  Material weaknesses make it more likely that a material misstatement of annual or interim financial statements will not be prevented or detected.  In addition, effective ICFR at any point in time may become ineffective in future periods because of changes in conditions or due to deterioration in the degree of compliance with our established policies and procedures.

The Company’s success will depend, in large part, on its ability to hire qualified and experienced executive officers, managers, and other personnel. The Company’s officers and directors do not have significant experience with early stage companies and only limited experience in manufacturing and distributing products. Its success will depend largely on its ability to hire the necessary executive level and managerial level personnel to oversee its business operations. There can be no assurance that the Company will be able to successfully identify, attract, hire, train, and/or retain such executive level personnel or the necessary administrative, marketing and customer service personnel. Competition for such personnel can be intense and there is no certainty that the Company will be able to successfully attract, integrate or retain sufficiently qualified personnel. The failure to attract and retain the necessary personnel could have a materially adverse effect on the Company’s business, operations and financial condition.

The Company likely will need additional capital in the future, which may not be available on acceptable terms. The development of the Company’s business model will likely require significant additional capital in the future to, among other things, fund its operations and growth strategy. The Company may rely on bank financing and also may seek access to the debt and/or equity capital markets. There can be no assurance, however, that these sources of financing will be available on reasonable terms, or at all. If the Company is unable to raise additional capital, its growth could be significantly impeded and/or it may be unable to execute its business model.

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As a new business venture, the Company’s start up and operational costs may be greater than projected. The costs of new business start-ups in the Company’s industry are often underestimated and may increase because of factors beyond the Company’s control. Such factors may include legal costs, labor disputes, governmental regulations, equipment breakdowns, costs of raw materials, disputes with its manufacturers or distributors, governmental regulatory interference and other disruptions. While the Company intends to manage these costs diligently, the risk of running over budget is always significant and may have a substantial adverse impact on the Company’s profitability. In such event, additional sales of the Company stock or additional financing may be required to continue the Company’s business, and there can be no guaranty that the Company could successfully conclude such additional sales or obtain such additional financing at all or on terms acceptable to the Company, which could have a materially adverse effect on the Company and its operations and result in the loss of some or all of the investor’s investment in the Company.

Because the Company depends on outside suppliers with whom the Company does not have long-term agreements for raw materials, the Company may be unable to obtain adequate supplies of raw materials for its products at favorable prices or at all, which could result in product shortages and back orders for its products, with a resulting loss of net sales and profitability. The Company purchases all of its raw materials for the manufacture of its products from third-party suppliers. It also relies on third-party co-packers for certain of its products. A number of the Company’s products contain one or more ingredients that may only be available from a single source or supplier. Any of those suppliers could discontinue selling to the Company at any time. Those suppliers or government regulators may interpret new regulations (including GMP regulations) in such a way as to cause a disruption in the Company’s supply chain as these parties undertake increased scrutiny of raw materials and components of raw materials and products, causing certain suppliers or the Company to discontinue, change or suspend the sale of certain ingredients or components. Although the Company believes that it could establish alternate sources for most of these materials, any delay in locating and establishing relationships with other sources could result in product shortages and back orders for the products, with a resulting loss of net sales and profitability. The Company is also subject to delays associated with raw materials. These can be caused by conditions not within its control. The Company acquires some ingredients from suppliers outside of the United States. Purchasing these ingredients is subject to the risks generally associated with importing raw materials from other countries, including, among other factors, delays in shipments, changes in economic and political conditions, quality assurance, tariffs, trade disputes and foreign currency fluctuations. These factors could result in a delay in or disruption of the supply of certain raw materials. Any significant delay in or disruption of the supply of raw materials could have a material adverse effect on the Company’s business.

The sale of ingested products involves product liability and other risks. Like other distributors of products that are ingested, the Company faces an inherent risk of exposure to product liability claims if the use of its products results in illness or injury. The products that the Company sells in the U.S. are subject to laws and regulations, including those administered by the USDA and FDA that establish manufacturing practices and quality standards for food products. Product liability claims could have a material adverse effect on the Company’s business as existing insurance coverage may not be adequate. Distributors of vitamins, nutritional supplements and minerals, have been named as defendants in product liability lawsuits from time to time. The successful assertion or settlement of an uninsured claim, a significant number of insured claims or a claim exceeding the limits of the Company’s insurance coverage would harm the Company by adding costs to its business and by diverting the attention of senior management from the operation of its business. The Company may also be subject to claims that its products contain contaminants, are improperly labeled, include inadequate instructions as to use or inadequate warnings covering interactions with other substances. Product liability litigation, even if not meritorious, is very expensive and could also entail adverse publicity for the Company and reduce its revenue. In addition, the products the Company distributes, or certain components of those products, may be subject to product recalls or other deficiencies. Any negative publicity associated with these actions would adversely affect the Company’s brand and may result in decreased product sales and, as a result, lower revenues and profits.

Significant additional labeling or warning requirements may inhibit sales of affected products. Various jurisdictions may seek to adopt significant additional product labeling or warning requirements relating to the content or perceived adverse health consequences of the Company’s product. If these types of requirements become applicable to the Company’s product under current or future environmental or health laws or regulations, they may inhibit sales of such products.

The Company is dependent on certain third party agreements for a percentage of revenue. The Company has contractual agreements with certain third-party distributors. Under the agreements, these third parties control when and how often the Company’s products are offered and the Company is not guaranteed any minimum level of sales or transactions. Additionally, some agreements contain exclusive rights in specified locations to promote the Company’s products during the contract term and for specified years thereafter. If any third party elects not to renew their agreement or reduces the promotion of the Company’s products, the Company’s operating profits will suffer. Additionally, in certain instances, the Company could be prohibited from selling its products through competitors of these third parties for a specified time after the termination of the agreements.

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The Company’s business is subject to online security risks, including security breaches and identity theft. To succeed, online commerce and communications must provide a secure transmission of confidential information over public networks. Currently, a limited number of the Company’s customers authorize the Company to bill their credit cards directly for all fees it charges. The Company relies on third party software products to secure its credit card transactions. Although the Company has developed systems and processes that are designed to protect consumer information and prevent fraudulent payment transactions and other security breaches, failure to prevent or mitigate such fraud or breaches may adversely affect the Company’s operating results.

The Company relies on efficient and reliable internet. The Company’s business also depends on a number of third parties for Internet access, and the Company has limited control over these third parties. Should the Company lose its network connections, its ability to fulfill orders through its website would be delayed. Further, if the Company’s website becomes unavailable for a noticeable period of time due to Internet or communication failures, its business could be adversely affected, including harm to its brand and loss of sales.

As a new business enterprise, the Company likely will experience fluctuations in its operating results. The Company's operating results may fluctuate significantly as a result of a variety of factors, many of which are outside its control. As a result of the Company's lack of operating history it is difficult for the Company to forecast its revenues or earnings accurately. The Company may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall. Accordingly, any significant shortfall in revenues relative to the Company’s planned expenditures would have an immediate, adverse effect on its business, results of operations and financial condition.

If the Company fails to manage its growth effectively, its business could be harmed. Failure to manage the Company’s growth effectively could harm its business. The Company’s business model anticipates that it will expand its sales and distribution network. To manage its growth effectively, the Company will have to develop and enhance its systems, procedures and controls and locate, hire, train and retain management and operating personnel. The Company cannot offer any assurance that it will be able to respond on a timely basis to all of the changing demands that its planned expansion will impose on its management and infrastructure. If the Company is unable to manage its growth effectively, its business and operating results could be materially adversely impacted.

The Company is dependent on its key personnel, and the loss of any could adversely affect its business. The Company depends on the continued performance of its officers and directors, particularly Michael Jaynes, Michael Malm and Eric Skae, who have contributed significantly to the expertise of the planning and development of the Company’s business. To date, the Company has not entered into an employment agreement with any of its key personnel. If the Company loses the services of any key individuals and is unable to locate suitable replacements for such persons in a timely manner, its business could be materially adversely affected. The Company does not expect to obtain key man life insurance for any members of management in the foreseeable future.

Criticism of the Company’s product and/or the market generally could adversely affect its operating results. Criticism of the Company’s product, including criticism by healthcare professionals and other criticism for a variety of reasons, could affect consumer opinions of its product and result in decreased demand, which in turn could have an adverse effect on its results of operations and business.

Changes in the business environment for the Company’s product could impact its financial results. The business environment for the Company’s product is rapidly evolving as a result of, among other things, changes in consumer preferences, including changes based on health and nutrition considerations; shifting consumer tastes and needs; changes in consumer lifestyles; and competitive product and pricing pressures. If the Company is unable to successfully adapt to this rapidly changing environment, its business could be negatively affected.

If the Company’s intellectual property rights under the license agreement decline in popularity, its financial condition may materially suffer. The Company’s license agreement with Warner Bros. Consumer Products, Inc., described above, allows the use of the costumes, artwork logos and other elements depicted in the 2009 movie “The Hangover and the 2011 movie “The Hangover II.” Currently these movies enjoy a great deal of popularity. The Company’s strategy has been to capitalize on the movies popularity as a marketing vehicle to sell the Company’s products. If these movies should suffer a decline in popularity, the return on the Company’s marketing efforts will be significantly less than the Company has anticipated.

The Company may be unable to extend the license agreement upon expiration of the current term and its financial condition may materially suffer. The Company’s license agreement with Warner Bros. Consumer Products, Inc., described above, expires January 31, 2016. The agreement may be extended upon agreement of the parties, but there is no assurance that the parties will be able to come to terms with an extension of the agreement. If the Company is required to rebuild its branding, it could negatively affect the Company’s cash flow and business.

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If the Company is not able to effectively protect its intellectual property, its business may suffer a material, negative impact and may fail. The Company believes that its brand is important to its success and competitive position. If the Company is unable to secure trademark protection for its intellectual property in the future or that protection is inadequate for future products, the Company’s business may be materially adversely affected. Further, the Company cannot be sure that its activities do not and will not infringe on the intellectual property rights of others. The Company’s predecessor, the LLC, experienced a patent infringement claim against the product formula it used, and the LLC quickly changed its formula in response to those claims prior to any significant product sales occurring, thereby minimizing any damage claims. If similar claims are made against the Company’s current product formula, the Company may not be able to effectively minimize damage claims due to its significant sales pipeline. If the Company is compelled to prosecute infringing parties, defend its intellectual property or defend itself from intellectual property claims made by others, it may face significant expenses and liability as well as the diversion of management’s attention from the Company’s business, any of which could negatively impact the Company’s business or financial condition.

RISKS RELATED TO OUR SECURITIES

The Company does not intend to declare any dividends in the foreseeable future.  The Company intends to retain any of its profits to fund the Company’s business operations.  Investors who require income from dividends should not purchase our common stock.

The lack of a broker or dealer to create or maintain a market in our stock could adversely impact the price and liquidity of our securities.  The Company has no agreement with any broker or dealer to act as a market maker for its securities and there is no assurance that it will be successful in obtaining any market makers. Thus, no broker or dealer will have an incentive to make a market for our stock. This in part, has resulted in very low trading volume of our common stock.  The lack of a market maker for our securities could adversely influence the market for and price of our securities, as well as your ability to dispose of, or to obtain accurate information about, and/or quotations as to the price of, our securities.

 As our stock is not listed on a national securities exchange, trading in our shares will be subject to rules governing "penny stocks," which will impair trading activity in our shares.   Our stock is not on a national securities exchange. Therefore, our stock is subject to rules adopted by the Commission regulating broker dealer practices in connection with transactions in "penny stocks." Those disclosure rules applicable to "penny stocks" require a broker dealer, prior to a transaction in a "penny stock" not otherwise exempt from the rules, to deliver a standardized list disclosure document prepared by the Commission. That disclosure document advises an investor that investment in "penny stocks" can be very risky and that the investor's salesperson or broker is not an impartial advisor but rather paid to sell the shares. The disclosure contains further warnings for the investor to exercise caution in connection with an investment in "penny stocks," to independently investigate the security, as well as the salesperson with which the investor is working and to understand the risky nature of an investment in this security. The broker dealer must also provide the customer with certain other information and must make a special written determination that the "penny stock" is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. Further, the rules require that, following the proposed transaction, the broker provide the customer with monthly account statements containing market information about the prices of the securities.

These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for our common stock. Many brokers may be unwilling to engage in transactions in our common stock because of the added disclosure requirements, thereby making it more difficult for shareholders to dispose of their shares. You will also find it difficult to obtain accurate information about, and/or quotations as to the price of, our common stock.  In general, buying low-priced penny stocks is very risky and speculative.  The Company’s common stock is currently defined as a penny stock under the Securities and Exchange Act of 1934, and rules thereunder.   You may not be able to sell your shares when you want to do so, if at all.  Our shares are defined as a penny stock under the Securities and Exchange Act of 1934, and rules of the Commission.  The Exchange Act and such penny stock rules generally impose additional sales practice and disclosure requirements on broker-dealers who sell our securities to persons other than certain accredited investors.  Consequently, the penny stock rules may affect the ability of broker-dealers to make a market in or trade our common stock and may also affect your ability to resell any shares you may purchase in the public markets.

The over-the-counter market for stock such as ours is subject to extreme price and volume fluctuations. You may not be able to resell your shares at or above the public sale price. The securities of companies such as ours have historically experienced extreme price and volume fluctuations during certain periods. These broad market fluctuations and other factors, such as new product developments and trends in the our industry and in the investment markets generally, as well as economic conditions and quarterly variations in our operational results, may have a negative effect on the market price of our common stock.

As a company with a class of securities registered pursuant to the 1934 Act the Company has significant obligations under the 1934 Act. Having a class of securities registered under the 1934 Act is a time consuming and expensive process and subjects the company to increased regulatory scrutiny and extensive and complex regulation.  Complying with these regulations is expensive and requires a significant amount of management’s time.  For example, public companies are obligated to institute and maintain financial accounting controls and for the accuracy and completeness of their books and records.  These requirements necessitate additional corporate spending on procedures and personnel requiring us to reallocate funds from other business objectives.

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ITEM 1B.  UNRESOLVED STAFF COMMENTS

None.

ITEM 2.  PROPERTIES

The Company and its subsidiary do not own or lease any real property.  The Company utilizes a third party laboratory and separate co-packing facility to manufacture, package and store its raw material and finished goods inventory on a short-term basis. Our co-packaging arrangements are generally are terminable upon notice and generally do not obligate us to rent or lease any warehouse space.

The Company’s principal business address for legal and business correspondence is Hangover Joe’s Holding Corporation, 9457 S. University Blvd, #349, Highlands Ranch, CO. 80126-4976 and our telephone number is (303) 872-5939 and our website is www.hangoverjoes.com.

ITEM 3.  LEGAL PROCEEDINGS

AMHC/Botdorf Settlement

On October 24, 2012, John Botdorf filed a complaint against Hangover Joe’s Inc., (Civil Action No. 1:11-CV-00391) in the District Court in El Paso County Colorado alleging Hangover Joe’s Inc entered into an employment contract with Mr. Botdorf as CEO and then breached the foregoing contract causing damages.  On December 10, 2012, AMHC Managed Services, Inc., (“AMMS”) filed a demand for arbitration with the American Arbitration Association ("AAA"), naming Hangover Joe's Inc. as the respondent in Case Number AAA#77148Y0034812 alleging among other things, breach of contract of a Management Services and Founders Agreement dated March 1, 2012.  AMMS was seeking damages for unpaid Management fees of $27,500 per month from October 1, 2012 through February 28, 2014.

On January 14, 2013, the Company and Hangover Joe’s Inc. entered into a settlement agreement and release with AMMS, J.W Roth, David Lavigne, and Mr. Botdorf to settle the civil complaint and demand for arbitration discussed above. The parties agreed that the Management Services Contract was terminated effective October 1, 2012.  In consideration, the Company issued 3,000,000 shares of common stock to AMMS and 1,500,000 shares of common stock to John Botdorf.  On January 15, 2013, AMMS filed a notice of dismissal with prejudice with the AAA pursuant to the terms of the settlement agreement. The Company believed both the civil complaint and the demand for arbitration were without merit, but agreed to settle these legal matters to minimize further litigation costs and to allow management to focus on the business and operations of the Company.

Applied Food Sciences Settlement

On December 12, 2012, the Company entered into a settlement agreement and mutual release with Applied Food Sciences, Inc. (“Applied”) with respect to civil action 1:11-CV-00391 filed in the United States District Court for the Eastern District of Texas Beaumont Division whereby the Company agreed to pay $5,000 in satisfaction of all claims.  Applied claimed that the Company was infringing on its patent for the use of glucarate and its derivatives such as glucuronolactone.  The Company believed this suit was frivolous and without merit, but agreed to settle this suit to minimize further litigation costs.  The Company believes glucarate or its derivatives are not effective or necessary in the relief or recovery of the symptoms of an alcohol induced hangover.  As a result, the Company removed any form of glucarate or its derivatives from early versions of its formula many years back and accordingly this settlement did not require the Company to modify or make any adjustments to its current formula.

ITEM 4.  MINE SAFETY DISCLOSURES

None.

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PART II

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PRUCHASES OF EQUITY SECURITIES

Our common stock is currently quoted on the OTC Bulletin Board under the symbol “HJOE”. Prior to July 25, 2012, our common stock was quoted on the OTC Bulletin Board under the symbol “AMHC”. The table below sets forth the high and low bid prices of HJOE common stock during the periods indicated as reported on Yahoo Finance (http://finance.yahoo.com).  The quotations reflect inter-dealer prices without retail markup, mark-down or commission and may not reflect actual transactions.

Quarter Ended	High		Low
December 31, 2012	$	0.08	$	0.08
September 30, 2012		0.19		0.16
June 30, 2012		0.09		0.06
March 31, 2012		0.09		0.09
December 31, 2011		0.38		0.38
September 30, 2011		0.25		0.25
June 30, 2011		0.22		0.22
March 31, 2011		0.80		0.80

The closing sales price of HJOE’s common stock as reported on April 8, 2013, was $0.091 per share, which was last reported trade of HJOE’s common stock on the OTC – Bulletin Board.

The Company also has outstanding 87,501 shares of Series A Preferred Stock.  Each share of Series A stock is currently convertible into 8 shares of Company common stock, and each Series A share is entitled to 8 votes per share.  The Series A stock votes as a single class with the Company’s common stock.

In January 2013, the Company issued 125,000 shares of Series B Preferred Stock. The Series B Preferred Stock is convertible into common shares based upon a formula equal to one divided by the average of the volume weighted average price for the common stock for the five business days immediately prior to the date a “Conversion Notice” (as defined) is provided to the Company. The Holder of outstanding shares of Series B Preferred Stock shall be entitled to vote as a single class with the Common Stock and each share of Series B Preferred Stock shall have one vote per share.

Holders

As of April 8, 2013, there were 255 holders of record of the Company’s Common Stock. This does not include persons who hold our common stock in brokerage accounts and otherwise in “street name.”

Dividends

Since its inception the Company has not declared or paid cash or other dividends on its Common Stock.  The Company has no plans to pay any dividends, although it may do so if its’ financial position changes.  There are no restrictions in the Registrant’s articles of incorporation or bylaws that restrict it from declaring dividends, although our debt covenants with TCA restrict our ability to pay dividends.  

Securities Authorized for Issuance Under Equity Compensation Plans

The Company has two active equity compensation plans.

The Company’s shareholders approved the adoption of the 2009 Stock Option Plan (the “2009 Plan”) in March 2009.  Initially, a total of 2,603,000 shares of Company common stock were reserved for issuance under the 2009 Plan. On October 6, 2010, the Company’s Board of Directors adopted an amendment to the plan increasing the shares reserved for issuance under the plan to 7,000,000 shares (the “Amendment”).  Although the Amendment received more than a majority of the votes cast at a meeting of shareholders held on December 15, 2010, it did not receive a sufficient number of votes to be approved by the shareholders.  The sole reason for seeking shareholder approval of the Amendment was to permit certain options granted pursuant to the Plan to qualify as Incentive Stock Options under Section 422 of the Internal Revenue Code.  The adoption of the Amendment itself was not subject to shareholder approval.  As a result, although the Amendment is effective, since shareholder approval was not received within one year of the Amendment’s adoption by the Board, options granted from those shares that are a part of the Amendment will not be eligible to be considered Incentive Stock Options under Section 422 of the Internal Revenue Code. As of December 31, 2012, stock options to purchase 650,000 shares of common stock are outstanding under the 2009 Plan.

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On July 26, 2012, the Company’s shareholders approved the 2012 Stock Option Plan (the “2012 Plan”). Under the Plan, the Company may grant stock options, restricted and other equity awarded to any employee, consultant, independent contractor, director or officer of the Company for up to a total of 11,500,000 shares of common stock. As of December 31, 2012, stock options to purchase 2,266,190 shares of common stock are outstanding under the 2012 Plan.

In April 2013, the Company’ Board of Directors reduced the number of common shares reserved under the 2012 Stock Option Plan from 11,500,000 shares to 4,500,000 and reduced the number of common shares reserved under the 2009 Stock Option Plan from 7,000,000 shares to 650,000 shares.  The reduction in shares reserved under the option plans was implemented to increase the number of common shares available for issuance for capital funding purposes.

The Company may grant stock options, restricted and other equity awards to any employee, consultant, independent contractor, director or officer of the Company pursuant to the terms outlined in the 2009 Plan and 2012 Plan.    The purpose of the equity compensation plans are to provide financial incentives for selected employees, advisors, consultants and directors of the Company, thereby promoting the long-term growth and financial success of the Company.

The following table gives information about the Company’s Common Stock that may be issued upon the exercise of options, warrants and rights under the Company’s compensation plans as of December 31, 2012.

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights			Weighted average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance
Equity compensationplans approved by security holders		2,916,190	(1)	$	0.11		2,233,810	(2)
Equity compensationplans not approved by    security holders		6,739,528	(3)	$	0.05		-
Total		9,655,718		$	0.07		2,233,810

(1) Consists of 650,000 options granted pursuant to the 2009 Plan and 2,266,190 options granted pursuant to the 2012 Plan.

(2) Consists of 515,930 shares available for issuance under the 2012 Plan after taking into consideration the reduction of shares available under the Plan of Recapitalization in March 2013 discussed above.

(3) Consists of four warrants issued for services. The first warrant to acquire 500,000 shares at an exercise price of $0.29 was issued for business development services and all the shares underlying the warrant remain subject to a vesting schedule.  The second warrant to acquire 10,000 shares at an exercise price of $0.40 is fully vested.  The third warrant to acquire 6,129,528 shares at an exercise price of $0.0326 per share was issued to Michael Malm and is subject to a vesting schedule based upon the Company meeting certain sales targets during 2012 and 2013.  The Company did not meet the sales target in 2012 and warrants to acquire 3,064,764 common shares were cancelled on January 1, 2013.  The remaining warrants to acquire 3,064,764 shares are subject to vesting on a sales target in 2013. The fourth warrant to acquire 100,000 common shares at an exercise price of $0.11 was issued to a consultant for investor relations services and is fully vested.

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Recent Sales of Unregistered Securities

All sales of unregistered equity securities that occurred during the period covered by this report, and through April 12,2013, have been previously reported in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K, except for the following:

On November 20, 2012, the Company issued 100,000 shares of its common stock in a private placement transaction.  The shares were issued at $0.07 per share for total proceeds of $7,000.  Because the investor represented that they qualified as an accredited investor, the Company relied on the exemptions from registration provided by Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated thereunder for this issuance.  The Company did not pay any commissions or finders’ fees with regards to this issuance.

On December 19, 2012, the Company issued 267,526 shares of its common stock in a private placement transaction.  The shares were issued at $0.07 per share in exchange for reduction in trade payables aggregating $18,727.  Because the investors represented that they qualified as an accredited investor, the Company relied on the exemptions from registration provided by Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated thereunder for this issuance.  The Company did not pay any commissions or finders’ fees with regards to this issuance.

Repurchases of Equity Securities

The Company did not repurchase any shares of the Company’s common stock during the year ended December 31, 2012.  

ITEM 6.  SELECTED FINANCIAL DATA

Not applicable.

ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement about Forward-Looking Statements

This Form 10-K contains forward-looking statements regarding future events and the Company’s future results that are subject to the safe harbors created under the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based on current expectations, estimates, forecasts, and projections about the industry in which the Company operates and the beliefs and assumptions of the Company’s management. Words such as “hopes,” “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “may,” variations of such words, and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of the Company’s future financial performance, including projections under our licensing and distribution arrangements, the Company’s anticipated growth potential in its business, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified under “Risk Factors” above.  Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements.  

The Company is under no duty to update any of these forward-looking statements after the date of this report. You should not place undue reliance on these forward-looking statements.

Background

Hangover Joe’s Holding Corporation (“HJHC” or the “Company”) was originally incorporated in the State of Colorado in December 2005 as Across American Real Estate Exchange, Inc. (“AAEX”) to facilitate the exchange of real estate properties between individuals under section 1031 of the internal revenue code.  In February 2010, Accredited Members, Inc. (“AMI”), a provider of investor research and management services, was merged with and into a wholly-owned subsidiary of AAEX, and AMI became a wholly-owned subsidiary of the Company.  In May 2010, AAEX changed its name to Accredited Members Holding Corporation.

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On July 25, 2012, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Hangover Joe’s, Inc., a privately-held Colorado corporation (“HOJ”), whereby on July 25, 2012, the Company acquired HOJ in a reverse triangular merger (the “Acquisition”).  Upon closing the Acquisition, the Company issued 83,514,827 common shares to the HOJ shareholders in exchange for all of their ownership interests in HOJ such that the former owners of HOJ owned approximately 69% of the Company post Acquisition.  The shareholders of the Company prior to the Acquisition owned approximately 31% of the Company post Acquisition.  As a result of the Acquisition on July 25, 2012, the Company changed its name to Hangover Joe’s Holding Corporation.

The Merger Agreement further provided that, within five business days after the closing of the Acquisition the Company would sell to Accredited Members Acquisition Corporation (“Buyer”) all of the equity interests in three of the Company’s subsidiaries (the “Sale”), being AMI., AMHC Managed Services, Inc. and World Wide Premium Packers, Inc. (collectively, the “Subsidiaries”).  Buyer is a privately-held Colorado corporation owned by two former directors of the Company, JW Roth and David Lavigne.  The parties closed the Sale on July 27, 2012.  Buyer paid $10,044 and assumed all liabilities of the Subsidiaries in exchange for all of the shares in the Subsidiaries owned by the Company.

HOJ is a Colorado corporation formed on March 5, 2012.  HOJ was formed for the purpose of acquiring all of the assets of both Hangover Joe’s Products LLC (“HOJ LLC”) and Hangover Joe’s Joint Venture (“HOJ JV”).  HOJ LLC had conducted operations through HOJ JV, with the owner of HOJ LLC being one of the same owners and control persons of HOJ JV. Effective March 30, 2012, HOJ acquired the net assets of HOJ LLC and HOJ JV through the issuance of common stock of HOJ.  Because HOJ had no significant assets or business operations prior to the merger and each of these entities were owned by the same control group, this transaction was accounted for as a reorganization of entities under common control.  Accordingly, the historical results of operations of HOJ LLC and HOJ JV are included in the results of operations of the Company.

Because all of the operating businesses of AMHC were contemporaneously sold within five business days after the Acquisition, the transaction has been accounted for as a recapitalization of HOJ.  Accordingly, the accompanying consolidated financial statements include the financial position, results of operations and cash flows of HOJ and its predecessor entities, HOJ LLC and HOJ JV, prior to the date of Acquisition. The historical results of operations and cash flows of AMHC and the Subsidiaries prior to the date of the Acquisition have been excluded from the accompanying consolidated financial statements. The historical stockholders’ equity of HOJ prior to the exchange was retroactively restated (a recapitalization) for the equivalent number of shares received in the exchange after giving effect to any differences in the par value of the AMHC and HOJ common stock, with an offset to additional paid-in capital.  The restated consolidated accumulated deficit of the accounting acquirer (HOJ) has been carried forward after the exchange.

The term the “Company” as used herein is intended to refer to the Hangover Joes Holding Corporation and its wholly owned subsidiary, Hangover Joes Inc. The Company has a limited operating history and there will be limited continuing impact regarding these operations, and the Company cannot provide any assurance it will be able to raise funds through a future issuance of equity or debt to carry out its business plan.

Plan of Operation

The Company sells an all-natural, two-ounce beverage, formulated to help relieve the symptoms associated with alcohol induced hangovers – the Hangover Recovery Shot. The Hangover Recovery Shot is also an officially licensed product of The Hangover movie series from Warner Brothers.  The Company has registered the trademark “Hangover Joe’s Get Up & Go” with the U.S. Patent and Trademark office. The assets consist of intellectual property relating to Hangover Joe’s Recovery Shot, including but not limited to a license agreement dated July 19, 2011, between the LLC and Warner Bros. Consumer Products, Inc.  The license agreement permits the Company to use the costumes, artwork logos, and other elements depicted in the 2009 movie “The Hangover” and the 2011 movie “The Hangover Part II” during the term of the license agreement, which as amended expires January 31, 2016.  

The Company sells its products primarily to convenience stores, liquor stores and grocery stores through distribution agreements, as well as through online internet sales. The Company began selling its products in February 2011. HOJ is actively seeking to expand the distribution of its product, the Hangover Joe’s Recovery Shot, and has recently entered into distribution agreements to expand its reach to Australia, New Zealand and Canada.

Management Changes

On September 27, 2012 JW Roth submitted his resignation as a director and Chairman of the Company. The Company believes Mr. Roth tendered his resignation because management had placed different priorities for payables made by the Company and Mr. Roth did not agree with those priorities. Further, Mr. Roth was in favor of hiring a candidate as Chief Executive Officer that the remaining Board members did not support.  Michael Jaynes was appointed as Chairman of the Company to replace Mr. Roth.

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On November 12, 2012 the Company appointed Michael Jaynes as acting principal financial officer.  Mr. Jaynes will serve in this capacity until a successor can be found and replaces AMHC Managed Services, Inc. which was providing accounting and financial management services pursuant to the Management Agreement.  

In March 2013, Eric Skae was appointed Interim Chief Operating Officer.

Results of Operations

The Company’s operations have generally grown as the Company has expanded its marketing efforts.  Although the Company’s increased operations have resulted in greater net sales for the Company, the Company’s costs of goods sold and operating costs have also increased.  

Year Ended December 31, 2012 and December 31, 2011

For the year ended December 31, 2012, we experienced a consolidated net loss of $2,145,000 or $.03 per common share compared to a consolidated net loss of $257,000 or less than $.01 per common share during the comparable period last year.  Net sales and gross profits increased $799,000 or 285% and $177,000 or 125%, respectively from the comparable period last year.  These increases were offset by a $2,064,000 increase in operating expenses from the comparable period last year.

Net Sales

During the year ended December 31, 2012, the Company generated approximately $1,079,000 in net sales compared to $280,000 in net sales in the comparable period last year.  The $799,000 or 285% increase from the comparable period last year was primarily due to higher sales volume from new distribution partners in the United States, Canada, and Australia added during 2012.  Approximately $270,000 of this increase was due to initial sales order from our distribution partners in Canada and Australia during the third and fourth quarters of 2012, respectively.

Cost of Goods Sold

Cost of goods sold, which includes product costs, packaging materials, and product royalties, increased $623,000 or 449% to $761,000 for the year ended December 31, 2012 as compared to $139,000 for the same period last year primarily due to higher sales volume described above.  In addition, higher product royalty costs associated with the Warner Brothers license signed in July 2011 resulted in full year of royalty costs in 2012 as compared to approximately two months of royalty costs during 2011. Cost of goods sold was also higher in 2012 due to the write-off of approximately $75,000 of packaging materials due to a change in images under the Warner Brothers license.  The Company anticipates that cost of goods sold will decline in 2013 due to reduction in the Warner Brother royalty rate and increased operational efficiencies associated with change in co-packers in March 2013.

Gross Profit

During the year ended December 31, 2012, the Company realized a gross profit of $318,000 or 29% of net sales compared to $141,000 or 50% of net sales during the same period last year.  The lower gross profit and corresponding gross margin during 2012 was due to several factors including i) a higher product royalty costs associated with the Warner Brothers license which was signed in July 2011 ii) write-off of packaging materials of approximately $75,000 in 2012 and iii) generally lower average sales prices realized on sales to distributors and international partners.  The Company anticipates that gross profit and corresponding gross margins will improve in 2013 due to anticipated reduction in product royalties and improved efficiencies at a new co-packer facility.

Sales & Marketing Costs

Sales & marketing costs increased $640,000 or 319% to $841,000 for the year ended December 31, 2012 as compared to $200,000 for the comparable period last year. This increase was primarily due to expanded marketing efforts to attract distribution partners in the United States, Canada, New Zealand & Australia.  During 2012, the Company increased its product advertising and provided more sample product to prospective customers.  The Company also hired several new sales brokers and brand manager consultants to increase its market presence.  Accordingly, the Company experienced higher sales related consulting, travel, and trade show costs in 2012.

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General & Administrative Expenses

General and administrative expenses increased $579,000 or 302% to $771,000 for the year ended December 31, 2012 as compared to $192,000 for the same period last year.  This increase was primarily due to higher legal and accounting costs associated with the merger and reorganization with Accredited Members Holding Corporation completed in July 2012.  In addition, the Company experienced higher overall costs associated with operating a public company as compared to a private company in 2011.

Management Fees – Related Party

This expense is solely attributable to the monthly management fee of $27,500 paid to AMHS Managed Services from March 1, 2012 to September 30, 2012.  The managed services agreement was terminated effective October 1, 2012.

Settlement costs

For the year ended December 31, 2012, the Company recorded accrued settlement cost for the estimated fair value of 4,500,000 shares issued to AMHC Managed Services, it two principals and an independent third party in settlement of certain claims associated with the managed service agreement and other matters.  On January 14, 2013, the Company issued 4,500,000 shares to the respective parties in settlement of these claims.

Interest Expense

Interest expenses increased $1,000 to $7,000 for the year ended December 31, 2012 as compared to $6,000 for the same period last year.  This increase was primarily due to higher overall average borrowings under the purchase order financing and factoring arrangements during 2012 as compared to 2011.

Material Changes in Financial Condition; Liquidity and Capital Resources

The Company’s consolidated financial statements for the year ended December 31, 2012, have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.  The Report of our Independent Registered Public Accounting Firm on the Company’s consolidated financial statement as of and for the year ended December 31, 2012, includes a “going concern” explanatory paragraph which means that the auditors stated that conditions exist that raise doubt about the Company’s ability to continue as a going concern.

Cash Flows

During the year ended December 31, 2012, we primarily used proceeds from the sale of common stock through private placements of approximately $727,000 and borrowings under purchase order financing and factor arrangements to fund our operations whereas during the comparable period in 2011, we used advances received from related parties of approximately $83,000 and approximately $23,000 of borrowings under inventory financing arrangements to fund our operations.  As described above, the company significantly increased its sales and marketing costs during 2012 to expand its distribution network in the United States, Canada, New Zealand and Australia.  Cash as of December 31, 2012 was approximately $9,000 as compared to $53,000 at December 31, 2011.

Cash flows used in operating activities for the year ended December 31, 2012 was $815,000 as compared to $43,000 for the comparable period last year. This increase in cash used in operations was primarily due to higher sales & marketing and general & administrative expenses during 2012 as compared to the same period last year.  The negative cash flows from these higher expenses were partially offset by increases in accounts payable and accrued liabilities.

Cash flows provided by investing activities for the year ended December 31, 2012 was $8,000 compared to no cash flows for the comparable period last year.  The increase during 2012 was primarily due to $10,000 proceeds received from the sale of subsidiary interests in July 2012.

Cash flow provided by financing activities for the year ended December 31, 2012 was $764,000 compared to $96,000 for the comparable period last year.  During 2012, the Company closed three private placement offerings of common stock for gross proceeds of approximately $727,000.  In addition, the Company had net borrowings under inventory financing payables of approximately $74,000 during 2012 as compared to $24,000 during 2011. These proceeds during 2012 were partially offset by cash outflows to repay advances made by related party of approximately $27,000.  During 2011, the Company received $83,000 in advances received from related parties.   

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Liquidity and Capital Resources

As of December 31, 2012, we had cash and cash on hand of approximately $9,000 and a working capital deficit of $1,407,000 as compared to cash and cash on hand of $53,000 and working capital deficit of $150,000 as of December 31, 2011. The decrease in our liquidity and working capital were primarily the result of an increase in accounts payable associated with higher spending in the quarter ended December 31, 2012.  In addition, the Company recorded accrued settlement costs of $652,000 and accrued consulting costs of $225,000 during 2012.  Both of these accrued liabilities were settled through an issuance of common stock in January 2013.

In September 2012, the Company entered into a factoring agreement with a finance company which provided financing up to $250,000, secured by the accounts receivable and inventory of the Company. The finance company advanced the Company up to 80% of eligible accounts receivable and was entitled to collect receivables directly from the Company’s customers.  In November 2012, the Company entered into a purchase order financing arrangement with this same finance company whereby the finance company advanced up to 100% of the manufacturing and shipping costs at the time a Company purchase order was submitted to the manufacturer. As of December 31, 2012, the Company had borrowed approximately $98,000 under these financing arrangements.  Amounts outstanding under these agreements were paid in full in January 2013 when the Company entered into the revolving credit facility described below.

On January 10, 2013, the Company entered into a senior secured lending arrangement with TCA Global Credit Master Fund LP (“TCA”) for up to a maximum borrowing of $6,000,000. The credit facility provided for an initial line of credit of $425,000 and is to be used only as permitted under the specified use of proceeds. The line of credit has a six month term from the date of closing with a six month renewal option. The lending arrangement is secured by all of the assets of the Company. At closing, the Company was advanced $425,000 less fees and closing costs.  The Company anticipates using this borrowing facility to help fund its operations in 2013.

In March/April 2013, the Company’ Board of Directors reduced the number of common shares reserved under the 2012 Stock Option Plan from 11,500,000 shares to 4,500,000 and reduced the number of common shares reserved under the 2009 Stock Option Plan from 7,000,000 shares to 650,000 shares thereby increasing the number of common shares available for issuance by 10,350,000.

In April 2013, the Board of Directors approved the authorization of 5,000,000 shares of Series C Preferred Stock (the “Series C Preferred Stock”). The Series C Preferred shares have voting rights equal to three votes per share and contain an automatic conversion into 15,000,000 common shares immediately upon the Company obtaining shareholder approval of, and filing with the Colorado Secretary of State, an increase in authorized common stock to at least 200,000,000 shares.

On April 12, 2013, the Company executed a term sheet with an accredited investor (“Investor”) for a proposed investment of $1,000,000 in the Company in exchange for 15,000,000 shares of common stock, 5,000,000 shares of Series C Preferred Stock, and warrants to acquire 500,000 shares of common stock at $0.12 per share for a period of five years. The warrants may be redeemed by the Company if certain conditions are met, including that the shares underlying the warrants have been registered and the common stock trades at or above $.20 per share for 20 trading days. The first tranche of $500,000 is to be deposited on or before April 17, 2013 in exchange for 15,000,000 shares of common stock and warrants to acquire 250,000 common shares described above. The second tranche of $500,000 is to be deposited on or before April 26, 2013 in exchange for 5,000,000 shares of Series C Preferred Stock and warrants to acquire 250,000 common shares described above. On April 12, 2013, the Company received $50,000 toward the first investment tranche.

Although the Company has generated revenue through the sale of its products, the Company’s cash flow has not been sufficient to cover its operating expenses and the Company has had to rely upon proceeds from the sale of common stock through private placements to fund its operations.  During the year ended December 31, 2012, the Company received gross proceeds of $727,000 from the sale of common stock through private placements.   We anticipate that we will continue to rely on sales of our securities in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing stockholders. There is no assurance that we will be able to complete any additional sales of our equity securities or that we will be able arrange for other financing to fund our planned business activities. If we are unable to fund future operations by way of financing, including public or private offerings of equity or debt securities, our business, financial condition and operating activities will be adversely impacted.

Off Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, net sales or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our shareholders.

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Recently issued and adopted accounting pronouncements

In May 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.” This pronouncement was issued to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards (“IFRS”).  ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements particularly for level 3 fair value measurements. ASU 2011-04 became effective for the Company on January 1, 2012. The adoption of ASU 2011-04 did not have any impact on the Company’s financial position, results of operations or liquidity.

Critical Accounting Policies

The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make a variety of estimates and assumptions that affect (i) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements. and (ii) the reported amounts of net sales and expenses during the reporting periods covered by the financial statements.

Our management routinely makes judgments and estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions affecting the future resolution of the uncertainties increase, these judgments become even more subjective and complex. Although we believe that our estimates and assumptions are reasonable, actual results may differ significantly from these estimates. Changes in estimates and assumptions based upon actual results may have a material impact on our results of operation and/or financial condition.

Our significant accounting policies are disclosed in Note 2 to the Consolidated Financial Statements included in this Form 10-K. Our critical accounting policies are outlined below.

Accounts Receivable and Concentration of Credit Risk

The Company is subject to credit risk through trade receivables. This credit risk is mitigated by the diversification of the Company’s operations, as well as its customer base. The Company grants varying payment terms to its customers. Payment terms for customers can vary from due upon receipts up to net 45 days.

Two customers comprise approximately 78% of trade accounts receivable at December 31, 2012; these individual customer balances represent approximately 65% and 13% of the total trade accounts receivable.  Three customers comprise approximately 76% of the trade accounts receivable at December 31, 2011; these individual customer balances represent approximately 50%, 15%, and 11% of the total trade accounts receivable. Four customers accounted for 54% of net sales for the year ended December 31, 2012; these individual customer sales represent approximately 18%, 16%, 10%, and 10% of annual net sales.  Three customers accounted for 36% of net sales for the year ended December 31, 2011; these individual customer sales represent approximately 14%, 12%, and 10% of annual net sales.  During 2012, sales to distribution partners in Canada and Australia accounted for approximately 16% and 10% of annual net sales.

Ongoing credit evaluations of customers’ financial condition are performed. Collateral is not required. The Company maintains an allowance when necessary for doubtful accounts that is the Company’s best estimate of potentially uncollectible trade receivables. Provisions are made based upon a specific review of all significant outstanding invoices that are considered potentially uncollectible in whole or in part. For those invoices not specifically reviewed or considered uncollectible, general provisions are provided at different rates, based upon the age of the receivable, historical experience, and other currently available evidence. The allowance estimates are adjusted as additional information becomes known or as payments are made. As of December 31, 2012 and December 31, 2011, the allowance for doubtful accounts was $21,624, and $0, respectively.

License and Royalties

The Company has a license with Warner Bros. Consumer Products, Inc. (“WBCP”) that allows the Company the use of the costumes, artwork, logos and other elements depicted in the 2009 movie, The Hangover and the 2011 movie, The Hangover Part II.  This license, as amended, expires January 31, 2016.  The terms of the WBCP license provide for royalties based on a percentage of products sold, as defined, subject to agreed-upon guaranteed minimum royalties. Guaranteed minimum royalty payments are made periodically over the term of the license and are recorded when paid as a prepaid expense in the balance sheet.  The prepaid expense is amortized to royalties in cost of goods sold at a ratio of current period revenues to the total revenues expected to be recorded over the term of the license.  The Company reviews its sales projections quarterly to determine the likely recoverability of its prepaid asset, as well as any unpaid minimum obligation.  If management determines that the prepaid expense is unlikely to be recovered by product sales, prepaid license expense is charged to cost of goods sold, based on current and expected revenues, in the period in which such determination is made.  

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Revenue Recognition

The Company has contractual agreements with certain third-party distributors.  Under the agreements, the Company is not guaranteed any minimum level of sales or transactions.  The Company also offers its products for sale through its website at www.hangoverjoes.com.

The Company recognizes revenue when all of the following have occurred: (1) persuasive evidence of an arrangement exists; (2) delivery to third party distributors and consumers via the Company’s website has occurred; (3) the sales price is fixed or determinable; and (4) collectability is reasonably assured.  Delivery is not considered to have occurred until the title and the risk of loss passes to the customer according to the terms of the contract between the Company and the customer.  For sales to distributors, revenue is usually recognized at the time of delivery.  For sales through the Company’s website, revenue is recognized at the time of shipment.

Management evaluates the terms of its sales in consideration of the criteria outlined in Principal Agent Consideration with regards to its determination of gross versus net reporting of revenue for transactions with customers.  The Company sells, through its website, Hangover Joe’s Recovery Shots.  In these transactions, management has determined that the Company (i) acts as principal; (ii) has the risks and rewards of ownership, including the risk of loss for collection, delivery or returns; and (iii) has latitude in establishing price with the customer.  For these transactions, the Company recognizes revenue on a gross basis.

The Company offers a variety of incentives and discounts to distributors, customers and consumers through various programs to support the distribution of its products.  These incentives and discounts include cash discounts, price allowances, volume based rebates and product placement fees.  These incentives and discounts are reflected as a reduction of gross sales to arrive at net sales. The aggregate deductions from gross sales recorded in relation to these programs were approximately $43,100 and $17,800 for the years ended December 31, 2012 and 2011, respectively.

Cost of Goods Sold

Cost of goods sold consists of the costs of raw materials utilized in the production of its product, co-packing fees, and in-bound freight charges. Raw material costs account for the largest portion of the cost of goods sold. Raw materials include bottles, ingredients and packaging materials. The manufacturer is responsible for the ingredients. Costs of goods sold also include license and royalty expenses.

Supplier/Manufacturer Concentration

The Company relies on its third-party suppliers for raw materials necessary for its products, and it relies on third-party manufacturers for the production of its product.  Although the Company believes that it could utilize alternative suppliers and manufacturers, any delay in locating and establishing relationships with other suppliers/manufacturers could result in product shortages and back orders for the products, with a resulting loss of net sales and profitability.  The Company’s third-party manufacturer acquires some ingredients from suppliers outside of the United States.  Purchasing these ingredients is subject to the risks generally associated with importing raw materials from other countries, including, among other factors, delays in shipments, changes in economic and political conditions, quality assurance, tariffs, trade disputes and foreign currency fluctuations.  These factors could result in a delay in or disruption of the supply of certain raw materials.  Any significant delay in or disruption of the supply of raw materials could have a material adverse effect on the Company’s business.

Sales and Marketing Expenses

Sales and marketing costs include selling expenses such as distribution expenses to transport products to customers and warehousing expenses after manufacture, as well as expenses for advertising, sampling and in-store demonstration costs, costs for merchandise displays, point-of-sale materials, trade shows, other marketing expenses and product design expenses.

Freight-Out Costs

Freight-out costs incurred to ship product to customers and are included in sales & marketing expense in the accompanying consolidated statements of operations. Total freight-out costs were approximately $47,000 and $30,000 for the year ended December 31, 2012 and 2011, respectively.

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Stock-Based Compensation

The Company accounts for stock-based compensation under ASC 718, Share-Based Payment.  ASC 718 requires the recognition of the cost of services received in exchange for an award of equity instruments in the financial statements and is measured based on the grant date fair value of the award.  ASC 718 also requires the stock-based compensation expense to be recognized over the period of service in exchange for the award (generally the vesting period).  The Company estimates the fair value of each stock option at the grant date by using an option pricing model, typically the Black-Scholes model.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Financial Statements following the signature page of this Form 10-K.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

None.

ITEM 9A.  CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the “1934 Act”), as of December 31, 2012, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures.  This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that because of the material weakness in our internal control over financial reporting, described below, that our disclosure controls and procedures were not effective as of December 31, 2012.  A material weakness is a deficiency or a combination of deficiencies in internal controls over financial reporting such that there is not a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting.

Management of the Company is also responsible for establishing internal control over financial reporting as defined in Rules 13a-15(f) and 15(d)-15(f) under the Securities Exchange Act of 1934.

The Company’s internal controls over financial reporting are intended to be designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. The Company’s internal controls over financial reporting are expected to include those policies and procedures that management believes are necessary that:

(i)    pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

(ii)    provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

(iii)    provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

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As of December 31, 2012, management assessed the effectiveness of the Company's internal control over financial reporting (ICFR) based on the criteria for effective ICFR established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and SEC guidance on conducting such assessments by smaller reporting companies and non-accelerated filers.

Based on that assessment, management concluded that, during the period covered by this report, such internal controls and procedures were not effective as of December 31, 2012 and that material weaknesses in ICFR existed as more fully described below.

As defined by Auditing Standard No. 5, “An Audit of Internal Control Over Financial Reporting that is Integrated with an Audit of Financial Statements and Related Independence Rule and Conforming Amendments,” established by the Public Company Accounting Oversight Board ("PCAOB"), a material weakness is a deficiency or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected. In connection with the assessment described above, management identified the following control deficiencies that represent material weaknesses as of December 31, 2012:

(1) Lack of an independent audit committee or audit committee financial expert, and no independent directors.  We have not identified an audit committee financial expert on our board of directors, and at the present time we have no independent directors.  These factors are counter to corporate governance practices as defined by the various stock exchanges and may lead to less supervision over management.

(2) Limited staffing within our accounting operations. The Company has utilized a limited number of consultants to provide bookkeeping and accounting functions during 2012. The relatively small number of personnel who are responsible for accounting functions prevents us from fully segregating duties within our internal control system. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews which may result in a failure to detect errors in spreadsheets, calculations, or assumptions used to prepare the financial statements and related disclosures as filed with the Securities and Exchange Commission. Additionally, we did not maintain a sufficient number of financial and accounting staff with the appropriate level of knowledge and experience throughout 2012 to ensure that accurate and reliable financial statements of the Company are prepared and reviewed timely in accordance with accounting principles generally accepted in the United States.

Our management determined that these deficiencies constituted material weaknesses.

Due to a lack of personnel resources, our ability to take any significant or immediate action to remediate these material weaknesses is limited.  However, we expect to implement further controls as circumstances and working capital permit.  Notwithstanding the assessment that our ICFR was not effective and that there were material weaknesses as identified in this report, we believe that our financial statements contained in this Annual Report on Form 10-K for the fiscal year ended December 31, 2012, fairly present our financial position, results of operations and cash flows for the years covered thereby in all material respects.

We are committed to improving our financial organization. As part of this commitment, we will (when funds and/or additional resources are available to the Company) consider taking the following actions: (1) appoint outside directors to our Board of Directors and utilize an independent audit committee of the Board of Directors who will undertake the oversight in the establishment and monitoring of required internal controls and procedures; (2) create a position to segregate duties consistent with control objectives and will increase our personnel resources; and (3) hire independent third parties to provide expert advice.  We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal control over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting due to the permanent exemption from such requirement for smaller reporting companies.

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ITEM 9B.  OTHER INFORMATION

Series C Preferred Stock

In April 2013, the Board of Directors approved the authorization of 5,000,000 shares of Series C Preferred Stock (the “Series C Preferred Stock”). The Series C Preferred shares have voting rights equal to three votes per share and contain an automatic conversion into 15,000,000 common shares immediately upon the Company obtaining shareholder approval of, and filing with the Colorado Secretary of State, an increase in authorized common stock to at least 200,000,000 shares.

Private Placement

On April 12, 2013, the Company executed a term sheet with an accredited investor (“Investor”) for a proposed investment of $1,000,000 in the Company in exchange for 15,000,000 shares of common stock, 5,000,000 shares of Series C Preferred Stock, and warrants to acquire 500,000 shares of common stock at $0.12 per share for a period of five years. The first tranche of $500,000 is to be deposited on or before April 17, 2013 in exchange for 15,000,000 shares of common stock and warrants to acquire 250,000 common shares described above. The second tranche of $500,000 is to be deposited on or before April 26, 2013 in exchange for 5,000,000 shares of Series C Preferred Stock and warrants to acquire 250,000 common shares described above. On April 12, 2013, the Company received $50,000 toward the first investment tranche.

The common shares and underlying common shares attributable to the Series C Preferred Stock and warrants will have piggyback registration rights that will be triggered if the Company files a registration statement with the Securities and Exchange Commission for the resale of other securities. The warrants may be redeemed by the Company if certain conditions are met, including that the shares underlying the warrants have been registered and the common stock trades at or above $.20 per share for 20 trading days. The Investor will be entitled to one seat on the Company's Board of Directors, and certain other development and distribution rights, as defined.

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PART III

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Identification of Directors and Executive Officers

The table below sets forth the names, titles, and ages of the members of the Company’s Board of Directors and its executive officers.   Executive officers of the Company are appointed by the Board of Directors and serve for a term of one year and until their successors have been elected and qualified or until their earlier resignation or removal by the Board of Directors. There are no family relationships among any of the directors and executive officers of the Company.  There was no agreement or understanding between Company and any director or executive officer pursuant to which he was selected as an officer or director.

Name	Position	Age	Year Appointed as Officer or Director
Michael Jaynes	Director, President, CEO and CFO	54	2012
Michael Malm	Director	50	2012
Eric Skae	Interim COO	49	2013

Michael Jaynes

Michael Jaynes was appointed President/Chief Executive Officer and Director of the Company in July 2012. Mr. Jaynes was founder of HOJ LLC and HOJ JV, both of which were predecessors-in-interest to HOJ, and has been involved in developing the business plan through those entities. Mr. Jaynes has over 21 years’ experience as a trial attorney, most recently in his own firm of Michael Jaynes, PC in Jackson, Tennessee. Prior to private practice, Mr. Jaynes was an employee of the Tennessee Supreme Court as an Assistant Public Defender. In 2008, Mr. Jaynes retired from the practice of law and has been involved in developing what is now Hangover Joe’s, Inc. Mr. Jaynes graduated from Lambuth University (Jackson, Tennessee) in 1983 with a Bachelors of Science degree in Political Science. He received his JD from Nashville School of Law in 1987.

Michael Malm

Michael Malm was appointed as Director of the Company in July 2012.  Mr. Malm has been a Director of HOJ since March 2012. Since 2003, Mr. Malm has been an Executive VP of the Crystal Art Gallery, where he has successfully developed a staff of designers to create wall décor for major retailers. In this position, Mr. Malm also negotiated and acquired licenses for wall décor and negotiated and created new sales programs with major retailers. From 1999 through 2003 Mr. Malm was an Executive VP of Crystal Art of Florida, taking over management of the company in a hostile takeover. Prior to 1999, Mr. Malm was the President of O.S.P. Publishing, a consumer products company specializing in manufacturing and selling licensed products. Mr. Malm graduated from the University of Southern California in 1984 with a degree in Business.

Eric Skae

Eric Skae was appointed Interim COO in March 2013.  Eric Skae joined the Company from consumer package goods consulting firm, The Bricktown Group (“Bricktown”), where he is the Managing Partner. Prior to Bricktown, he served as Chairman and Chief Executive Officer of publicly traded beverage company New Leaf Brands Inc.(Ticker: NLEF), from September 28, 2008 to February 14, 2012. While there, he recapitalized and led the Company’s transition from a highly leveraged nutritional supplement business to a pure play non-alcoholic beverage Company. Prior to that, Mr. Skae founded Skae Beverage International, LLC, in October 2002, the U.S. Distributor for Iceland Spring Water and the creator of New Leaf Teas. In September 2008, he engineered the sale of the Company to Baywood International (the precedent public company to New Leaf Brands, Inc.). Prior to Skae Beverage International, Mr. Skae worked in the beverage industry in senior-level sales, marketing and distribution roles including President and General Manager, Fresh Solutions, Inc. (a Division of Saratoga Beverage Group), Director of Sales at Fresh Samantha Inc. (now a subsidiary of Coca Cola, Ticker: KO), Vice-President of National Accounts at Hansen Beverage Company (Ticker: MNST) and Regional Manager at Arizona Beverages. Mr. Skae graduated from Northwood University with a Bachelor Degree in Business Administration.

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Board of Directors – Composition.

The Company’s Board of Directors seeks to ensure that it is composed of members whose particular experience, qualifications, attributes, and skills, when taken together, will allow the Board of Directors to satisfy its oversight obligations effectively.  Currently, the Company does not have a separate nominating committee as, to date, it does not believe that the Company as an early stage company with limited personnel, required such a committee.  However, as the Company grows, the Board may consider establishing a separate nominating committee.  As such, currently the Board of Directors as a whole is in charge of identifying and appointing appropriate persons to add to the Board of Directors when necessary.

In identifying Board candidates it is the Board’s goal to identify persons whom it believes have appropriate expertise and experience to contribute to the oversight of a company of the Company’s nature while also reviewing other appropriate factors.

The Company believes that the persons that currently comprise its Board of Directors have the experience, qualifications and attributes and skills taken as a whole to enable the Board of Directors to satisfy its oversight responsibilities effectively.

Involvement in Certain Legal Proceedings:

During the past ten years, none of the persons serving as executive officers and/or directors of the Company has been the subject matter of any of the following legal proceedings that are required to be disclosed pursuant to Item 401(f) of Regulation S-K including: (a) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (b) any criminal convictions; (c) any order, judgment, or decree permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; (d) any finding by a court, the SEC or the CFTC to have violated a federal or state securities or commodities law, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud; or (e) any sanction or order of any self-regulatory organization or registered entity or equivalent exchange, association or entity.  Further, no such legal proceedings are believed to be contemplated by governmental authorities against any director or executive officer.

Section 16(a) Beneficial Ownership Reporting Compliance:

Section 16(a) of the 1934 Act requires the Company’s directors and officers and any persons who own more than ten percent of the Company’s equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission (the “SEC”).  All directors, officers and greater than ten-percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) reports files.  Based solely on our review of the copies of Forms 3, 4 and any amendments thereto furnished to us during the fiscal year completed December 31, 2012, and subsequently, we believe that during the Company’s 2012 fiscal year all filing requirements applicable to our officers, directors and greater-than-ten-percent stockholders were complied with.

Code of Ethics:

The Company has not  adopted a code of ethics because the board does not believe that, given the small size of the Company its limited personnel, and the limited number of transactions the Company has engaged in, a code of ethics is warranted.

No Audit Committee:

The Company does not have a separately designated audit committee.  Instead, the entire Board as a whole acts as the Company’s audit committee.  Consequently the Company does not currently have a designated audit committee financial expert.

No Nominating Committee; Procedures by which Security Holders May Recommend Nominees to the Board of Directors; Communications with Members of the Board of Directors:

The Company does not have a separately designated nominating committee.  The Company does not have such a committee because we currently believe that given our small size, the fact that none of the members of our Board are not currently considered “independent”, and because no Company securities are traded on a major stock exchange, that such a committee is not currently necessary.  Unless and until the Company establishes a separate nominating committee, when a board vacancy occurs, the remaining board members will participate in deliberations concerning director nominees.  In the future the Company may determine that it is appropriate to designate a separate nominating committee of the board of directors comprised solely of independent directors.

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To date, the Board of Directors has not adopted a formal procedure by which shareholders may recommend nominees to the board of directors.   In considering candidates for membership on the Board of Directors, the Board of Directors will take into consideration the needs of the Company and its Board of Directors and the qualifications of the candidate.  With respect to potential new Board members the Board will require and/or review information such as the following:

§	The name and address of the proposed candidate;
§	The proposed candidates’ resume or a listing of his or her qualifications to be a director of the Company;
§	A description of any relationship that could affect such person's qualifying as an independent director, including identifying all other public company board and committee memberships;
§	A confirmation of such person's willingness to serve as a director if selected by the Board of Directors; and
§	Any information about the proposed candidate that would, under the federal proxy rules, be required to be included in the Company's proxy statement if such person were a nominee.

ITEM. 11.  EXECUTIVE COMPENSATION

The following table sets out the compensation received for the fiscal years December 31, 2012 and 2011 in respect to each of the individuals who served as the Company’s chief executive officer at any time during the last fiscal year, as well as the Company’s most highly compensated executive officers:

								(1)
							Option			All Other
Name and	Fiscal	Salary			Bonus		Awards			Compensation			Total
Principal Position	Year	($)			($)		($)			($)			($)
Michael Jaynes,
Chairman, President, Chief Executive Officer, and Chief Financial Officer (2)	2012	$	43,548	(3)	$	-	$	-		$	3,883	(4)	$	47,431
	2011	$	-		$	-	$	-		$	-		$	-
Michael Malm,
Vice President Sales (5)	2012	$	-		$	-	$	126,313	(6)	$	30,565	(7)	$	156,878
	2011	$	-		$	-	$	-		$	-		$	-
JW Roth,
Former Co-Chairman and	2012	$	113,750	(9)	$	-	$	-		$	-		$	113,750
Chief Executive Officer (8)	2011	$	210,000		$	1,015	$	-		$	-		$	211,015
David Lavigne,
Former Co-Chairman and	2012	$	113,750	(11)	$	-	$	-		$	-		$	113,750
Chief Financial Officer (10)	2011	$	210,000		$	1,015	$	-		$	-		$	211,015

(1)	Amounts represent the calculated fair value of stock options granted to the named executive officers based on provisions of ASC 718-10, Stock Compensation. See Note 11 to the consolidated financial statement for discussion regarding assumptions used to calculate fair value under the Black-Scholes-Merton valuation model.
(2)	Mr. Jaynes was appointed as President and Chief Executive Officer on July 25, 2012.  Mr. Jaynes was appointed Chairman on October 2, 2012 and Chief Financial Officer on November 12, 2012.
(3)	Mr. Jaynes has an annual salary of $100,000 of which $43,548 was earned from the date of the merger (July 25, 2012) (“Merger Date”) through the end of December.  Due to limited capital resources, Mr. Jaynes deferred $21,529 of salary during 2012.
(4)	Benefits for company paid health insurance for Mr. Jaynes and his family from the Merger Date through the end of December totaled $3,883.
(5)	Mr. Malm was appointed Vice President Sales on the Merger Date.
(6)	In connection with the AMHC Merger, Mr. Malm was granted a warrant to acquire 6,129,528 shares of Company common stock with 3,064,764 shares vesting each on January 1, 2013 and January 1, 2014 if the Company’s sales exceed certain thresholds in 2012 and 2013, respectively. This warrant replaces a warrant issued by Hangover Joe’s Inc and later assumed by the Company in the AMHC Merger.  Management has evaluated the performance criteria and has not recognized any stock based compensation in its consolidated financial statements for the year ended December 31, 2012.  Pursuant to SEC instructions, this amount represents the calculated fair value of warrants to acquire 6,129,528 shares of common stock granted to Mr. Malm assuming all performance conditions are met.

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(7)	Pursuant to an agreement, Mr. Malm is paid a 3% royalty on net sales to customers in United States and Canada.  Mr. Malm is also paid a commission of 6% on direct sales and 4% on indirect sales made by sales reps hired by Mr. Malm. Mr. Malm earned $16,601 and $13,963 in royalties and commissions respectively from the Merger Date through the end of December.  As part of his agreement, Mr. Malm received commission draws aggregating $33,000 from the Merger Date through the end of December.  The commission draws have not been included as earned compensation.
(8)	Mr. Roth served as Chief Executive Officer from December 3, 2010 through Merger Date. Mr. Roth served as Co-Chairman until July 25, 2012 and then as Chairman through October 2, 2012.
(9)	Mr. Roth was paid an annual base salary of $210,000 for 2011 and through the Merger Date in 2012.
(10)	Mr. Lavigne served as Co-Chairman and Chief Financial Officer from December 3, 2010 through the Merger Date.
(11)	Mr. Lavigne was paid an annual base salary of $210,000 for 2011 and through the Merger Date in 2012.

The Board of Directors acting in lieu of a compensation committee, is charged with reviewing and approving the terms and structure of the compensation of the Company’s executive officers.  To date, the Company has not retained an independent compensation consultant to assist the Company in reviewing and analyzing the structure and terms of the Company’s executive officers.  Moreover, throughout much of the Company’s fiscal year, the same persons serving on the Board also served as Company executive officers.

The Company considers various factors when evaluating and determining the compensation terms and structure of its executive officers, including the following:

1.   The executive’s leadership and operational performance and potential to enhance long-term value to the Company’s shareholders;

2.   The Company’s financial resources, results of operations, and financial projections;

3.   Performance compared to the financial, operational and strategic goals established for the Company;

4.   The nature, scope and level of the executive’s responsibilities;

5.   Competitive market compensation paid by other companies for similar positions, experience and performance levels; and

6.   The executive’s current salary, the appropriate balance between incentives for long-term and short-term performance.

Company management is responsible for reviewing the base salary, annual bonus and long-term compensation levels for other Company employees, and the Company expects this practice to continue going forward.  The entire Board of Directors remains responsible for significant changes to, or adoption, of new employee benefit plans.  The Company believes that as relatively new company its compensation structure is fair to its executive officers as it is intended to balance the Company’s need to minimize its overhead costs yet reward its executives for individual performance and company performance.

To date the Company has not entered into any employment agreements with any of the persons who serve (or served) as the Company’s executive officers.  Currently there are no contractual commitments in place that provide for severance payments to our executive officers or similar benefits upon a change of control transaction.

The Company believes that the compensation environment for qualified professionals in the industry in which we operate is competitive.  In order to compete in this environment, the compensation of our executive officers is primarily comprised of the following components:

·   Base salary;

·   Stock option awards and/or equity based compensation

·   Discretionary cash bonuses

·   Royalties or Commissions for sales of company product

·   Other employment benefits including health and dental insurance. 

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Base Salary

Base salary, paid in cash, is the first element of compensation to our officers.In determining base salaries for our key executive officers, the Company aims to set base salaries at a level we believe enables us to hire and retain individuals in a competitive environment and to reward individual performance and contribution to our overall business goals. The Board of Directors believes that base salary should be relatively stable over time, providing the executive a dependable, minimum level of compensation, which is approximately equivalent to compensation that may be paid by competitors for persons of similar abilities.   The Board of Directors believes that base salaries for our executive officers are appropriate for persons serving as executive officers of public companies similar in size and complexity similar to the Company.

Stock Option Plan Benefits

Each of the Company’s executive officers is eligible to be granted awards under the Company’s equity compensation plans.  The Company believes that equity based compensation helps align management and executives’ interests with the interests of our shareholders. Our equity incentives are also intended to reward the attainment of long-term corporate objectives by our executives. We also believe that grants of equity-based compensation are necessary to enable us to be competitive from a total remuneration standpoint.

We have no set formula for granting awards to our executives or employees. In determining whether to grant awards and the amount of any awards, we take into consideration discretionary factors such as the individual’s current and expected future performance, level of responsibilities, retention considerations, and the total compensation package.  The Company has granted certain of its executive officers (and other key employees) stock options.

Discretionary Annual Bonus.

Discretionary cash bonuses are another prong of our compensation plan.  The Board of Directors believes that it is appropriate that executive officers and other employees have the potential to receive a portion of their annual cash compensation as a cash bonus to encourage performance to achieve key corporate objectives and to be competitive from a total remuneration standpoint.

We have no set bonus formula for determining or awarding discretionary cash bonuses to our other executives or employees. In determining whether to award bonuses and the amount of any bonuses, we have taken and expect to continue to take into consideration discretionary factors such as the individual’s current and expected future performance, level of responsibilities, retention considerations, and the total compensation package, as well as the Company’s overall performance including cash flow and other operational factors.

During fiscal 2011, we paid discretionary cash bonuses to certain of the Company’s executive officers (being Messrs. Roth and Lavigne).  In general the bonuses paid to these executive officers were determined by the Board after considering the following factors: sales generated by each executive and improvements in Company operations oversaw by that executive.

Commissions and Royalties

The Company has placed a significant amount of emphasis on its executive officers’ ability to help grow the Company’s business through organic growth.  As such the Company has adopted certain commission formulas for paying its executive officers commissions on sales of product provided by the Company.  

In March 2012, the Company entered into a representative agreement with Michael Malm who became executive officer and member of the Company’s board of directors in July 2012. Under this agreement, as amended, Mr. Malm is entitled to a commission of between 4% and 6% of sales made by Mr. Malm and certain sales brokers, based on the nature of the sales, and a royalty of 3% of all sales made by the Company, as defined. Mr. Malm earned $16,601 and $13,963 in royalties and commissions respectively from the Merger Date through the end of December.  As part of his agreement, Mr. Malm received commission draws aggregating $33,000 from the Merger Date through the end of December.  The commission draws have not been included as earned compensation.

Other Compensation/Benefits

Another element of the overall compensation is through providing our executive officers are various employment benefits, such as the payment of a monthly allowance for health care insurance.

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Stock Option, Stock Awards and Equity Incentive Plans

During 2012, the Company did not grant any stock options or stock option awards to named executive officers under the 2009 or 2012 Stock Option Plan.  However, the Company did grant a warrant to purchase 6,129,528 shares of common stock to Mr. Malm outside the equity incentive plans during fiscal 2012.

The following table sets forth the outstanding equity awards for each named executive officer at December 31, 2012.  There were no equity awards granted to the named executive officers during 2011.    

	Number of Securities
	Underlying Unexercised
	Warrants (1)		Option	Option
			Exercise	Expiration
Name and Principal Position	Exercisable	Un-exercisable	Price ($)	Date
Michael Malm, VP Sales, Director	-	6,129,528	0.0326	04/30/2015

(1)  In April 2012, the Company granted a warrant to Mr. Malm to purchase up to 6,129,528 shares of common stock in connection with a two-year service agreement.  This warrant has a three-year term and an exercise price of $0.0326 per share with 3,064,764 shares vesting each on January 1, 2013 and January 1, 2014 if the Company’s sales exceed certain thresholds in 2012 and 2013, respectively.  On January 1, 2013, the board of directors concluded the sales target for 2012 was not met and warrants to purchase 3,064,764 shares of Company common stock were cancelled.

Compensation of Directors

To date, the Company has not provided any of the persons serving as on its directors any separate or additional consideration for serving on the Board.  Therefore, each of the persons who served on the Company’s Board of Directors during fiscal 2012 and 2011 also served as executive officers, all compensation they received was provided in their capacity as executive officers.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

Security Ownership of Directors and Management

The number of shares outstanding of the Company’s Common Stock at April 8, 2013, was 122,591,301.  Additionally, the Company had 87,501 shares of its Series A Convertible Preferred Stock Outstanding (the “Series A Stock”) and 125,000 shares of its Series B Convertible Preferred Stock Outstanding (“Series B Stock”).  Holders of shares of Series A Stock vote as a single class with the Common Stock, and each share of Series A Stock is entitled to eight votes per share. Holders of shares of Series B Stock vote as a single class with the Common Stock, and each share of Series A Stock is entitled to one vote per share. The number of total voting shares calculated on an as converted basis is 123,291,309. 

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The following table sets forth the beneficial ownership of the Company’s common stock as of April 8, 2013, by each director and each executive officer of the Company and by all directors and executive officers as a group.  The listed directors and executive officers do not have any beneficial ownership in Series A Stock or Series B Stock. To the extent any of the named shareholders own derivative securities that are vested or otherwise exercisable into shares of our common stock these securities are included in the column regarding that shareholders’ common stock beneficial ownership (as required by Rule 13d-3(a)) and the material terms of such derivative securities are explained in the notes to the table.

Name and Address of Beneficial Owner	Position	Common Stock - Amount and Nature of Beneficial Ownership		Percent of Common Stock	Percent of Voting Stock (4)
Michael Jaynes 9457 S University Blvd #349 Highlands Ranch, CO 80126	Director, President and CEO	30,647,636	(1)	25.0%	24.9%
Michael Malm 9457 S University Blvd #349 Highlands Ranch, CO 80126	Director, Vice President Sales	3,064,764	(2)	2.5%	2.5%
Eric Skae 9457 S University Blvd #349 Highlands Ranch, CO 80126	Interim COO	1,300,000	(3)	1.0%	1.0%
All current directors and executive officers as a group (three persons)		35,012,400		28.3%	28.3%

(1)	Consists of 30,647,636 shares of common stock held by Alcoy International Services. Mr. Jaynes has sole dispositive voting power over shares held by Alcoy International Services.
(2)	Consists of 3,064,764 shares of common stock.
(3)	Consists of 1,300,000 shares of common stock held by Bricktown Beverage LLC. Mr. Skae is managing partner and has sole dispositive voting power over shares held by Bricktown Beverage LLC.
(4)	Represents percentage of beneficial ownership for all classes of voting stock.

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Security Ownership of Certain Beneficial Owners

The following table sets forth the beneficial ownership of the Company’s voting stock as of April 8, 2013, by each person (other than the directors and executive officers of the Company) who owned of record, or was known to own beneficially, more than 5% of the outstanding voting stock.

Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership (1)	Percent of Common Stock	Percent of Voting Stock (2)
Daimiel Global Resources (2) 1000 Bourbon Street New Orleans, LA 70116	26,147,636	21.3%	21.2%

(1)	Calculated in accordance with Rule 13d-3 under the Securities Exchange Act of 1934.
(2)	Represents percentage of beneficial ownership for all classes of voting stock.
(3)	Shawn Adamson is General Manager of Daimiel Global Resources and an employee of the Company.

Changes in Control

There are no arrangements known to the Company which may result in a change in control of the Company.

Securities Authorized for Issuance Under Equity Compensation Plans

See Item 5, above, for information regarding securities authorized for issuance under equity compensation plan in the form required by Item 201(d) of Regulation S-K.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Related Party Transactions

The Company’s Board of Directors as a whole is charged with reviewing and approving all related party transactions. There have not been any transactions, or proposed transactions, to which the Company was or is to be a party, in which any Company director, officer, or any member of the immediate family of the aforementioned persons had or is to have a direct or indirect material interest, except those outlined below.  On July 25, 2012 the Company completed a merger transaction whereby HOJ became a wholly owned subsidiary of the Company (the “HOJ Merger”).  The following disclosure is with respect to material transactions between the Company and related parties since July 25, 2012, and with respect to material transactions between HOJ and related parties since its inception.

1.   The Company’s President/CEO (former owner of HOJ LLC) has historically advanced funds to the Company and predecessor entities from time to time for working capital.  As of December 31, 2012 and December 31, 2011, advances payable to this party were $89,442 and $116,379, respectively.  These advances are non-interest bearing, unsecured, and due on demand.

2.   In March 2012, the Company entered into a representative agreement with Michael Malm who became a member of the Company’s board of directors in July 2012. Under this agreement, as amended, Mr. Malm is entitled to a commission of between 4% and 6% of sales made by Mr. Malm and certain sales brokers, based on the nature of the sales, and a royalty of 3% of all sales made by the Company, as defined. Commissions and royalty expense to Mr. Malm for the year ended December 31, 2012 and 2011 totaled approximately $49,500 and $12,500, respectively. Effective April 1, 2012, the Company agreed to pay Mr. Malm a $6,000 draw per month against commissions.  As of December 31, 2012, net prepaid expenses related to draws in excess of commissions were approximately $28,200.

3.   Effective March 1, 2012, the Company entered into a management agreement (the “Management Agreement”) with AMHC Managed Services, Inc. (“AMHC Services”), a subsidiary of AMHC to provide financial management and accounting services to HOJ. The Management Agreement term was 24 months, and required the Company to pay AMHC Managed Services a monthly fee equal to $27,500 per month ($192,500 expensed during the year ended December 31, 2012). On October 1, 2012, AMHC Services suspended the accounting and financial management services provided under the Management Agreement due to a dispute under the contract.

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4.   On January 14, 2013 the Company entered into a settlement agreement with AMHC Services, the principal owners of AMHC Services, and a separate shareholder pursuant to which the respective parties released each other from certain claims. Under the terms of the settlement the Company issued AMHC Services 3,000,000 shares of its common stock, and issued the separate shareholder 1,500,000 shares of its common stock.  The fair value of the shares issued under this settlement was $652,500 based upon the closing price of the stock on the date of the signed settlement agreement.  As a result of this settlement, the Company recorded an accrued settlement liability of $652,500 on its consolidated balance sheet as of December 31, 2012 and has recorded a corresponding settlement cost on its consolidated statement of operations for the year ended December 31, 2012.

5.   In March 2013, the Company hired one of the principal owners of The Bricktown Group (“Bricktown”) to become the interim COO of the Company.  In November 2012, the Company entered into a consulting agreement with Bricktown to provide beverage management and strategic advisory consulting services to the Company.  The consulting agreement has an initial term of six months with an automatic extension of 180 days provided neither party has provided a written notice to not extend the agreement.  The contract can be terminated upon written notice at any time, but the Company is obligated to pay any fees accrued under the agreement.  The agreement requires the Company to pay an upfront retainer of $10,000 and monthly consulting fees of $10,000 per month, which was to be deferred until that Company raised at least $300,000 in debt or equity.  The Company is to issue 3,000,000 shares of the Company's common stock, of which 1,500,000 shares are issuable upon request after January 4th, 2013 and 1,500,000 shares are issuable on March l, 2013. The first 1,500,000 shares are non-forfeitable and fully vested on the date of the agreement.

Based upon the terms of the agreement, the Company has determined that the measurement date for the initial 1,500,000 shares to be issued under the agreement is the contract date and has calculated a fair value of $225,000 based upon the closing market price on this date.  Accordingly, the Company has recorded an accrued consulting cost liability of $225,000 on the consolidated balance sheet as of December 31, 2012 until such shares are issued.  The stock based compensation associated with the initial shares of $225,000 was recorded as prepaid consulting costs and is being amortized over the initial 3 months of this agreement. For the year ended December 31, 2012, the Company recognized consulting expense of $81,383 related to this agreement. The measurement date for the second tranche of 1,500,000 shares is March 1, 2013.  The fair value of these shares is determined based upon the closing market price of the Company’s common stock on this date and will be amortized over the remaining 3 months of the contract.  On January 10, 2013 the Company issued the initial 1,500,000 shares of its common stock to Bricktown.

Independence of the Board of Directors

Our Board of Directors currently consists of Messrs. Jaynes and Malm.  Neither of the directors are considered “independent” as that term defined by Section 803A of the NYSE Amex Company Guide in as much as each of the directors has had material relationships with the Company.  The Board considers all relevant facts and circumstances in its determination of independence of all members of the Board.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Audit Fees

Our independent registered public accounting firm, GHP Horwath, P.C., (“GHP Horwath”) billed the Company and its predecessor, AMHC, aggregate fees in the amount of approximately $61,000 for the fiscal year ended December 31, 2012, and approximately $51,000 for the fiscal year ended December 31, 2011.  These amounts were billed for professional services that GHP Horwath provided for the audit of our annual financial statements, reviews of the interim consolidated financial statements included in our reports on Forms 10-Q and other services typically provided by an auditor in connection with statutory and regulatory filings or engagements for those fiscal years.

Audit-Related Fees

GHP Horwath billed us aggregate fees in the amount of $25,000 during the fiscal year ended December 31, 2012, for the audit services performed related to the acquisition of HOJ.

Tax Fees

GHP Horwath did not bill us for any tax fees for the fiscal years ended December 31, 2012 and 2011.

All Other Fees

GHP Horwath did not bill us for any other fees for the fiscal years ended December 31, 2012 and 2011.

Audit Committee’s Pre-Approval Practice

In as much as the Company does not have an audit committee, the Company’s board of directors performs the functions of its audit committee.  Section 10A(i) of the 1934 Act prohibits our auditors from performing audit services for us as well as any services not considered to be “audit services” unless such services are pre-approved by the board of directors (in lieu of the audit committee) or unless the services meet certain de minimis standards.

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The board of directors has adopted resolutions that provide that the board must:

Pre-approve all audit services that the auditor may provide to us or any subsidiary (including, without limitation, providing comfort letters in connection with securities underwritings or statutory audits) as required by §10A(i)(1)(A) of the 1934 Act.

Pre-approve all non-audit services (other than certain de minimis services described in §10A(i)(1)(B) of the 1934 Act that the auditors propose to provide to us or any of our subsidiaries.

The board of directors considers at each of its meetings whether to approve any audit services or non-audit services.  In some cases, management may present the request; in other cases, the auditors may present the request.  The board of directors approved GHP Horwath performing our audit for the 2012 fiscal year.

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PART IV

ITEM 15.  EXHIBITS

Exhibit No.	Title
2.1	Agreement and Plan of Merger and Reorganization dated July 25, 2012 by and among Accredited Members Holding Corporation, AMHC Merger Corp., and Hangover Joe’s Inc., Incorporated by reference from Form 10-Q for the quarter ended September 30, 2012 and filed on November 14, 2012.
2.2	Purchase and Indemnification Agreement dated July 27, 2012 by and among Accredited Members Holding Corporation, Hangover Joe’s Inc., Accredited Members, Inc., AMHC Managed Services, Inc. and World Wide Premium Packers, Inc., Incorporated by reference from Form 10-Q for the quarter ended September 30, 2012 and filed on November 14, 2012.
3.1.1	Articles of Incorporation. Incorporated by reference from Form SB-2 Registration Statement filed on January 29, 2007.
3.1.2	Amendment to Articles of Incorporation. Incorporated by reference from Form 10-Q for the quarter ended March 31, 2010 and filed on May 17, 2010.
3.1.3	Amendment to the Articles of Incorporation.  Incorporated by reference from Form 8-K dated December 15, 2010, and filed on December 20, 2010.
3.1.4	Amendment to the Articles of Incorporation.  Incorporated by reference from Form 10-Q for the quarter ended June 30, 2012 and filed on August 14, 2012
3.1.5	Amendment to the Articles of Incorporation.  Incorporated by reference from Form 10-Q for the quarter ended June 30, 2012 and filed on August 14, 2012
3.1.6	Certificate of Designation of the Preferences, rights, limitations, qualifications, and restrictions of the Series B Preferred Stock of Hangover Joe’s Holding Corporation. Filed herewith.
3.1.7	Certificate of Designation of the Preferences, rights, limitations, qualifications, and restrictions of the Series C Preferred Stock of Hangover Joe’s Holding Corporation. Filed herewith.
3.2	Bylaws. Incorporated by reference from Form 8-K dated October 19, 2010, and filed on October 25, 2010.
10.1	Credit Agreement between Hangover Joe’s Holding Corporation and Hangover Joe’s Inc, collectively as borrowers and TCA Global Credit Master Fund LP, as Lender effective January 10, 2013. Filed herewith.
10.2	First Amendment to Credit Agreement between Hangover Joe’s Holding Corporation and Hangover Joe’s Inc, collectively as borrowers and TCA Global Credit Master Fund LP, as Lender dated February , 2013. Filed herewith.
31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Michael Jaynes, Chief Executive Officer).  Filed herewith.
31.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Michael Jaynes, Chief Financial Officer). Filed herewith.
32.1	Certification Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Michael Jaynes, Chief Executive Officer).  Filed herewith.
32.2	Certification Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Michael Jaynes, Chief Financial Officer). Filed herewith.
101.INS	XBRL Instance Document. Filed herewith.
101.SCH	XBRL Schema Document. Filed herewith.
101.CAL	XBRL Calculation Linkbase Document. Filed herewith.
101.DEF	XBRL Definition Linkbase Document. Filed herewith.
101.LAB	XBRL Labels Linkbase Document. Filed herewith.
101.PRE	XBRL Presentation Linkbase Document. Filed herewith.

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SIGNATURES

In accordance with the requirements of Section 13 or 15(d) Securities Exchange Act of 1934, we have duly caused this report to be signed on our behalf by the undersigned, thereunto duly authorized.

	HANGOVER JOE’S HOLDING CORPORATION
Date:  April 15, 2013	By:	/s/  Michael Jaynes
		Michael Jaynes Principal Executive Officer
Date:  April 15, 2013	By:	/s/ Michael Jaynes
		Michael Jaynes Principal Accounting Officer

Pursuant to the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Accredited Members Holding Corporation and in the capacities and on the dates indicated.

Date:  April 15, 2013	By:	/s/ Michael Jaynes
		Michael Jaynes Chairman, President, Chief Executive Officer

Date: April 15, 2013	By:	/s/  Michael Malm
		Michael Malm Director

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HANGOVER JOE’S HOLDING CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Financial Statements:
Balance sheets as of December 31, 2012 and 2011	F-3
Statements of operations for the years ended December 31, 2012 and 2011	F-4
Statements of changes in deficit for the years ended December 31, 2012 and 2011	F-5
Statements of cash flows for the years ended December 31, 2012 and 2011	F-6
Notes to financial statements	F-7 – F-22

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of Hangover Joe’s Holding Corporation:

We have audited the accompanying consolidated balance sheets of Hangover Joe’s Holding Corporation and subsidiary (the “Company”) as of December 31, 2012 and 2011, and the related consolidated statements of operations, changes in equity, and cash flows for the years ended December 31, 2012 and 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2012 and 2011, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company reported a net loss of approximately $2,145,000 in 2012, used net cash in operating activities of approximately $815,000 in 2012, and has a working capital deficiency of approximately $1,407,000 at December 31, 2012.  These factors raise substantial doubt about the Company’s ability to continue as a going concern.  Management’s plans in regard to these matters are also described in Note 1.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ GHP Horwath, P.C.

Denver, Colorado

April 15, 2013

F-2

HANGOVER JOE’S HOLDING CORPORATION

CONSOLIDATED BALANCE SHEETS

	December 31,			December 31,
	2012			2011
ASSETS
CURRENT ASSETS
Cash	$	8,779		$	53,048
Accounts receivable, net		131,273			19,105
Inventory		26,634			46,745
Prepaid expenses		188,570			2,233
Deposits		-			7,500
Total current assets		355,256			128,631
PROPERTY AND EQUIPMENT, NET		3,215			1,750
TOTAL ASSETS	$	358,471		$	130,381
LIABILITIES AND DEFICIT
CURRENT LIABILITIES
Accounts payable	$	594,866		$	92,010
Accrued expenses		960,465			46,842
Payable to shareholder		20,000			-
Advances payable, related party		89,422			116,379
Inventory financing payable		97,611			23,712
Total liabilities (all current)		1,762,364			278,943
COMMITMENTS AND CONTINGENCIES
DEFICIT
Preferred stock; $0.10 par value; authorized shares-10,000,000
Series A; 425,000 authorized shares, 87,501 shares
issued and outstanding		315,078			-
Common stock; $0.001 par value; 150,000,000 authorized shares,
120,846,348 shares issued and outstanding		120,847			-
Additional paid-in capital		623,790			169,931
Accumulated deficit		(2,463,608	)		(318,493	)
Total deficit		(1,403,893	)		(148,562	)
TOTAL LIABILITIES AND DEFICIT	$	358,471		$	130,381

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

F-3

HANGOVER JOE’S HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

		Year ended December 31,
		2012			2011
NET SALES	$	1,079,234		$	279,961
COST OF GOODS SOLD		761,441			138,717
GROSS PROFIT		317,793			141,244
OPERATING EXPENSES
Selling and marketing		840,823			200,496
General and administrative		770,574			191,838
Management fees – related party		192,500			-
Settlement costs		652,500			-
Total operating expenses		2,456,397			392,334
LOSS FROM OPERATIONS		(2,138,604	)		(251,090	)
OTHER INCOME (EXPENSE)
Interest income		14			-
Interest expense		(6,525	)		(5,583)
NET LOSS	$	(2,145,115	)	$	(256,673	)
BASIC AND DILUTED NET LOSS PER
COMMON SHARE	$	(0.02	)		*
BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING		92,551,863			61,295,271
* Less than $(0.01) per share

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

F-4

HANGOVER JOE’S HOLDING CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN DEFICIT

YEARS ENDED DECEMBER 31, 2012 AND 2011

	Common Stock						Preferred Stock						Additional paid-in			Accumulated
	Shares			Amount			Shares			Amount			Capital			deficit			Total
Balances, January 1, 2011		-		$	-			-		$	-		$	31,000		$	(61,820	)	$	(30,820	)
Withdrawals		-			-			-			-			(11,069	)		-			(11,069	)
Contributed services		-			-			-			-			150,000			-			150,000
Net loss		-			-			-			-			-			(256,673	)		(256,673	)
Balances, December 31, 2011		-			-			-			-			169,931			(318,493	)		(148,562	)
Withdrawals		-			-			-			-			(10,579	)		-			(10,579	)
Contributed services		-			-			-			-			50,000			-			50,000
Issuance of common shares upon incorporation and legal reorganization of entities under common control		61,295,271			61,295			-			-			(61,095	)		-			200
Shares issued to founders		4,290,669			4,291			-			-			(4,277	)		-			14
Proceeds from issuance of common stock		18,541,840			18,542			-			-			691,458			-			710,000
Common shares cancelled due to dissenters right		(612,953	)		(613	)		-			-			(19,387	)		-			(20,000	)
Acquisition of AMHC and sale   of subsidiary interests		36,807,801			36,808			89,168			321,081			(347,845	)		-			10,044
Proceeds from issuance of common stock post-merger		242,858			243			-			-			16,757			-			17,000
Common shares issued to reduce payables		267,526			268			-			-			18,459						18,727
Conversion of preferred to common stock		13,336			13			(1,667	)		(6,003	)		5,990			-			-
Stock-based compensation		-			-			-			-			114,378			-			114,378
Net loss		-			-			-			-			-			(2,145,115	)		(2,145,115	)
Balances, December 31, 2012		120,846,348		$	120,847			87,501		$	315,078		$	623,790		$	(2,463,608	)	$	(1,403,893	)

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

F-5

HANGOVER JOE’S HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year ended
	December 31,
	2012			2011
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss	$	(2,145,115	)	$	(256,673	)
Adjustments to reconcile net loss to net cash used in
operating activities:
Contributed services		50,000			150,000
Amortization of prepaid consulting services paid for in common stock		81,383			-
Settlement expense		652,500			-
Depreciation expense		1,097			700
Bad debt expense		21,624			-
Stock-based compensation		114,378			-
Changes in operating assets and liabilities:
Accounts receivable		(133,792	)		(19,105	)
Prepaid expenses		(42,720	)		(2,233	)
Deposits		7,500			(7,500	)
Inventory		20,111			(46,745	)
Accounts payable		521,583			92,010
Accrued expenses		36,123			46,843
Net cash used in operating activities		(815,328	)		(42,703	)
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(2,562	)		-
Cash received in sale of subsidiary interests		10,044			-
Net cash provided by investing activities		7,482			-
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock		727,214			-
Increase in inventory financing payable		73,899			23,712
Advances (paid to) received from related party		(26,957	)		83,044
Withdrawals		(10,579	)		(11,069	)
Net cash provided by financing activities		763,577			95,687
Net (decrease) increase in cash		(44,269	)		52,984
Cash, beginning of period		53,048			64
Cash, end of period	$	8,779		$	53,048
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid for interest	$	6,524		$	5,583
SUPPLEMENTAL DISCLOSURE NON-CASH ITEMS
Common shares issued for payables	$	18,727		$	-
Common shares issued for preferred shares	$	6,003		$	-
Shareholder payable	$	20,000		$	-

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

F-6

NOTE 1 – ORGANIZATION, DESCRIPTION OF BUSINESS, AND MANAGEMENT’S PLANS

Organization:

Hangover Joe’s Holding Corporation (“HJHC” or the “Company”) was originally incorporated in the State of Colorado in December 2005 as Across American Real Estate Exchange, Inc. (“AAEX”) to facilitate the exchange of real estate properties between individuals under Section 1031 of the Internal Revenue Code.  In February 2010, Accredited Members, Inc. (“AMI”), a provider of investor research and management services, was merged with and into a wholly-owned subsidiary of AAEX, and AMI became a wholly-owned subsidiary of the Company.  In May 2010, AAEX changed its name to Accredited Members Holding Corporation (“AMHC”).

On July 25, 2012, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Hangover Joe’s, Inc., a privately-held Colorado corporation (“HOJ”), whereby on July 25, 2012, the Company acquired HOJ in a reverse triangular merger (the “Acquisition”).  Prior to the Acquisition, the Company had 36,807,801shares outstanding. Upon closing the Acquisition, the Company issued 83,514,827 common shares to the HOJ shareholders in exchange for all of their ownership interests in HOJ such that the former owners of HOJ owned approximately 69% of the Company post Acquisition.  The shareholders of the Company prior to the Acquisition owned approximately 31% of the Company post Acquisition.  In connection with the Acquisition on July 25, 2012, the Company changed its name to Hangover Joe’s Holding Corporation.

The Merger Agreement further provided that within five business days after the closing of the Acquisition, the Company would sell to Accredited Members Acquisition Corporation (“Buyer”) all of the equity interests in three of the Company’s subsidiaries (the “Sale”), being Accredited Members, Inc., AMHC Managed Services, Inc. and World Wide Premium Packers, Inc. (collectively, the “Subsidiaries”).  Buyer is a privately-held Colorado corporation owned by two former directors of the Company, JW Roth and David Lavigne.  The parties closed the Sale on July 27, 2012.  The Buyer paid $10,044 and assumed all liabilities related to the business of the Subsidiaries in exchange for all of the shares in the Subsidiaries owned by the Company.

HOJ is a Colorado corporation formed on March 5, 2012.  HOJ was formed for the purpose of acquiring all of the assets of both Hangover Joe’s Products LLC (“HOJ LLC”) and Hangover Joe’s Joint Venture (“HOJ JV”).  HOJ LLC had conducted operations through HOJ JV, with the owner of HOJ LLC being one of the same owners and control persons of HOJ JV. Effective March 30, 2012, HOJ acquired the net assets of HOJ LLC and HOJ JV through the issuance of common stock of HOJ.  Because HOJ had no significant assets or business operations prior to the merger and each of these entities were owned by the same control group, this transaction was accounted for as a reorganization of entities under common control.  Accordingly, the historical results of operations of HOJ LLC and HOJ JV prior to March 30, 2012 are included in the results of operations of the Company.

Because all of the operating businesses of AMHC were contemporaneously sold within five business days after the Acquisition, the transaction has been accounted for as a recapitalization of HOJ.  Accordingly, the accompanying consolidated financial statements include the financial position, results of operations and cash flows of HOJ and its predecessor entities, HOJ LLC and HOJ JV, prior to the date of Acquisition. The historical results operations and cash flows of AMHC and the Subsidiaries prior to the date of the Acquisition have been excluded from the accompanying consolidated financial statements. The stockholders’ equity of HOJ prior to the Acquisition has been retroactively restated for the equivalent number of shares received in the exchange after giving effect to any differences in the par value of the AMHC and HOJ common stock, with an offset to additional paid-in capital.  The restated consolidated accumulated deficit of the accounting acquirer (HOJ) has been carried forward after the exchange.

Description of Business:

The Company sells an all-natural, two-ounce beverage, formulated to help relieve the symptoms associated with alcohol induced hangovers – the Hangover Recovery Shot. The Hangover Recovery Shot is an officially licensed product of The Hangover movie series from Warner Brothers.  The Company has registered the trademark “Hangover Joe’s Get Up & Go” with the U.S. Patent and Trademark office. The assets consist of intellectual property relating to Hangover Joe’s Recovery Shot, including but not limited to a license agreement dated July 19, 2011, between HOJ LLC and Warner Bros. Consumer Products, Inc.  The license agreement permits HOJ to use the costumes, artwork logos, and other elements depicted in the 2009 movie “The Hangover” during the term of the license agreement, as amended, which expires January 31, 2016.  The Company sells its products primarily to convenience stores, liquor stores, and grocery stores through distribution agreements, as well as through online internet sales. The Company began selling a hangover recovery shot in February 2011 and began selling the licensed Hangover Joe’s Recovery Shot in July 2011. HOJ is activelyseeking to expand the distribution of the Hangover Joe’s Recovery Shot, and has recently entered into distribution agreements to expand its reach to Australia, New Zealand and Canada.

F-7

NOTE 1 – ORGANIZATION, DESCRIPTION OF BUSINESS, AND MANAGEMENT’S PLANS (CONTINUED)

Management’s plans

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company reported a net loss of approximately $2,145,000 for the year ended December 31, 2012, and a working capital deficiency and accumulated deficit of approximately $1,407,000 and $2,464,000, respectively, at December 31, 2012.  The Company has a limited operating history and has relied primarily on debt financing and private placements of its common stock to fund its operations.  The Company cannot provide any assurance it will be able to raise funds through a future issuance of debt or equity to carry out its business plan. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets, or the amounts or classification of liabilities that may result from the possible inability of the Company to continue as a going concern. Management’s plans with regards to these conditions are described below.

Management has taken various steps to increase capital resources and improve liquidity.  

-   In January 2013, the Company entered into a senior secured lending arrangement with TCA Global Credit Master Fund LP (“TCA”) for up to a maximum borrowing of $6,000,000. The credit facility has an initial line of credit of $425,000 with a six month term (and six month renewal option) and is collateralized by the assets of the Company. At closing, the Company was advanced $425,000, less fees and closing costs.

-   On April 12, 2013, the Company executed a term sheet with an accredited investor (“Investor”) for a proposed investment of $1,000,000 in the Company in exchange for 15,000,000 shares of common stock, 5,000,000 shares of newly authorized Series C Preferred Stock (convertible into 15,000,000 shares of common stock) and warrants to acquire 500,000 shares of common stock at $0.12 per share for a period of five years. The first tranche of $500,000 is to be deposited on or before April 17, 2013 in exchange for 15,000,000 shares of common stock and warrants to acquire 250,000 common shares described above. The second tranche of $500,000 is to be deposited on or before April 26, 2013 in exchange for 5,000,000 shares of Series C Preferred Stock and warrants to acquire 250,000 common shares described above (See Note 11). On April 12, the Company received $50,000 toward the first investment tranche.

-   Management has also taken steps to reduce its operating costs. As part of this effort, certain executive officers and consultants agreed to defer a portion of their compensation effective October 1, 2012.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its 100%-owned subsidiary.  All intercompany accounts, transactions, and profits are eliminated in consolidation.

Reclassifications

Certain immaterial reclassifications have been made to the prior period consolidated financial statements in order to conform to the current year presentation.  The Company has reclassified $86,000 in sample costs and $30,000 in shipping and handling costs from cost of goods sold to sales and marketing costs, respectively for the fiscal year ended December 31, 2011. The Company has determined that the reclassification more accurately reflects the economics of these transactions.

F-8

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant estimates are used in accounting for certain items such as allowance for doubtful accounts, revenue recognition, and stock-based compensation. Estimates are based on historical experience, where applicable, and assumptions that management believes are reasonable under the circumstances. Due to the inherent uncertainty involved with estimates, actual results may differ.

Accounts Receivable and Concentration of Credit Risk

The Company is subject to credit risk through trade receivables. This credit risk is mitigated by the diversification of the Company’s operations, as well as its customer base. The Company grants varying payment terms to its customers. Payment terms for customers can vary from due upon receipt up to net 45 days.

Two customers comprise approximately 78% of trade accounts receivable at December 31, 2012; these individual customer balances represent approximately 65% and 13% of the net trade accounts receivable.  Three customers comprise approximately 76% of the trade accounts receivable at December 31, 2011; these individual customer balances represent approximately 50%, 15%, and 11% of the total trade accounts receivable. Four customers accounted for 54% of net sales for the year ended December 31, 2012; these individual customer sales represent approximately 18%, 16%, 10%, and 10% of annual net sales.  Three customers accounted for 36% of net sales for the year ended December 31, 2011; these individual customer sales represent approximately 14%, 12%, and 10% of annual net sales.  During 2012, sales to distributors in Canada and Australia accounted for approximately 16% and 10% of annual net sales.

Ongoing credit evaluations of customers’ financial condition are performed. Collateral is not required. The Company maintains an allowance when necessary for doubtful accounts that is the Company’s best estimate of potentially uncollectible trade receivables. Provisions are made based upon a specific review of all significant outstanding invoices that are considered potentially uncollectible in whole or in part. For those invoices not specifically reviewed or considered uncollectible, general provisions are provided at different rates, based upon the age of the receivable, historical experience, and other currently available evidence. The allowance estimates are adjusted as additional information becomes known or as payments are made. As of December 31, 2012, the allowance for doubtful accounts was $21,624. There was no allowance at December 31, 2011.

Inventory

Inventory is valued at the lower of cost (first-in, first-out) or market value.

License and Royalties

The Company has a license with Warner Bros. Consumer Products, Inc. (“WBCP”) that allows the Company the use of the costumes, artwork, logos and other elements depicted in the 2009 movie, The Hangover.  This license, as amended, expires January 31, 2016.  The terms of the WBCP license provide for royalties based on a percentage of products sold, as defined, subject to agreed-upon guaranteed minimum royalties. Guaranteed minimum royalty payments are made periodically over the term of the license and are recorded when paid as a prepaid expense in the balance sheet.  The prepaid expense is amortized to royalties in cost of goods sold at a ratio of current period revenues to the total revenues expected to be recorded over the term of the license.  The Company reviews its sales projections quarterly to determine the likely recoverability of its prepaid asset, as well as any unpaid minimum obligation.  If management determines that the prepaid expense is unlikely to be recovered by product sales, prepaid license expense is charged to cost of goods sold, based on current and expected revenues, in the period in which such determination is made.  

F-9

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue Recognition

The Company has contractual agreements with certain third-party distributors.  Under the agreements, the Company is not guaranteed any minimum level of sales or transactions.  The Company also offers its products for sale through its website at www.hangoverjoes.com.

The Company recognizes revenue when all of the following have occurred: (1) persuasive evidence of an arrangement exists; (2) delivery to third party distributors and consumers via the Company’s website has occurred; (3) the sales price is fixed or determinable; and (4) collectability is reasonably assured.  Delivery is not considered to have occurred until the title and the risk of loss passes to the customer according to the terms of the contract between the Company and the customer.  For sales to distributors, revenue is usually recognized at the time of delivery.  For sales through the Company’s website, revenue is recognized at time of shipment.

Management evaluates the terms of its sales in consideration of the criteria outlined in Principal Agent Consideration with regards to its determination of gross versus net reporting of revenue for transactions with customers.  The Company sells, through its website, Hangover Joe’s Recovery Shots.  In these transactions, management has determined that the Company (i) acts as principal; (ii) has the risks and rewards of ownership, including the risk of loss for collection, delivery or returns; and (iii) has latitude in establishing price with the customer.  For these transactions, the Company recognizes revenue on a gross basis.

The Company offers a variety of incentives and discounts to distributors, customers and consumers through various programs to support the distribution of its products.  These incentives and discounts include cash discounts, price allowances, volume based rebates and product placement fees.  These incentives and discounts are reflected as a reduction of gross sales to arrive at net sales. The aggregate deductions from gross sales recorded in relation to these programs were approximately $43,100 and $17,800 for the years ended December 31, 2012 and 2011, respectively.

Cost of Goods Sold

Cost of goods sold consists of the costs of raw materials utilized in the production of its product, co-packing fees, and in-bound freight charges. Raw material costs account for the largest portion of the cost of goods sold. Raw materials include bottles, ingredients and packaging materials. The manufacturer is responsible for the ingredients. Costs of goods sold also include license and royalty expenses.

Supplier/Manufacturer Concentration

The Company relies on its third-party suppliers for raw materials necessary for its products, and it relies on third-party manufacturers for the production of its product.  Although the Company believes that it could utilize alternative suppliers and manufacturers, any delay in locating and establishing relationships with other suppliers/manufacturers could result in product shortages and back orders for the products, with a resulting loss of net sales and profitability.  The Company’s third-party manufacturer acquires some ingredients from suppliers outside of the United States.  Purchasing these ingredients is subject to the risks generally associated with importing raw materials from other countries, including, among other factors, delays in shipments, changes in economic and political conditions, quality assurance, tariffs, trade disputes and foreign currency fluctuations.  These factors could result in a delay in or disruption of the supply of certain raw materials.  Any significant delay in or disruption of the supply of raw materials could have a material adverse effect on the Company’s business.

Sales and Marketing Expenses

Sales and marketing costs include selling expenses such as distribution expenses to transport products to customers and warehousing expenses after manufacture, as well as expenses for advertising, sampling and in-store demonstration costs, costs for merchandise displays, point-of-sale materials, trade shows, other marketing expenses and product design expenses.

Advertising Expenses

Advertising costs are expensed as incurred and are included in sales and marketing expense in the accompanying consolidated statements of operations. Total advertising expenses were approximately $122,000 and $27,000 for the years ended December 31, 2012 and 2011, respectively.

F-10

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Freight-Out Costs

Freight-out costs incurred to ship product to customers are included in sales and marketing expense in the accompanying consolidated statements of operations. Total freight-out costs were approximately $47,000 and $30,000 for the years ended December 31, 2012 and 2011, respectively.

Income Taxes

Prior to March 2012, no provision for income taxes was provided in the accompanying financial statements because HOJ LLC (as a limited liability company), and HOJ JV (as a partnership), elected to file as partnerships, and therefore management believes that prior to March 31, 2012 the Company was not subject to income taxes, and, that such taxes were the responsibility of the individual member/partners.

Beginning in March 2012, as a corporation, the Company now records a provision for deferred income tax assets and liabilities in order to reflect the net tax effects of temporary differences between (i) the tax basis of assets and liabilities and (ii) their reported amounts in the financial statements.  The provision is based upon enacted tax laws and rates in effect for the years in which the differences are expected to affect taxable income.  The Company establishes a valuation allowance when necessary to reduce deferred income tax assets to the amounts expected to be realized.  The Company expects to file income tax returns in the US Federal jurisdiction and various State jurisdictions.

The Company assesses the likelihood of the financial statement effect of a tax position that should be recognized when it is more likely than not that the position will be sustained upon examination by a taxing authority based on the technical merits of the tax position, circumstances, and information available as of the reporting date.  All tax years remain open and subject to U.S. Federal tax examination.  Management does not believe that there are any current tax positions that would result in an asset or liability for taxes being recognized in the accompanying financial statements.

The Company’s policy is to classify tax related interest and penalties as income tax expense. There is no interest or penalties estimated on the underpayment of income taxes as a result of unrecognized tax benefits.

Stock-Based Compensation

Stock-Based Compensation is recognized for an award of equity instruments in the financial statements and is measured based on the grant date fair value of the award.  Stock-Based Compensation expense is recognized over the period of service in exchange for the award (generally the vesting period).  The Company estimates the fair value of each stock option at the grant date by using an option pricing model, typically the Black-Scholes model.

For shares issued to non-employees for goods or services, the Company accounts for these shares in accordance with ASC 505-50.  Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable (a) goods or services received; or (b) the equity instruments issued.  The fair value of the share-based payment transaction is determined at the earlier of the performance commitment date or performance completion date.

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss applicable to common shareholders by the weighted-average number of shares of common stock outstanding for the period. Historical loss per share of the accounting acquirer (HOJ) has been adjusted retroactively to reflect the new capital structure of the Company as a result of the Merger Agreement.  Diluted net loss per share reflects the potential dilution that could occur if dilutive securities were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company, unless the effect of such inclusion would reduce a loss or increase earnings per share. For each of the periods presented in the accompanying consolidated financial statements, the effect of the inclusion of dilutive shares would have resulted in a decrease in loss per share. Stock options, warrants, and common shares underlying convertible preferred stock in the aggregate of 10,355,726 and 3,638,070 shares as of December 31, 2012 and 2011, respectively, were not included in the calculation of diluted net loss per common share because the effect would have been anti-dilutive.

F-11

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Fair Value of Financial Instruments

ASC 820 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available.

The three levels of inputs required by the standard that the Company uses to measure fair value are summarized below.

·   Level 1: Quoted prices in active markets for identical assets or liabilities.

·   Level 2: Observable inputs other than Level 1 inputs such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.

·   Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Under fair value accounting, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. As of December 31, 2012 and 2011, the Company had no financial assets or liabilities required to be reported for fair value purposes.

The carrying value of the Company’s financial instruments, including cash, accounts receivable, accounts payable, and the inventory financing payable approximate fair value at December 31, 2012 and 2011, due to the relatively short maturity of the respective instruments. The fair value of related party payables is not practicable to estimate due to the related party nature of the underlying transactions.

Recent Accounting Pronouncements

In May 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.” This pronouncement was issued to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards (“IFRS”).  ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements particularly for level 3 fair value measurements. ASU 2011-04 became effective for the Company on January 1, 2012. The adoption of ASU 2011-04 did not have any impact on the Company’s financial position, results of operations or liquidity.

NOTE 3 – INVENTORY

Inventory as of December 31, 2012 and 2011, consists of the following:

	December 31, 2012		December 31, 2011
Raw materials (packing supplies)	$	26,634	$	27,515
Finished goods (bottled products)		-		19,230
	$	26,634	$	46,745

In connection with the Warner Brothers license renewal in January 2013, certain changes were made to images that were available to the Company under the original license agreement which required a re-design of certain packaging materials.  The Company is able to use the existing packaging and promotional materials through March 31, 2013. Accordingly, the Company evaluated the carrying value of the packing material on hand as of December 31, 2012 and recorded a write-down of inventory of $75,376 in the fourth quarter of 2012.  The inventory write-down is included in costs of goods sold in the consolidated statement of operations for the year-end December 31, 2012.

F-12

NOTE 4 – PROPERTY AND EQUIPMENT

As of December 31, 2012 and 2011, property and equipment consists of the following:

	December 31, 2012			December 31, 2011
Website development	$	3,500		$	3,500
Furniture and equipment		2,562			-
		6,062			3,500
Less accumulated depreciation		(2,847	)		(1,750	)
	$	3,215		$	1,750

Depreciation and amortization expense on property and equipment for the years ended December 31, 2012 and 2011 was $1,097 and $700, respectively.

NOTE 5 – INVENTORY FINANCING AND FACTORING ARRANGEMENTS

Through March 2012, the Company had an agreement with a finance company which provided financing up to $250,000, secured by the specific goods underlying the goods ordered from the Company’s third-party manufacturer. The finance company made the required payment to the third-party manufacturer at the time a purchase order was placed, and was entitled to demand payment from the Company when the goods were delivered. The Company paid a financing fee equal to 4.75% of the purchase order amount for each transaction, plus administrative fees. Additional charges of 0.16% per day (57.6% annualized) were incurred if the financing remained open for more than 30 days. The inventory financing payable was $23,712 at December 31, 2011, and interest expense during the year ended December 31, 2012 was $223 (none in 2011).  Amounts outstanding under this agreement were paid in full when the agreement expired in April 2012.

In September 2012, the Company entered into a factoring agreement with the same finance company described above which provided financing up to $250,000, secured by the accounts receivable and inventory of the Company. The finance company advanced to the Company up to 80% of eligible accounts receivable and was entitled to collect receivables directly from the Company’s customers.  The Company paid a financing fee equal to 2.5% for receivable amounts outstanding up to 30 days and an additional rate of 0.084% per day (30.7% annualized) after the initial 30 days with a maximum exposure of 60 days.  

In October 2012, the Company entered into a purchase order financing arrangement with this same finance company which supplements the factoring agreement above.  The finance company advanced up to 100% of the manufacturing and shipping costs at the time a Company purchase order is submitted to the manufacturer.  The Company paid a financing fee equal to 3.85% of the purchase order amount for each transaction and an additional rate of 0.13% per day (47.4% annualized) after the initial 30 days. As of December 31, 2012, the inventory financing payable under the purchase order financing and factoring arrangement was $97,611.  Interest expense during the year ended December 31, 2012 was $6,302 (none in 2011).  Amounts outstanding under this agreement were paid in full in January 2013 when the Company entered into the revolving credit facility described in Note 11.

NOTE 6 – ACCRUED EXPENSES

Accrued expenses as of December 31, 2012 and 2011 consist of the following:

	December 31,		December 31,
	2012		2011
Accrued expenses	$	37,005	$	46,842
Deferred salaries		45,960		-
Accrued settlement costs – paid for in common stock		652,500		-
Accrued consulting costs – paid for in common stock		225,000		-
	$	960,465	$	46,842

In January 2013, the Company issued 4,500,000 and 1,500,000 common shares for the accrued settlement costs and accrued consulting costs, respectively. See Note 8 for further discussion of accrued settlement costs and accrued consulting costs.

F-13

NOTE 7 – RELATED PARTY TRANSACTIONS

Advances payable, related party

The President/CEO of the Company has advanced funds to the Company from time to time for working capital.  As of December 31, 2012 and December 31, 2011, advances payable to this party were $89,442 and $116,379, respectively.  These advances were non-interest bearing, unsecured, and due on demand. On March 1, 2013, the Company converted the outstanding advance amount of $89,422 into a promissory note.  Interest at the rate of 5.5% per annum is compounded and paid annually.  Principal payments in the amount of $14,966 and accrued interest shall be payable in six installments with the first payment due on June 15, 2013.

Sales to Related Party

During fiscal years ended December 31, 2011 and 2012, the Company recorded net sales of $10,700 and $4,100, respectively for product sold to a company that is 32% owned by a member of the Company's board of directors.

NOTE 8 – COMMITMENTS AND CONTINGENCIES

WBCP License Agreement

The Company has a license with WBCP that allows the Company the use of the costumes, artwork, logos and other elements depicted in the 2009 movie, The Hangover.  This license had an initial term through January 31, 2013 and provides for certain royalties based on a percentage of products sold subject to certain agreed-upon guaranteed minimum royalty payments over the term of the license.

In January 2013, the Company entered into an extension of its product license agreement with WBCP extending the term of the agreement to January 31, 2016. Further, the extension added certain channels of distribution and required certain agreed-upon minimum royalty payments over the next three years, the first of which was paid from the proceeds from the TCA revolving credit facility discussed in Note 11.

Royalty and Commission Agreements

The Company has a representative agreement with an individual who became a member of the Company’s board of directors in March 2012. Under this agreement, as amended, this individual is entitled to a commission of between 4% and 6% of sales made by this individual, based on the nature of the sales, and a royalty of 3% of all sales made by the Company, as defined. Commissions and royalty expense to this individual for the years ended December 31, 2012 and 2011 totaled approximately $49,500 and $12,500, respectively. Effective April 1, 2012, the Company agreed to pay this individual a $6,000 draw per month against commissions. As of December 31, 2012, net prepaid expenses related to draws in excess of commissions were approximately $28,000.

The Company has an agreement with a second individual for design services. Under this agreement, as amended, this individual is entitled to receive a royalty of 2% of net sales, as defined. Royalty expense to this individual was $18,400 and $4,500 for the years ended December 31, 2012 and 2011, respectively. Effective April 1, 2012, the Company agreed to pay this individual a $3,000 draw per month against royalties. As of December 31, 2012, net prepaid expenses related to draws in excess of royalties were approximately $17,000.

Management Agreement with AMHC Managed Services

Effective March 1, 2012, HOJ entered into a management agreement (the “Management Agreement”) with AMHC Managed Services, Inc. (“AMHC Services”), a subsidiary of AMHC. The significant terms of the Management Agreement provided for monthly payments to AMHC Services in exchange for financial management and accounting services, corporate office and administrative services, and expertise regarding compliance with securities regulations.  The Management Agreement term was 24 months, and required the Company to pay AMHC Services a monthly fee equal to $27,500 per month ($192,500 expensed during the year ended December 31, 2012).

On October 1, 2012, AMHC Services suspended the accounting and financial management services provided under the Management Agreement due to a dispute under the contract.  In January 2013, the Company settled the dispute and terminated the Management Agreement in exchange for 3,000,000 shares of common stock (See below).

F-14

NOTE 8 – COMMITMENTS AND CONTINGENCIES (CONTINUED)

Settlement Agreement with AMHC Services and Other Claims

On January 14, 2013, the Company entered into a settlement agreement with AMHC Services, the principal owners of AMHC Services, and an independent third party pursuant to which the respective parties released each other from certain claims. Under the terms of the settlement, the Company issued AMHC Services 3,000,000 shares of its common stock, and issued the independent third party 1,500,000 shares of its common stock.  The fair value of the shares issued under this settlement was $652,500 based upon the closing price of the stock on the date of the signed settlement agreement.

As a result of this settlement, the Company recorded an accrued settlement liability of $652,500 on its consolidated balance sheet as of December 31, 2012 and has recorded a corresponding settlement expense on its consolidated statement of operations for the year ended December 31, 2012.  Legal costs are expensed as incurred.

Strategic Consulting Agreement

In November 2012, the Company entered into a consulting agreement with The Bricktown Group (“Bricktown”) to provide beverage management and strategic advisory consulting services to the Company.  The consulting agreement has an initial term of six months with an automatic extension of 180 days provided neither party has provided a written notice to not extend the agreement.  The contract can be terminated upon written notice at any time, but the Company is obligated to pay any fees accrued under the agreement.  The agreement requires the Company to pay an upfront retainer of $10,000 and monthly consulting fees of $10,000 per month, which was to be deferred until the Company raised at least $300,000 in debt or equity.  The Company is to issue 3,000,000 shares of the Company's common stock in two tranches, of which 1,500,000 shares are issuable upon request after January 4th, 2013 and 1,500,000 shares are issuable on March l, 2013. The first 1,500,000 shares are non-forfeitable and fully vested on the date of the agreement.

Based upon the terms of the agreement, the Company determined that the measurement date for the initial 1,500,000 shares to be issued under the agreement is the contract date and calculated a fair value of $225,000 based upon the closing market price on this date.  Accordingly, the Company recorded an accrued consulting cost liability of $225,000 on the consolidated balance sheet as of December 31, 2012 until such shares are issued.  The stock-based compensation associated with the initial shares of $225,000 was recorded as prepaid consulting costs and is being amortized over the three-month term of this agreement. For the year ended December 31, 2012, the Company recognized consulting expense of $81,383 related to this agreement. The measurement date for the second tranche of 1,500,000 shares was March 1, 2013.  The fair value of these shares was determined based upon the closing market price of the Company’s common stock on this date and will be amortized over the remaining 3 months of the contract.  On January 10, 2013, the Company issued the initial 1,500,000 shares of its common stock to Bricktown. In March 2013, the Company hired one of the principal owners of Bricktown to become the interim COO of the Company.

NOTE 9 – STOCKHOLDERS’ EQUITY

Preferred stock

The Company is authorized to issue up to 10,000,000 shares of Preferred stock, par value $0.10 per share.  The Articles of Incorporation provide that the Preferred stock may be issued from time to time in one or more series and gives the Board of Directors authority to establish the designations, preferences, limitations, restrictions, and relative rights of each series of Preferred Stock

Series A Preferred Stock

Of the 10,000,000 shares of the Company’s authorized Preferred Stock, ($0.10 par value per share), 425,000 shares are designated as Series A Convertible Preferred Stock (the “Series A Preferred”).  The holders of outstanding shares of Series A Preferred are entitled to notice of any shareholders’ meeting and to vote as a single class with the common stock upon any matter submitted for approval by the holders of common stock, on an as-converted basis, as defined. Each share of Series A Preferred shall have eight votes per share. If any dividend or distribution is declared or paid by the Company on common stock, whether payable in cash, property, securities or rights to acquire securities, the holders of the Series A Preferred will be entitled to participate with the holders of common stock in such dividend or distribution, as defined.

F-15

NOTE 9 – STOCKHOLDERS’ EQUITY (CONTINUED)

Additionally, upon liquidation, dissolution or winding up on the Company, the Series A Preferred shareholders are entitled to be paid together with the common shareholders on a pro-rata basis.  The Series A Preferred holders may convert such shares of Series A Preferred in whole or in part, at any time, or from time-to-time upon written notice to the Company subject to the terms set forth below. The Series A Preferred may, or shall, be converted into shares of the Company’s authorized but unissued common stock on the following bases: (i) At the option of the holder, at any time before the “Financial Milestone” is met each share of Series A Preferred shall be convertible into eight shares of the Company’s common stock. (ii) Upon the “Financial Milestone” being met, each share of Series A Preferred shall automatically be converted into 28.8 shares of the Company’s common stock. (iii) If the “Financial Milestone” has not been met by October 8, 2013, each share of Series A Preferred then outstanding shall automatically be converted into eight shares of the Corporation’s Common Stock. Subsequent to the HOJ Merger on July 24, 2012 through December 31, 2012, one Series A Preferred holder converted 1,667 Series A Preferred Shares into 13,336 shares of the Company’s common stock.

Common stock

The Company is authorized to issue up to 150,000,000 shares of $0.001 par value common stock. As discussed in Note 1, the Company entered into the Merger Agreement with HOJ, whereby the Company issued 83,514,827 common shares in exchange for all the outstanding shares of HOJ. This transaction has been accounted for as a recapitalization of HOJ and accordingly the historical stockholders’ equity transactions of HOJ prior to the Acquisition has been retroactively restated for the equivalent number of shares received in the exchange after giving effect to any differences in the par value of the AMHC and HOJ common stock, with an offset to additional paid-in capital. 

On March 30, 2012, the owners of HOJ LLC and HOJ JV assigned the net assets of HOJ LLC and HOJ JV to HOJ in exchange for 61,295,271 shares of the Company’s common stock.  As a result, on March 30, 2012, the Company’s equity accounts were reclassified to reflect this change in legal organization of the Company, with no impact on total equity (deficit).

In April 2012, 4,290,669 shares were issued as founders shares to three individuals.  In May 2012, the Company completed a private placement of 15,323,838 shares at $0.0326 per share for cash proceeds of $500,000.  In July 2012, the Company issued 3,218,002 shares of the Company’s common stock at $0.065 per share for cash of $210,000.  During the fourth quarter of 2012, the Company issued 242,858 shares of common stock at $0.07 per share for cash proceeds of $17,000.  Also, the Company issued 267,526 shares of common stock in consideration for $18,727 of accounts payable.

Dissenting Shareholder

In connection with the Acquisition, an HOJ shareholder holding the equivalent of 612,953 shares of common stock asserted his rights as a dissenting shareholder under the Colorado Business Corporation Act and demanded payment for the fair value amount of his shares as of the date of the Acquisition.  In July 2012, the Company estimated the fair value of these shares to be $20,000 and recorded a payable to shareholder in the amount of $20,000 and corresponding decrease to Equity.

On February 15, 2013, the Company entered into a settlement agreement with the dissenting HOJ shareholder.  Under the terms of the settlement agreement, the Company agreed to pay $5,000 cash at closing and $15,000 plus accrued interest at 5% within 90 days.  The Company also agreed to issue 50,000 shares of the Company’s common stock.  The fair value of the common stock at the date of settlement was $5,500.

Stock options

Effective March 11, 2009, AMHC established the 2009 Stock Option Plan (“the “2009 Plan).  The 2009 Plan established by AMHC was retained by the Company after the Acquisition.  Under the 2009 Plan, the Company may grant non-statutory and incentive options to employees, directors and consultants for up to a total of 7,000,000 shares of common stock. The exercise prices of the options granted are determined by the Plan Committee, whose members are appointed by the Board of Directors, and the exercise prices are generally to be established at the estimated fair value of the Company's common stock at the date of grant. Options granted have terms that do not exceed five years. As of December 31, 2012, stock options to purchase 650,000 shares of common stock are outstanding under the 2009 Plan.

F-16

NOTE 9 – STOCKHOLDERS’ EQUITY (CONTINUED)

On July 26, 2012, the Company’s shareholders approved the 2012 Stock Option Plan (the “2012 Plan”). Under the Plan, the Company may grant stock options, restricted and other equity awarded to any employee, consultant, independent contractor, director or officer of the Company for up to a total of 11,500,000 shares of common stock. As of December 31, 2012, stock options to purchase 2,266,190 shares of common stock are outstanding under the 2012 Plan.

In April 2013, the Company’s Board of Directors reduced the number of common shares reserved under the 2012 Stock Option Plan from 11,500,000 shares to 4,500,000 and reduced the number of common shares reserved under the 2009 Stock Option Plan from 7,000,000 shares to 650,000 shares thereby increasing the number of common shares available for issuance by 13,350,000.

The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton valuation model. Expected volatility is based upon weighted average of historical volatility over the expected term of the option and implied volatility. The expected term of stock options is based upon historical exercise behavior and expected exercised behavior. The risk-free interest rate is based upon implied yield on a U.S. Treasury zero-coupon issue with a remaining term equal to the expected term of the option. The dividend yield is assumed to be none as the Company does not anticipate paying any dividends in the foreseeable future.

A summary of the weighted average assumptions used to value stock options for the year ended December 31, 2012 is as follows:

Risk free interest rate	0.25 - 0.33%
Expected volatility	186%
Expected term	2-3 years
Expected dividend yield	n/a

During the year ended December 31, 2012, the Company granted options to purchase an aggregate of 2,266,190 shares of common stock with a weighted-average grant-date fair value of $0.055.  Stock options to acquire 766,190 shares were granted to an employee for sales development and have an exercise price of $0.0326 per share and a term of three years.  The options vest 383,095 each on April 5, 2013 and 2014 based upon the achievement of the performance objectives determined by management, as defined.  Management has evaluated the performance criteria as of December 31, 2012 and determined it is unlikely that the performance objective will be met for 2013 or 2014 and accordingly has not recognized any stock-based compensation during the year ended December 31, 2012.  In December 2012, the Company granted options to purchase 1,500,000 shares of common stock which vested immediately with a weighted average grant date fair value of $0.064. No options were exercised during the year ended December 31, 2012.

During the year ended December 31, 2011, AMHC granted options to purchase an aggregate of 892,500 shares of common stock with a weighted average grant date fair value of $0.16.  No options were exercised during the year ended December 31, 2011.

F-17

NOTE 9 – STOCKHOLDERS’ EQUITY (CONTINUED)

The following is a summary of stock option activity for the years ended December 31, 2012 and 2011:

						Weighted
				Weighted		Average
	Shares			average		Remaining		Aggregate
	under			exercise		contractual		intrinsic
Options	Option			price		Life		value
Outstanding at January 1, 2011		2,294,570		$	0.48
Granted		892,500		$	0.16
Exercised		-		$	-
Forfeited/Cancelled		(1,100,000	)	$	0.18
Outstanding at December 31, 2011		2,087,070		$	0.42	2.97		39,049
Granted		2,266,190		$	0.06
Exercised		-		$	-
Forfeited/Cancelled		(1,437,070	)	$	0.30
Outstanding at December 31, 2012		2,916,190		$	0.11		2.76	$	32,486
Vested or Expected to Vest at December 31, 2012		2,150,000		$	0.14		2.93	$	-
Exercisable at December 31, 2012		2,150,000		$	0.14		2.93	$	-

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the estimated fair value of the Company’s common stock on December 31, 2012, and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had they exercised their options on December 31, 2012.

As a result of the reorganization described in Note 1, the Company has not recognized any stock-based compensation cost previously recorded on the books of AMHC prior to the date of reorganization.  During the year ended December 31, 2012, the Company recognized $95,690 of stock-based compensation related to stock options issued in general and administrative expenses.  No stock-based compensation was recognized in 2011. As of December 31, 2012, the Company does not expect outstanding options to acquire 766,190 shares of common stock will vest due to the performance criteria outlined in the option agreement. Compensation cost is revised if subsequent information indicates that the actual number of options vested is likely to differ from previous estimates.

The following table summarizes the activity and value of non-vested options as of and for the years ended December 31, 2012 and 2011:

				Weighted
	Number			Average
	Of			grant date
	Options			fair value
Non-vested options at January 1, 2011		888,798		$	0.31
Granted		892,500		$	0.16
Vested		(619,748	)	$	0.22
Forfeited/cancelled		(558,333	)	$	0.18
Non-vested options at December 31, 2011		603,217		$	0.10
Granted		2,266,190		$	0.06
Vested		(1,546,684	)	$	0.07
Forfeited/Cancelled		(556,533	)	$	0.27
Non-vested options at December 31, 2012		766,190		$	0.06

F-18

NOTE 9 – STOCKHOLDERS’ EQUITY (CONTINUED)

As of December 31, 2012, there was $42,159 of total unrecognized compensation cost related to non-vested share based compensation arrangements granted under the qualified stock option plans. That cost is expected to be recognized over a weighted average period of 1.3 years if certain performance criteria are met.

Warrants:

Summarized information about warrants outstanding and exercisable at December 31, 2012 is as follows:

						Weighted
				Weighted		Average
				average		Remaining		Aggregate
				exercise		contractual		intrinsic
Warrants	Shares			Price		Life		value
Outstanding at January 1, 2012		1,551,000		$	0.29
Issued for Services		6,229,528		$	0.03
Exercised		-		$	-
Forfeited/Cancelled		(1,041,000	)	$	0.29
Outstanding at December 31, 2012		6,739,528		$	0.05	$	2.19	$	259,892
Vested or Expected to Vest at December 31, 2012		610,000		$	0.27	$	0.81	$	-
Exercisable at December 31, 2012		610,000		$	0.27	$	0.81	$	-

In April 2012, the Company granted a warrant to a sales consultant and director of the Company to purchase up to 6,129,528 shares of common stock in connection with a two-year service agreement.  This warrant has a three-year term and an exercise price of $0.0326 per share with 3,064,764 shares vesting each on January 1, 2013 and January 1, 2014 if the Company’s sales exceed certain thresholds in 2012 and 2013, respectively.  On January 1, 2013, the board of directors concluded the sales target for 2012 was not met and warrants to purchase 3,064,764 shares of Company common stock were cancelled. Management has evaluated the performance criteria and currently does not anticipate that the sales thresholds for 2013 will be met and accordingly no stock-based compensation has been recognized during the year ended December 31, 2012. Compensation cost is revised if subsequent information indicates that the actual number of warrants vested is likely to differ from previous estimates.

In December 2012, the Company granted a warrant to an investor relations firm to purchase up to 100,000 shares of common stock that vested immediately.  This warrant has a three-year term and an exercise price of $0.11 per share, and $17,549 of stock based compensation related to this warrant has been recognized in general and administrative expenses during the year ended December 31, 2012.

Contributed Services

Prior to March 31, 2012, the Company’s owners/officers contributed management and administrative services to the Company.  The fair value of those services has been recorded as an expense in the accompanying consolidated financial statements based on the estimated fair value for such services, with a corresponding credit to contributed capital.  The fair value of the historical services was estimated based on the compensation per employment terms that were entered into in March 2012.  Contributed services were $50,000 and $150,000 for the years ended December 31, 2012 and 2011, respectively.

NOTE 10 – INCOME TAXES

Provision for Income Taxes

Through March 5, 2012 (the date of incorporation of HOJ), no provision for income taxes has been provided in the accompanying combined financial statements because HOJ LLC and HOJ JV elected to file as partnerships, and therefore HOJ was not subject to income taxes, and, that such taxes are the responsibility of the individual member/partners.

F-19

NOTE 10 – INCOME TAXES (CONTINUED)

Beginning March 5, 2012, HOJ began recording a provision for deferred income tax assets and liabilities in order to reflect the net tax effects of temporary differences between (i) the tax basis of assets and liabilities and (ii) their reported amounts in the financial statements.  The provision is based upon enacted tax laws and rates in effect for the years in which the differences are expected to affect taxable income. The Company establishes a valuation allowance when necessary to reduce deferred income tax assets to the amounts expected to be realized.

On July 25, 2012, the Company acquired HOJ and began recording a provision for deferred income tax assets and liabilities. As of December 31, 2012, the Company’s net deferred tax assets have been fully reserved, effectively by a valuation allowance, because management does not believe realization of the deferred tax assets is sufficiently assured at the balance sheet date.

No income tax benefit was recognized for the year ended December 31, 2012 as indicated below:

Deferred tax benefit:
Federal	$	686,000
State		59,000
		745,000
Increase in valuation allowance		(745,000	)
Net income tax benefit	$	-

The differences in the total income tax  benefit that would result from applying the 35% federal statutory rate to loss before income taxes and the reported income tax for 2012 are as follows:

U.S. Federal tax benefit at statutory rate	$	(751,000	)
State income taxes, net of federal tax benefit		(65,000	)
Permanent differences		3,000
Income tax losses allocated to partners		68,000
Increase in valuation allowance		745,000
Net income tax benefit	$	-

The components of the deferred tax assets at December 31, 2012 are as follows:

Deferred tax assets:
Allowance for doubtful accounts	$	8,000
Accrued settlement costs		248,000
Accrued compensation		48,000
Stock-based compensation		44,000
Net operating loss carryforwards		397,000
Total net deferred tax assets		745,000
Less: valuation allowance		(745,000	)
Net deferred tax asset	$	-

At December 31, 2012 the Company has U.S. net operating loss carry-forwards of approximately $1.0 million which expire in the years 2029 through 2032.

F-20

NOTE 10 – INCOME TAXES (CONTINUED)

The valuation allowance for deferred tax assets of $745,000 at December 31, 2012 relates principally to the uncertainty of the utilization of certain deferred tax assets, primarily net operating loss carry forwards in various tax jurisdictions. The Company continually assesses both positive and negative evidence to determine whether it is more likely than not that the deferred tax assets can be realized prior to their expiration. Based on the Company’s assessment, it has determined the deferred tax assets are not currently realizable.

Net Operating Loss Carry Forward Limitation

The Tax Reform Act of 1986 contains provisions that limit the utilization of net operating loss and tax credit carry forwards if there has been a change in ownership as described in Section 382 of the Internal Revenue Code. As a result of the Acquisition in July 2012, substantial changes in the Company’s ownership have occurred that may limit or reduce the amount of net operating loss carry-forward that the Company could utilize in the future to offset taxable income. The Company has not completed a detailed Section 382 study to determine what impact, if any, that ownership changes may have had on the Company’s net operating loss carry-forwards.

Accounting for Uncertainty in Income Taxes

During the years ended December 31, 2012 and 2011, the Company has not identified any unrecognized tax benefits or had any additions or reductions in tax positions and therefore a reconciliation of the beginning and ending amount of unrecognized tax benefits is not presented. The Company does not have any unrecognized tax benefits as of December 31, 2012 and accordingly the Company’s effective tax rate will not be materially affected by unrecognized tax benefits.

The Company’s federal and state income tax returns remain open for examination for 2009 through 2011 tax years.

NOTE 11 – SUBSEQUENT EVENTS

Revolving Credit Facility

On January 10, 2013, the Company entered into a senior secured lending arrangement with TCA Global Credit Master Fund LP (“TCA”) for up to a maximum borrowing of $6,000,000. The credit facility provides for an initial line of credit of $425,000 based upon accounts receivables and projected sales and is to be used only as permitted under the specified use of proceeds for working capital purposes. The line of credit has a six month term from the date of closing with a six month renewal option. The lending arrangement is secured by all of the assets of the Company. As a partial guaranty under the TCA lending arrangement, the Company’s CEO executed a validity guaranty thereby personally guaranteeing certain representations made by the Company to TCA.  At closing, the Company was advanced $425,000 less fees and closing costs.

In connection with the agreement above, TCA was issued an investment banking fee consisting of 125,000 shares of newly–authorized Series B Preferred Shares in the Company equating to an aggregate of $125,000 in the Company’s capital stock. The shares are convertible into the Company’s common shares after July 1, 2013.  Also in connection with the TCA agreement, the Company issued 194,954 shares of common stock to Meyers Associates LP as consideration for a finder’s fee for this transaction.

Surrender of Founder’s shares

In January 2013, a shareholder of the Company surrendered 4,500,000 shares of common stock to the Company’s treasury for no consideration.  The shares were initially issued to a founder in March 2012 and were returned to increase the number of common shares available.

Investor Relations Agreement

On February 15, 2013, the Company entered into an investor relations agreement with a firm which requires the Company to pay a consulting fee of $2,500 per month and to provide 100,000 shares of the Company common stock per month and warrants to purchase 100,000 shares of the Company’s common stock per month.

F-21

NOTE 11 – SUBSEQUENT EVENTS (CONTINUED)

Interim Chief Operating Officer

Effective March 1, 2013, the Board of Directors appointed Eric Skae to serve as interim Chief Operating Officer (“COO”). Mr. Skae will be paid an annual salary of $100,000 in the same manner as other officers of the Company.

Series C Preferred Stock

In April 2013, the Board of Directors approved the authorization of 5,000,000 shares of Series C Preferred Stock (the “Series C Preferred Stock”). The Series C Preferred shares have voting rights equal to three votes per share and contain an automatic conversion into 15,000,000 common shares immediately upon the Company obtaining shareholder approval of, and filing with the Colorado Secretary of State, an increase in authorized common stock to at least 200,000,000 shares.

Private Placement

On April 12, 2013, the Company executed a term sheet with an accredited investor (“Investor”) for a proposed investment of $1,000,000 in the Company in exchange for 15,000,000 shares of common stock, 5,000,000 shares of Series C Preferred Stock, and warrants to acquire 500,000 shares of common stock at $0.12 per share for a period of five years. The first tranche of $500,000 is to be deposited on or before April 17, 2012 in exchange for 15,000,000 shares of common stock and warrants to acquire 250,000 common shares described above. The second tranche of $500,000 is to be deposited on or before April 26, 2013 in exchange for 5,000,000 shares of Series C Preferred Stock and warrants to acquire 250,000 common shares described above. On April 12, 2013, the Company received $50,000 toward the first investment tranche.

The common shares and underlying common shares attributable to the Series C Preferred Stock and warrants will have piggyback registration rights that will be triggered if the Company files a registration statement with the Securities and Exchange Commission for the resale of other securities. The warrants may be redeemed by the Company if certain conditions are met, including that the shares underlying the warrants have been registered and the common stock trades at or above $.20 per share for 20 trading days. The Investor will be entitled to one seat on the Company's Board of Directors, and certain other development and distribution rights, as defined.

F-22

EX-3.1.6

Exhibit 3.1.6

CERTIFICATE OF DESIGNATION

of the

PREFERENCES, RIGHTS, LIMITATIONS, QUALIFICATIONS AND RESTRICTIONS

of the

SERIES B PREFERRED STOCK

of

HANGOVER JOE’S HOLDING CORPORATION

HANGOVER JOE’S HOLDING CORPORATION (the “Corporation”), a corporation organized and existing under the Colorado Business Corporation Act (the “CBCA”), hereby certifies that, pursuant to the authority conferred upon the Board of Directors of the Corporation (the “Board”) by its Articles of Incorporation and pursuant to the provisions of the CBCA, on January 9, 2013, the Board duly adopted the following resolution providing for the authorization of 125,000 shares of the Corporation's Series B Preferred Stock (the “Series B Preferred Stock”):

RESOLVED, that pursuant to the authority vested in the Board by the Corporation’s Articles of Incorporation, the Board hereby establishes from the Corporation’s authorized class of preferred stock a new series to be known as “Series B Preferred Stock,” consisting of 125,000shares, and hereby determines the designation, preferences, rights, qualifications, limitations and privileges of the Series B Preferred Stock of the Corporation to be as follows:

1.Designation and Amount; Designated Holder.  Of the 10,000,000 shares of the Company’s authorized Preferred Stock, $0.10 par value per share, 125,000 are designated as “Series B Preferred Stock,” with the rights and preferences set forth below. Only one person or entity is entitled to be designated as the owner of all of the Series B Preferred Stock (the “Holder”), in whose name the initial certificates representing the Series B Preferred Stock shall be issued. Any transfer of the Series B Preferred Stock to a different Holder must be approved in advance by the Corporation; provided, however, the Holder shall have the right to transfer the Series B Preferred Stock, or any portion thereof, to any affiliate of Holder or nominee of Holder, without the approval of the Corporation.

2.Rank.  The Series B Preferred Stock shall be pari passu to the Common Stock.

3.Voting Rights.The Holder of outstanding shares of Series B Preferred Stock shall be entitled to notice of any shareholders’ meeting and to vote as a single class with the Common Stock upon any matter submitted for approval by the holders of common stock.  Each share of Series B Preferred Stock shall have one vote per share.   

4.Dividends.  The Holder of the Series B Preferred Stock will not be entitled to participate with the holders of common stock in any dividends or distributions.

5.Liquidation Rights/Cancellation/ Redemption.  Upon any liquidation, dissolution or winding up of the Corporation, the Holder of outstanding shares of Series B Preferred Stock will be entitled to be paid the “Liquidation Preference,” which is defined and calculated as follows: $125,000 in the aggregate (not on a per share basis), less any and all gross proceeds in cash from the sale or other conversion of the Series B Preferred Stock and/or common stock into which shares of Series B Preferred Stock shall have been converted, and less any payments in redemption of shares of Series B Preferred Stock. Holder of Series B Preferred Stock shall promptly provide to the Corporation all documents necessary for the adjustments in the Liquidation Preference due to the sale or disposition of any Series B Preferred Stock or common stock into which the Series B Preferred Stock was converted. Once the Liquidation Preference is calculated as zero, the Holder shall not be entitled to any further proceeds remaining from the liquidation of the Corporation, any remaining shares of Series B Preferred Stock shall automatically be cancelled, and Holder shall surrender to the Corporation any certificates evidencing remaining shares of Series B Preferred Stock for cancellation.  Further, once the Liquidation Preference equals zero, then all remaining shares of Series B Preferred Stock shall automatically be cancelled.  At any time after January __, 2014, if the Liquidation Preference is greater than zero, then Holder has the right to put any remaining shares of Series B Preferred Stock back to the Corporation in complete redemption at a price equal to the Liquidation Preference; provided, however, that this mandatory redemption provision shall only be applicable if the Corporation is permitted at the time of the redemption to redeem such shares under the CBCA.

6.Conversion Rights.

(a)   The Holder may convert such shares of Series B Preferred Stock in whole or in part, at any time after July __, 2013, or from time-to-time thereafter upon written notice to the Corporation subject to the terms set forth below. Each share of Series B Preferred Stock may, or shall, be converted into shares of the Corporation’s authorized but unissued Common Stock (the “Conversion Shares”) equal to: one divided by the average of the volume weightedaveragepriceforthe common stockforthefive businessdaysimmediatelyprior to the date a “Conversion Notice” (as hereinafter defined) is provided to the Corporation, as reported by Bloomberg (the “VWAP”).

(b)   No fractional shares of common stock shall be issued upon the conversion of the Series B Preferred Stock.  If the number of shares to be issued to the holders of the Series B Preferred Stock is not a whole number, then the number of the shares shall be rounded up to the nearest whole number.

(c)   Mechanics of Conversion.  In the case of a conversion, before Holder shall be entitled to convert the same into shares of Common Stock, it shall provide a conversion notice (the “Conversion Notice”), which Conversion Notice shall specify the VWAP as of the conversion date, the number of Conversion Shares to be issued in connection with such conversion, and the name or names in which the certificate or certificates for shares of Common Stock are to be issued. The calculations and entries set forth in the Conversion Notice shall control in the absence of manifest or mathematical error. To effect conversions of Series B Preferred Stock, the Holder shall not be required to surrender the certificate(s) representing the Series B Preferred Stock to the Corporation unless all of the shares of Series B Preferred Stock represented thereby are so converted, in which case such Holder shall surrender to the Corporation or its transfer agent, the certificate or certificates representing the shares of Series B Preferred Stock to be converted, or if the Holder notifies the Corporation or its transfer agent that such certificate or certificates have been lost, stolen or destroyed, upon the execution and delivery of an agreement reasonably satisfactory to the Corporation to indemnify the Corporation from any losses incurred by it in connection therewith. Partial conversions hereunder where the certificate(s) representing the shares of Series B Preferred Stock are not surrendered shall have the effect of reducing the number of shares represented by such certificate(s) by the number of shares of Series B Preferred Stock converted in each applicable conversion, as set forth in each Conversion Notice.  The Holder and the Corporation shall maintain records showing the amount of shares of Series B Preferred Stock converted upon each conversion, and the number of shares of Series B Preferred Stock remaining to be converted. The Corporation shall, as soon as practicable after receipt of a Conversion Notice, and in any case within ten (10) business days of the Corporation’s receipt of the Conversion Notice (“Share Delivery Date”), issue and deliver at such office to the Holder, or to the nominee or nominees of such Holder, as set forth in the Conversion Notice, a certificate or certificates representing the Conversion Shares to which such Holder shall be entitled as aforesaid.

(d)   Failure to Deliver Certificates. If in the case of any Conversion Notice, the certificate or certificates representing the Conversion Shares issuable upon such conversion are not delivered to or as directed by the Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to the Corporation at any time on or before its receipt of such certificate or certificates, to rescind such Conversion Notice, in which event the Corporation shall promptly return to the holder any original certificates representing Series B Preferred Stock delivered to the Corporation and the Holder shall promptly return to the Corporation the Common Stock certificates unsuccessfully tendered for conversion to the Corporation, to the extent later received by the Holder.

(e)   Obligation Absolute; Partial Liquidated Damages. The Corporation’s obligation to issue and deliver the Conversion Shares upon conversion of the Series B Preferred Stock, or any portion thereof, in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any person or entity, 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 or entity of any obligation to the Corporation or any violation or alleged violation of law by such Holder or any other person or entity, and irrespective of any other circumstance which might otherwise limit such obligation of the Corporation to such Holder in connection with the issuance of such Conversion Shares; provided, however, that such delivery shall not operate as a waiver by the Corporation of any such action that the Corporation may have against such Holder.  In the event Holder shall elect to convert the Series B Preferred Stock, or any portion thereof, the Corporation may not refuse conversion based on any claim that such Holder or anyone 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 conversion of all or part of the Series B Preferred Stock by Holder shall have been sought and obtained, and the Corporation posts a surety bond for the benefit of Holder in the amount of 150% of the aggregate value into which such Series B Preferred Stock are to be converted as provided above, which bond shall remain in effect until the completion of litigation or other proceeding of the underlying dispute and the proceeds of which shall be payable to such Holder to the extent it obtains final adjudication. In the absence of such injunction, the Corporation shall issue Conversion Shares upon a properly noticed conversion.  If the Corporation fails to deliver to Holder the certificate or certificates representing the Conversion Shares by the Share Delivery Date, the Corporation shall pay to such Holder, in cash, as liquidated damages and not as a penalty, $500.00 per trading day (increasing to $1,000.00 per trading day on the tenth (10th) trading day after such damages begin to accrue) for each trading day after the Share Delivery Date until such certificates are delivered or Holder rescinds such conversion. Nothing herein shall limit Holder’s right to pursue actual damages for the Corporation’s failure to deliver Conversion 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 Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

(f)   Issue Taxes. The Corporation shall pay all issue taxes, if any, incurred in respect of the issue of any Conversion Shares on conversion.

(g)   Valid Issuance. All shares of Common Stock which may be issued in connection with the conversion provisions set forth herein will, upon issuance by the Corporation, be validly issued, fully paid and non-assessable, free from preemptive rights and free from all taxes, liens or charges with respect thereto created or imposed by the Corporation.

(h)   Reservation of Stock Issuable Upon Conversion.  The Corporation shall at all times after July __, 2013 reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series B Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series B Preferred Stock based upon the VWAP at the end of the previous calendar month; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series B Preferred Stock, the Corporation will call and hold a special meeting of the shareholders within seventy-five (75) business days of such occurrence, for the sole purpose of increasing the number of shares authorized to an amount sufficient to allow a full conversion by the Holder of the Series B Preferred Stock. The Corporation’s management shall recommend to the shareholders to vote in favor of increasing the number of shares of Common Stock authorized.

(i)   Notice to Allow Conversion by Holder.  If: (A) the Corporation shall declare a dividend (or any other distribution in whatever form) on any of its Common Stock, (B) the Corporation shall declare a special nonrecurring cash dividend on or a redemption of any of the Common Stock, (C) the Corporation shall authorize the granting to all holders of  Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Corporation shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Corporation is a party, any sale or transfer of all or substantially all of the assets of the Corporation, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Corporation shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, then, in each case, the Corporation shall cause to be filed at each office or agency maintained for the purpose of conversion of the Series B Preferred Stock, and shall cause to be delivered to the Holder at its last address as it shall appear upon the Corporation’s records, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating: (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice.  The Holder is entitled to convert the Series B Preferred Stock during the 10-day period commencing on the date of such notice through the effective date of the event triggering such notice.

7.Severability.  If any right, preference or limitation of the Series B Preferred Stock set forth herein is invalid, unlawful or incapable of being enforced by reason of any rule, law or public policy, all other rights, preferences and limitations set forth herein that can be given effect without the invalid, unlawful or unenforceable right, preference or limitation shall nevertheless remain in full force and effect, and no right, preference or limitation herein shall be deemed dependent upon any other such right, preference or limitation unless so expressed herein.

8.Amendment and Waiver.  This Certificate of Designation shall not be amended, either directly or indirectly or through merger or consolidation with another entity, in any manner that would alter or change the powers, preferences or special rights of the Series B Preferred Stock so as to affect them materially and adversely without the consent of the Holder.  Subject to the preceding sentence, any amendment, modification or waiver of any of the terms or provisions of the Series B Preferred Stock shall be binding upon the Holder.

9.Replacement.  Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered Holder shall be satisfactory) of the ownership and the loss, theft, destruction, or mutilation of any certificate evidencing shares of Series B Preferred Stock, and in the case of any such loss, theft or destruction upon receipt of indemnity reasonably satisfactory to the Corporation (provided that if the Holder is a financial institution or other institutional investor its own agreement shall be satisfactory) or in the case of any such mutilation upon surrender of such certificate, the Corporation, at its expense, shall execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares of such Series represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate.

10.Notices.  Any notice required by the provisions of this Certificate of Designation shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified; (ii) when sent by confirmed facsimile if sent during normal business hours of the recipient; if not, then on the next business day; (iii) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid; (iv) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt; or (v) when sent by electronic mail  (with confirmation of transmission)if sent during normal business hours of the recipient; if not, then on the next business day.  All notices to the Corporation shall be addressed to the Corporation’s President at the Corporation’s principal place of business on file with the Secretary of State of the State of Colorado.  All notices to stockholders shall be addressed to each holder of record at the address of such holder appearing on the books of the Corporation.

* * * * *

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation to be executed by Michael Jaynes, President of the Corporation, this 9 day of January 2013.

By:	/s/ Michael Jaynes
Name:	Michael Jaynes
Title:	President

[Signature Page to Series B Certificate of Designation]

EX-3.1.7

Exhibit 3.1.7

CERTIFICATE OF DESIGNATION

of the

PREFERENCES, RIGHTS, LIMITATIONS, QUALIFICATIONS AND RESTRICTIONS

of the

SERIES C PREFERRED STOCK

of

HANGOVER JOE’S HOLDING CORPORATION

HANGOVER JOE’S HOLDING CORPORATION (the “Corporation”), a corporation organized and existing under the Colorado Business Corporation Act (the “CBCA”), hereby certifies that, pursuant to the authority conferred upon the Board of Directors of the Corporation (the “Board”) by its Articles of Incorporation and pursuant to the provisions of the CBCA, on April __, 2013, the Board duly adopted the following resolution providing for the authorization of 5,000,000 shares of the Corporation's Series C Preferred Stock (the “Series C Preferred Stock”):

RESOLVED, that pursuant to the authority vested in the Board by the Corporation’s Articles of Incorporation, the Board hereby establishes from the Corporation’s authorized class of preferred stock a new series to be known as “Series C Preferred Stock,” consisting of 5,000,000shares, and hereby determines the designation, preferences, rights, qualifications, limitations and privileges of the Series C Preferred Stock of the Corporation to be as follows:

1.Designation and Amount; Designated Holder.  Of the 10,000,000 shares of the Company’s authorized Preferred Stock, $0.10 par value per share, 5,000,000 are designated as “Series C Preferred Stock,” with the rights and preferences set forth below. The owner of the Series C Preferred Stock is collectively referred to as the “Holder”, in whose name the initial certificates representing the Series C Preferred Stock shall be issued.

2.Rank.  The Series C Preferred Stock shall be pari passu to the Common Stock on an as-converted basis.

3.Voting Rights.The Holder of outstanding shares of Series C Preferred Stock shall be entitled to notice of any shareholders’ meeting and to vote as a single class with the Common Stock upon any matter submitted for approval by the holders of common stock.  Each share of Series C Preferred Stock shall have three votes per share.   

4.Dividends.  The Holder of the Series C Preferred Stock will be entitled to participate with the holders of common stock in any dividends or distributions on an as-converted basis.

5.Liquidation Rights/Cancellation/ Redemption.  Upon any liquidation, dissolution or winding up of the Corporation, the Holder of outstanding shares of Series C Preferred Stock will be entitled to be paid on an as-converted basis.

6.Mandatory Conversion.  Each share of Series C Preferred Stock shall automatically be converted into three shares of the Corporation’s authorized but unissued Common Stock (the “Conversion Shares”) immediately upon the filing of an amendment with the Colorado Secretary of State to increase the authorized capital of the Company to at least 200,000,000 shares of common stock

7.Severability.  If any right, preference or limitation of the Series C Preferred Stock set forth herein is invalid, unlawful or incapable of being enforced by reason of any rule, law or public policy, all other rights, preferences and limitations set forth herein that can be given effect without the invalid, unlawful or unenforceable right, preference or limitation shall nevertheless remain in full force and effect, and no right, preference or limitation herein shall be deemed dependent upon any other such right, preference or limitation unless so expressed herein.

8.Amendment and Waiver.  This Certificate of Designation shall not be amended, either directly or indirectly or through merger or consolidation with another entity, in any manner that would alter or change the powers, preferences or special rights of the Series C Preferred Stock so as to affect them materially and adversely without the consent of the Holder.  Subject to the preceding sentence, any amendment, modification or waiver of any of the terms or provisions of the Series C Preferred Stock shall be binding upon the Holder.

9.Replacement.  Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered Holder shall be satisfactory) of the ownership and the loss, theft, destruction, or mutilation of any certificate evidencing shares of Series C Preferred Stock, and in the case of any such loss, theft or destruction upon receipt of indemnity reasonably satisfactory to the Corporation (provided that if the Holder is a financial institution or other institutional investor its own agreement shall be satisfactory) or in the case of any such mutilation upon surrender of such certificate, the Corporation, at its expense, shall execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares of such Series represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate.

10.Notices.  Any notice required by the provisions of this Certificate of Designation shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified; (ii) when sent by confirmed facsimile if sent during normal business hours of the recipient; if not, then on the next business day; (iii) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid; (iv) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt; or (v) when sent by electronic mail  (with confirmation of transmission) if sent during normal business hours of the recipient; if not, then on the next business day.  All notices to the Corporation shall be addressed to the Corporation’s President at the Corporation’s principal place of business on file with the Secretary of State of the State of Colorado.  All notices to stockholders shall be addressed to each holder of record at the address of such holder appearing on the books of the Corporation.

* * * * *

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation to be executed by Michael Jaynes, President of the Corporation, this ___ day of April, 2013.

By:	/s/ Michael Jaynes
Name:	Michael Jaynes
Title:	President

[Signature Page to Series C Certificate of Designation]

EX-10.1

Exhibit 10.1

CREDIT AGREEMENT DATED AS

OF DECEMBER 31, 2012,

BUT MADE EFFECTIVE AS OF JANUARY 10, 2013, BY AND AMONG

HANGOVER JOE’S HOLDING CORP

AND HANGOVER JOE’S, INC.

COLLECTIVELY, AS BORROWERS,

AND

TCA GLOBAL CREDIT MASTER FUND, LP,

AS LENDER

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

CREDIT AGREEMENT

This CREDIT AGREEMENT (this “Agreement”), dated as of December 31, 2012, but made effective as of January 10, 2013 (the “EffectiveDate”), is executed by and among HANGOVERJOE’SHOLDINGCORP., a Colorado corporation (the “IssuingBorrower”) and HANGOVERJOE’S,INC., a Colorado corporation (each of the foregoing, including the Issuing Borrower, hereinafter sometimes individually referred to as a “Borrower” and all such entities sometimes hereinafter collectively referred to as “Borrowers” or the “CreditParties”), and TCA GLOBAL CREDIT MASTER FUND, LP (“Lender”).

WHEREAS, Borrowers have requested that Lender extend a revolving credit facility to Borrowers of up to Six Million and No/100 Dollars ($6,000,000.00) for the purposes permitted hereunder; and for these purposes, Lender is willing to make certain loans and extensions of credit to Borrowers of up to such amount and upon the terms and conditions set forth herein; and

WHEREAS, Borrowers have agreed to secure all of their obligations under the Loan Documents by granting to Lender a first priority security interest in and Lien upon all of their existing and after-acquired personal and real property; and

WHEREAS, in connection with the loans and extensions of credit to be made by Lender pursuant to this Agreement, the officers and directors of the Borrowers are willing to execute validity guarantees in favor of Lender in connection with the Borrowers’ obligations under the Loan Documents;

NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, and for other good and valuable consideration, the parties hereto agree as follows:

1.           DEFINITIONS.

1.1       DefinedTerms.   For the purposes of this Agreement, the following capitalized words and phrases shall have the meanings set forth below.

(a)       “Account”   shall   mean,   individually,   and   “Accounts”   shall   mean, collectively, any and all accounts (as such term is defined in the UCC) of each of the Borrowers.

(b)      “Affiliate” (a) of Lender shall mean: (i) any entity which, directly or indirectly, controls or is controlled by or is under common control with Lender; and (ii) any entity administered or managed by Lender, or an Affiliate or investment advisor thereof and which is engaged in making, purchasing, holding or otherwise investing in commercial loans; and (b) of a Borrower shall mean any entity which, directly or indirectly, controls or is controlled by or is under common control with any Borrower.  With respect to an Affiliate of Lender or an Affiliate of Borrowers, an entity shall be deemed to be “controlled by” another entity if such other entity possesses, directly or indirectly, power to direct or cause the direction of the management and policies of such entity, whether by contract, ownership of voting securities, membership interests or otherwise.

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

(c)       “Agreement” shall mean this Credit Agreement by and among Borrowers and Lender.

(d)       “Borrower” and “Borrowers” shall have the meaning given to such terms in the preamble hereof.

(e)       “BorrowingBaseAmount” shall mean, if the Reserve Amount has not been fully collected by Lender as of the date the Borrowing Base Amount is calculated, then an amount,  expressed  in  Dollars,  equal  to  eighty  percent  (80%)  of  the  amount  of  funds  then available and cleared in the Lock Box Account as of the date the Borrowing Base Amount is calculated, less the Reserve Amount, less any interest or fees then due and payable to Lender under this Agreement.  If the Reserve Amount has been fully collected by Lender in the Lock Box Account as of the date the Borrowing Base Amount is calculated, then “BorrowingBaseAmount” shall mean an amount, expressed in Dollars, equal to one hundred percent (100%) of the amount of funds then available and cleared in the Lock Box Account as of the date the Borrowing Base Amount is calculated, less the Reserve Amount, less any interest or fees then due and payable to Lender under this Agreement.

(f)        “Borrowing Base Certificate”  shall  mean  a  certificate  delivered  by Lender to Borrower from time to time in a form acceptable to Lender, pursuant to which the formula and calculation of the Borrowing Base Amount is made.

(g)       “BusinessDay” shall mean any day other than a Saturday, Sunday or a legal holiday on which banks are authorized or required to be closed for the conduct of commercial banking business in the State of Florida.

(h)       “Capital Expenditures”  shall  mean  expenditures  (including  Capital Lease obligations which should be capitalized under GAAP) for the acquisition of fixed assets which are required to be capitalized under GAAP.

(i)        “CapitalLease” shall mean, as to any Person, a lease of any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, by such Person as lessee that is, or should be, in accordance with Financial Accounting Standards Board Statement No. 13, as amended from time to time, or, if such Statement is not then in effect, such statement of GAAP as may be applicable, recorded as a “capital lease” on the balance sheets of any Borrower prepared in accordance with GAAP.

(j)        “ChangeinControl” shall mean any sale, conveyance, assignment or other transfer, directly or indirectly, of any ownership interest of any Borrower, which results in any change in the identity of the individuals or entities previously in Control of such Borrower or the grant of a security interest in any ownership interest of any Person, directly or indirectly Controlling any Borrower, which could result in a change in the identity of the individuals or entities previously in Control of such Borrower.

(k)       “ClosingDate” shall mean the date upon which the first Revolving Loan hereunder is initially funded.

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

(l)        “Collateral”  shall  mean,  collectively,  and  whether  now  existing  or hereafter arising, all assets which secure the Loans, including, without limitation, all existing and after-acquired tangible and intangible assets and property of each of the Borrowers, including real property owned by each of the Borrowers, with respect to which each of the Borrowers grant to Lender a Lien under the terms of the Security Agreement and any of the other Loan Documents.

(m)      “CommonStock” shall mean the common stock of the Issuing Borrower, par value $0.001 per share.

(n)       “ComplianceCertificate” shall mean the covenant compliance certificate contemplated by Section 10.11 hereof, the form of which is attached hereto as Exhibit “A”.

(o)     “ContingentLiability” and “ContingentLiabilities” shall mean, respectively, each obligation and liability of Borrowers and all such obligations and liabilities of Borrowers incurred pursuant to any agreement, undertaking or arrangement by which Borrowers, or any one of them, either: (i) guarantee, endorse or otherwise become or are contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the indebtedness, dividend, obligation or other liability of any other Person in any manner (other than by endorsement of instruments in the course of collection), including without limitation, any indebtedness, dividend or other obligation which may be issued or incurred at some future time; (ii) guarantee the payment of dividends or other distributions upon the shares or ownership interest of any other Person; (iii) undertake or agree (whether contingently or otherwise): (A) to purchase, repurchase, or otherwise acquire any indebtedness, obligation or liability of any other Person or any property or assets constituting security therefor; (B) to advance or provide funds for the payment or discharge of any indebtedness, obligation or liability of any other Person (whether in the form of loans, advances, stock purchases, capital contributions or otherwise), or to maintain solvency, assets, level of income, working capital or other financial condition of any other Person; or (C) to make payment to any other Person other than for value received; (iv) agree to lease property or to purchase securities, property or services from such other Person with the purpose or intent of assuring the owner of such indebtedness or obligation of the ability of such other Person to make payment of the indebtedness or obligation; (v) to induce the issuance of, or in connection with the issuance of, any letter of credit for the benefit of such other Person; or (vi) undertake or agree otherwise to assure a creditor against loss.  The amount of any Contingent Liability shall (subject to any limitation set forth herein) be deemed to be the outstanding principal amount (or maximum permitted principal amount, if larger) of the indebtedness, obligation or other liability guaranteed or supported thereby.

(p)       “Control” or “Controlling” shall mean the possession of the power to direct, or cause the direction of, the management and policies of a Person by contract, voting of securities, or otherwise.

(q)           “Credit Parties”  shall  have  the  meaning  given  to  it  in  the  preamble hereof.

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

(r)        “Customer” shall mean any Person who is obligated to any Borrower for any Receipts.

(s)       “Default Rate”  shall  mean  a  per  annum rate  of  interest  equal  to  the greater of: (i) Eighteen Percent (18%) per annum; or (ii) the highest rate permitted by applicable law.

(t)       “Depreciation” shall mean the total amounts added to depreciation, amortization, obsolescence, valuation and other proper reserves, as reflected on any Borrower’s financial statements and determined in accordance with GAAP.

(u)       “Dollars” or “$” means lawful currency of the United States of America.

(v)       “EBIDTA” shall mean, for any period, the sum of the following: (i) Net Income (excluding extraordinary and unusual items and income or loss attributable to a minority equity position in any affiliated corporation or Subsidiary) for such period; plus (ii) interest expense; plus (iii) income and franchise taxes payable or accrued; plus (iv) Depreciation for such period; plus (v) all other non-cash charges; plus (vi) management fees; plus (vii) costs, fees and expenses incurred in connection with, or otherwise associated with, the closing of the transaction contemplated by this Agreement; minus (viii) that portion of Net Income arising out of the sale of assets outside of the Ordinary Course of Business (to the extent not previously excluded under clause (i) of this definition), in each case to the extent included in determining Net Income for such period.

(w)     “Effective Date”  shall  have  the  meaning  given  to  it  in  the  preamble hereof.

(x)      “EmployeePlan” includes any pension, stock bonus, employee stock ownership plan, retirement, disability, medical, dental or other health plan, life insurance or other death benefit plan, profit sharing, deferred compensation, stock option, bonus or other incentive plan, vacation benefit plan, severance plan or other employee benefit plan or arrangement, including, without limitation, those pension, profit-sharing and retirement plans of Borrowers described from time to time in the financial statements of each Borrower and any pension plan, welfare plan, Defined Benefit Pension Plans (as defined in ERISA) or any multi-employer plan, maintained or administered by any Borrower or to which any Borrower is a party or may have any liability or by which any Borrower is bound.

(y)      “EnvironmentalLaws” shall mean all federal, state, district, local and foreign laws, rules, regulations, ordinances, and consent decrees relating to health, safety, hazardous substances, pollution and environmental matters, as now or at any time hereafter in effect, applicable to Borrowers’ business or facilities owned or operated by any Borrower, including laws relating to emissions, discharges, releases or threatened releases of pollutants, contamination, chemicals, or hazardous, toxic or dangerous substances, materials or wastes in the environment (including, without limitation, ambient air, surface water, land surface or subsurface strata) or otherwise relating to the generation, manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials.

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

(z)       “ERISA” shall mean the Employee Retirement Income Security Act of

1974, as amended from time to time.

(aa)     “EventofDefault” shall mean any of the events or conditions set forth in

Section 12 hereof.

(bb)    “ExchangeAct” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

(cc)     “Funded  Indebtedness”   shall   mean,   as   to   any   Person,   without duplication: (i) all indebtedness for borrowed money of such Person (including principal, interest and, if not paid when due, fees and charges), whether or not evidenced by bonds, debentures, notes or similar instruments; (ii) all obligations to pay the deferred purchase price of property or services; (iii) all obligations, contingent or otherwise, with respect to the maximum face amount of all letters of credit (whether or not drawn), bankers’ acceptances and similar obligations issued for the account of such Person (including the Letters of Credit), and all unpaid drawings in respect of such letters of credit, bankers’ acceptances and similar obligations; and (iv) all indebtedness secured by any Lien on any property owned by such Person, whether or not such indebtedness has been assumed by such Person (provided, however, if such Person has not assumed or otherwise become liable in respect of such indebtedness, such indebtedness shall be deemed to be in an amount equal to the fair market value of the property subject to such Lien at the  time  of  determination).    Notwithstanding  the  foregoing,  Funded  Indebtedness  shall  not include trade payables and accrued expenses incurred by such Person in accordance with customary practices and in the Ordinary Course of Business of such Person.

(dd)     “GAAP”   shall   mean   United   States   generally   accepted   accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements  of  the  Financial  Accounting  Standards  Board  (or  agencies  with  similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination; provided, however, that interim financial statements or reports shall be deemed in compliance with GAAP despite the absence of footnotes and fiscal year-end adjustments as required by GAAP.

(ee)    “GovernmentalAuthority” means any foreign, federal, state or local government,  or  any  political  subdivision  thereof,  or  any  court,  agency  or  other  body, organization, group, stock market or exchange exercising any executive, legislative, judicial, quasi-judicial, regulatory or administrative function of government.

(ff)     “HazardousMaterials” shall mean any hazardous, toxic or dangerous substance, materials and wastes, including, without limitation, hydrocarbons (including naturally occurring or man-made petroleum and hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials, biological substances, polychlorinated biphenyls, pesticides, herbicides and any other kind and/or type of pollutants or contaminants (including, without limitation, materials which include hazardous constituents), sewage, sludge, industrial slag,  solvents  and/or  any  other  similar  substances,  materials  or  wastes  that  are  or  become regulated under any Environmental Law (including, without limitation, any that are or become classified as hazardous or toxic under any Environmental Law).

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

(gg)    “InterestRate” shall mean a fixed rate of interest equal to Twelve Percent (12%) per annum, calculated on the actual number of days elapsed over a 360-day year.

(hh)    “Lender” shall have the meaning given to it in the preamble hereof.

(ii)      “Liabilities”  shall  mean,  at  all  times,  all  liabilities  of  Borrowers  that would be shown as such on the balance sheets of each Borrower prepared in accordance with GAAP.

(jj)      “Lien” shall mean, with respect to any Person, any mortgage, pledge, hypothecation, judgment lien or similar legal process, title retention lien, or other lien or security interest granted by such Person or arising by judicial process or otherwise, including, without limitation, the interest of a vendor under any conditional sale or other title retention agreement and the interest of a lessor under a lease of any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, by such Person as lessee that is, or should be, a Capital Lease on the balance sheet of such Person prepared in accordance with GAAP.

(kk)     “Loan” or “Loans” shall mean the aggregate of all Revolving Loans made by Lender to Borrower under and pursuant to this Agreement.

(ll)       “LoanDocuments” shall mean those documents listed in Sections 3.1, 3.2 and 3.3 hereof, and any other documents or instruments executed in connection with this Agreement or the Revolving Loans contemplated hereby, and all renewals, extensions, future advances, modifications, substitutions, or replacements thereof.

(mm)   “MaterialAdverseEffect” shall mean: (i) a material adverse change in, or a material adverse effect upon, the assets, business, prospects, properties, financial condition or results of operations of any Borrower, individually, or all Borrowers, collectively; (ii) a material impairment of the ability of any Borrower, individually, or all Borrowers, collectively, to perform any of their respective Obligations under any of the Loan Documents; (iii) a material adverse effect on: (A) any material portion of the Collateral; (B) the legality, validity, binding effect or enforceability against any Borrower of any of the Loan Documents; (C) the perfection or priority (subject to Permitted Liens) of any Lien granted to Lender under any Loan Document; or (D) the rights or remedies of Lender under any Loan Document; or (iv) a material adverse effect or impairment on the Lender’s ability to sell Facility Fee Shares or other shares of Issuing Borrower’s Common Stock issuable to Lender under any Loan Documents without limitation or restriction in the Principal Trading Market.

(nn)     “MaterialContract” shall mean any contract or agreement to which any Borrower is a party or by which any Borrower or any of their respective assets are bound and which is required to be disclosed to the SEC pursuant to the rules and regulations of the SEC or the Principal Trading Market, or otherwise: (i) imposes any guaranty, surety or indemnification obligations on any Borrower; or (ii) prohibits any Borrower from engaging in any business or competing anywhere in the world.

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

(oo)     “NetIncome” shall mean, with respect to any period, the amount shown opposite the caption “Net Income” or a similar caption on the financial statements of any Borrower, prepared in accordance with GAAP.

(pp)   “Obligations” shall mean all loans, advances and other financial accommodations (whether primary, contingent or otherwise), all interest accrued thereon (including interest which would be payable as post-petition in connection with any bankruptcy or similar Proceeding, whether or not permitted as a claim thereunder), and any fees due to Lender under this Agreement or the other Loan Documents, any expenses incurred by Lender under this Agreement or the other Loan Documents, and any and all other liabilities and obligations of each of the Borrowers to Lender, and the performance by each of the Borrowers of all covenants, agreements and obligations of every nature and kind on the part of Borrowers to be performed under this Agreement and any other Loan Documents.

(qq)    “OrdinaryCourseofBusiness” means the ordinary course of business consistent with past custom and practice (including with respect to quantity, quality and frequency).

(rr)           “PaymentDate” shall have the meaning given to it in Section2.1(c) hereof.

(ss)      “PermittedLiens” shall mean: (i) Liens for Taxes, assessments or other governmental charges not at the time delinquent or thereafter payable without penalty or being contested in good faith by appropriate proceedings and, in each case, for which adequate reserves are maintained in accordance with GAAP and in respect of which no Lien has been filed; (ii) Liens of carriers, warehousemen, mechanics and materialmen arising in the Ordinary Course of Business and other similar Liens imposed by law; (iii) Liens in the form of deposits or pledges incurred in connection with worker’s compensation, unemployment compensation and other types of social security (excluding Liens arising under ERISA or in connection with surety bonds, bids, performance bonds and similar obligations) for sums not overdue or being contested in good faith by appropriate proceedings and not involving any advances or borrowed money or the deferred purchase price of property or services, which do not in the aggregate materially detract from the value of the property or assets of any Borrower taken as a whole or materially impair the use thereof in the operation of any Borrower’s business and, in each case, for which adequate reserves are maintained in accordance with GAAP and in respect of which no Lien has been filed; (iv) Liens described in the Financial Statements referred to in Section7.9 hereof and the replacement, extension or renewal of any such Lien upon or in the same property subject thereto arising out of the extension, renewal or replacement of the indebtedness secured thereby (without increase in the amount thereof); (v) attachments, appeal bonds, judgments and other similar Liens, for sums not exceeding Fifty Thousand and 00/100 Dollars ($50,000) arising in connection with court proceedings, provided the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are being actively contested in good faith and by appropriate proceedings and to the extent such judgments or awards do not constitute an Event of Default; (vi) zoning and similar restrictions on the use of property and easements, rights of way, restrictions, minor defects or irregularities in title and other similar Liens not interfering in any material respect with the ordinary conduct of the business of any Borrower; (vii) Liens arising in connection with Capital Leases (and attaching only to the property being leased); (viii)

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

Liens that constitute purchase money security interests on any property securing indebtedness incurred for the purpose of financing all or any part of the cost of acquiring such property, provided that any such Lien attaches to such property within sixty (60) days of the acquisition thereof and attaches solely to the property so acquired; (ix) Liens granted to Lender hereunder and under the Loan Documents; (x) any interest or title of a lessor, sublessor, licensor or sublicensor under any lease or non-exclusive license permitted by this Agreement; (xi) Liens arising from precautionary uniform commercial code financing statements filed under any lease permitted  by  this  Agreement;  and  (xii)  banker’s  Liens  and  rights  of  set-off  of  financial institutions arising in connection with items deposited in accounts maintained at such financial institutions and subsequently unpaid and unpaid fees and expenses that are charged to any Borrower by such financial institutions in the Ordinary Course of Business of the maintenance and operation of such accounts.

(tt)     “Permit”  means  any  license,  permit,  approval,  waiver,  order, authorization, right or privilege of any nature whatsoever, granted, issued, approved or allowed by any Governmental Authority.

(uu)     “Person”   shall   mean   any   individual,   partnership,   limited   liability company, limited liability partnership, corporation, trust, joint venture, joint stock company, association, unincorporated organization, government or agency or political subdivision thereof, or other entity.

(vv)     “Principal Trading Market”  shall  mean  the  Nasdaq  Global  Select Market, the Nasdaq Global Market, the Nasdaq Capital Market, the OTC Bulletin Board, the OTC Markets, the so-called OTC Pink Sheets, the NYSE Euronext or the New York Stock Exchange, whichever is at the time the principal trading exchange or market for the Common Stock.

(ww) “RealProperty” means any real estate, land, building, structure, improvement, fixture or other real property of any nature whatsoever, including, but not limited to, fee and leasehold interests.

(xx)   “Receipts” shall mean all revenues, receipts, receivables, Accounts, collections or any other funds at any time received or receivable by any Borrower, or otherwise owing to any Borrower (whether by Customers or any other Person), in connection with its business, operations or from any other source, but specifically excluding proceeds from any debt or equity financing events permitted hereunder.

(yy)   “Receipts Collection Fee”  shall  mean  a  surcharge  of  1.40%  of  all

Receipts deposited into the Lock Box Account.

(zz)     “RegulatoryChange” shall mean the introduction of, or any change in any applicable law, treaty, rule, regulation or guideline or in the interpretation or administration thereof by any governmental authority or any central bank or other fiscal, monetary or other authority having jurisdiction over Lender or its lending office.

(aaa)    “ReserveAmount” shall mean an amount, expressed in Dollars, equal to twenty percent (20%) of the then applicable Revolving Loan Commitment.

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

(bbb)      “RevolvingLoan” and “RevolvingLoans” shall mean, respectively, each direct advance, and the aggregate of all such direct advances, made by Lender to Borrowers under and pursuant to Section 2.1 of this Agreement.

(ccc)       “RevolvingLoanAvailability” shall mean at any time the then applicable

Revolving Loan Commitment.

(ddd)     “RevolvingLoanCommitment” shall mean, on the Closing Date, Four Hundred Twenty-Five Thousand and No/100 Dollars ($425,000.00), and in the event Borrowers request and Lender agrees to increase the Revolving Loan Commitment pursuant to Section

2.1(b), thereafter, shall mean the amount to which Lender agrees to increase the Revolving Loan Commitment,  up to Six Million and No/100 Dollars ($6,000,000.00), all as applicable pursuant to Section 2.1(b).

(eee)     “RevolvingLoanMaturityDate” shall mean the earlier of: (i) six (6) months from the Closing Date; (ii) upon prepayment of the Revolving Note by Borrowers (subject to Section2.1(d)(ii)); or (iii) the occurrence of an Event of Default and acceleration of the Revolving Note pursuant to this Agreement, unless the date in clause (i) shall be extended pursuant to Section 2.3 or by Lender pursuant to any modification, extension or renewal note executed by Borrowers and accepted by Lender in its sole and absolute discretion in substitution for the Revolving Note.

(fff)       “RevolvingNote” shall mean that certain Revolving Note in the principal amount of the Revolving Loan Commitment of even date herewith made by Borrowers in favor of Lender, in form substantially similar to that of Exhibit“B”attached hereto, and any renewal, extension, future advance, modification, substitution, or replacement thereof.

(ggg)     “SEC” shall mean the United States Securities and Exchange Commission.

(hhh)     “SecuritiesAct” shall mean the Securities Act of 1933, as amended.

(iii)         “Security Agreement”  shall  mean  a  Security  Agreement  in  favor  of Lender, in form substantially similar to that of Exhibit “C”attached hereto.

(jjj)        “Subsidiary” and “Subsidiaries” shall mean, respectively, each and all such corporations, partnerships, limited partnerships, limited liability companies, limited liability partnerships or other entities of which or in which a Person owns, directly or indirectly, fifty percent (50%) or more of: (i) the combined voting power of all classes of stock having general voting power under ordinary circumstances to elect a majority of the board of directors of such entity if a corporation; (ii) the management authority and capital interest or profits interest of such entity, if a partnership, limited partnership, limited liability company, limited liability partnership, joint venture or similar entity; or (iii) the beneficial interest of such entity, if a trust, association or other unincorporated organization.

(kkk)     “UCC” shall mean the Uniform Commercial Code in effect in Nevada from time to time.

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

(lll)     “Validity Guaranties” shall mean the validity guaranties executed by such officers and directors of Borrowers as Lender shall require, in Lender’s sole discretion, which shall be substantially in the form of Exhibit “D”attached hereto.

1.2       AccountingTerms.  Any accounting terms used in this Agreement which are not specifically defined herein shall have the meanings customarily given them in accordance with GAAP.    Calculations  and  determinations  of  financial  and  accounting  terms  used  and  not otherwise specifically defined hereunder and the preparation of financial statements to be furnished to Lender pursuant hereto shall be made and prepared, both as to classification of items and  as  to  amount,  in  accordance  with  GAAP  as  used  in  the  preparation  of  the  financial statements of any Borrower on the date of this Agreement.  If any changes in accounting principles or practices from those used in the preparation of the financial statements are hereafter occasioned  by  the  promulgation  of  rules,  regulations,  pronouncements  and  opinions  by  or required by the Financial Accounting Standards Board or the American Institute of Certified Public Accountants (or any successor thereto or agencies with similar functions), which results in a  material  change  in  the  method  of  accounting  in  the  financial  statements  required  to  be furnished to Lender hereunder or in the calculation of financial covenants, standards or terms contained in this Agreement, the parties hereto agree to enter into good faith negotiations to amend such provisions so as equitably to reflect such changes to the end that the criteria for evaluating the financial condition and performance of each Borrower will be the same after such changes as they were before such changes; and if the parties fail to agree on the amendment of such provisions, Borrowers will furnish financial statements in accordance with such changes but shall provide calculations for all financial covenants, perform all financial covenants and otherwise observe all financial standards and terms in accordance with applicable accounting principles and practices in effect immediately prior to such changes.  Calculations with respect to financial covenants required to be stated in accordance with applicable accounting principles and practices in effect immediately prior to such changes shall be reviewed and certified by Borrowers’ accountants.

1.3       OtherTermsDefinedinUCC.  All other words and phrases used herein and not otherwise specifically defined shall have the respective meanings assigned to such terms in the UCC, as amended from time to time, to the extent the same are used or defined therein.

1.4       OtherDefinitionalProvisions;Construction.  Whenever the context so requires, the neuter gender includes the masculine and feminine, the single number includes the plural, and vice versa.  The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and references to Article, Section, Subsection, Annex, Schedule, Exhibit  and  like  references  are  references  to  this  Agreement  unless  otherwise  specified. Wherever the word “include,” “includes” or “including” is used in this Agreement, it will be deemed to be followed by the words “without limitation.”  An Event of Default shall “continue” or be “continuing” until such Event of Default has been waived in accordance with Section 14.3 hereof.  References in this Agreement to any party shall include such party’s successors and permitted assigns.  References to any “Section” shall be a reference to such Section of this Agreement unless otherwise stated.  The term “Borrower” or “Borrowers” shall refer collectively to the Issuing Borrower and all of its Subsidiaries from time to time in existence, whether made a part of this Agreement or not, and to each of them individually, in each case as the context may

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

so require, it being the intent of the parties under this Agreement that all of the terms, conditions, provisions and representations hereof shall, to the greatest extent possible, apply equally to each of them, as if each term, covenant, provision and representation was separately made herein by each of them, except only with respect to any terms and provisions that deal directly with the issuance of any Common Stock of the Issuing Borrower, in which case the term Borrower shall mean and refer only to the Issuing Borrower.  To the extent any of the provisions of the other Loan Documents are inconsistent with the terms of this Agreement, the provisions of this Agreement shall govern.

2.         REVOLVING LOAN FACILITY.

2.1           Revolving Loan.

(a)       RevolvingLoanCommitment.  Subject to the terms and conditions of this Agreement and the other Loan Documents, and in reliance upon the representations and warranties of Borrowers set forth herein and in the other Loan Documents, Lender agrees to make such Revolving Loans at such times as Borrowers may from time to time request, pursuant to the terms of this Agreement, until, but not including, the Revolving Loan Maturity Date, and in such amounts as Borrowers may from time to time request up to the Revolving Loan Availability (and subject at all times to the amounts available to be borrowed in accordance with the Borrowing Base Certificate); provided, however, that the aggregate principal balance of all Revolving Loans outstanding at any time shall not exceed the Revolving Loan Availability; and further provided, however, that, notwithstanding anything contained in this Agreement or any other Loan Documents to the contrary, each Revolving Loan requested by Borrowers under this Agreement shall be subject to Lender’s approval, which approval may be given or withheld in Lender’s sole and absolute discretion. Revolving Loans made by Lender may be repaid and, subject  to  the  terms  and  conditions  hereof,  borrowed  again  up  to,  but  not  including,  the Revolving Loan Maturity Date, unless the Revolving Loans are otherwise terminated  or extended as provided in this Agreement. The Revolving Loans shall be used by Borrower for the purpose of ongoing working capital purposes.

(b)       IncreasetoRevolvingLoanCommitment.  Borrowers may request, from time to time, that the Revolving Loan Commitment be increased to up to Six Million Dollars ($6,000,000); and Lender, in its sole discretion, may make available Revolving Loan Commitment increases to Borrowers.   Lender’s election to increase the Revolving Loan Commitment from time to time may be granted or denied by Lender in its sole and absolute discretion, however, at a minimum, the following conditions must be satisfied, in Lender’s sole and absolute discretion:

(i)           no Event of Default shall have occurred or be continuing, or result from the applicable increase of the Revolving Loan Commitment;

(ii)           Borrowers shall have executed and delivered a new or revised Revolving Note;

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

(iii)     After giving effect to such increase, the amount of the aggregate outstanding principal balance of all Revolving Loans shall not be in excess of the Revolving Loan Availability; and

(iv)      Lender shall have reviewed and accepted, in its sole and absolute discretion, the amount and type of current and historical Receipts of the Borrower, or other Collateral required for the increase.

(c)       RevolvingLoanInterestandPayments.  Except as otherwise provided in this Section, the outstanding principal balance of the Revolving Loans shall be repaid on or before the Revolving Loan Maturity Date.  Principal amounts repaid on the Revolving Note may be re-borrowed.  The principal amount of the Revolving Loans outstanding from time to time shall bear interest at the Interest Rate. The Receipts Collection Fee and accrued and unpaid interest on the unpaid principal balance of all Revolving Loans outstanding from time to time shall be payable on a weekly basis on the weekly anniversary date of the Closing Date, or such other date as Lender and Borrowers may agree upon, commencing on the first such date to occur after the date hereof and on the Revolving Loan Maturity Date (each a “PaymentDate”).  It is intended that payments required hereunder shall be paid on a Payment Date from Receipts received into the Lock Box Account in accordance with Section 2.1(e) below.  In the event, however, there are no Receipts received into the Lockbox Account from which such payments can be made on any Payment Date, the Borrowers shall pay directly to Lender, on the Payment Date, the Receipts Collection Fee and accrued and unpaid interest on the unpaid principal balance of all Revolving Loans outstanding from time to time from the Borrowers’ accounts. Any amount of principal or interest on the Revolving Loans which is not paid when due, whether at stated maturity, by acceleration or otherwise, shall at Lender’s option bear interest payable on demand at the Default Rate.

(d)           Revolving Loan Principal Repayments.

(i)        MandatoryPrincipalPrepayments;Overadvances.  All Revolving Loans hereunder shall be repaid by Borrowers on or before the Revolving Loan Maturity Date, unless payable sooner pursuant to the provisions of this Agreement.  In the event the aggregate outstanding principal balance of all Revolving Loans hereunder exceed the Revolving Loan Availability, Borrowers shall, upon notice or demand from Lender, immediately make such repayments of the Revolving Loans or take such other actions as shall be necessary to eliminate such excess.  Lender shall apply funds (in excess of any recurring fees owed under Section 2.2, fees owed to any custodian/back-up servicer, the Receipts Collection Fee, and interest owed under Sections 2.1(c) and 2.4) received into the Lock Box Account as payment against the outstanding  principal  balance  of  the  Revolving  Loans  on  any  Payment  Date,  or  any  such amounts may be left in the Lock Box Account as part of the Reserve Amount, at Lender’s sole discretion.

(ii)       OptionalPrepayments.  Borrowers may, from time to time, prepay the Revolving Loan, in whole or in part, provided, however, that if prior to the Revolving Loan Maturity Date, Borrowers prepay the entire outstanding amount of the Revolving Loan in full and  then  terminate  the  Revolving  Loan  Commitment,  Borrowers  shall  pay  to  Lender  as liquidated damages and compensation for the costs of being prepared to make funds available

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

hereunder, an amount equal to Five Percent (5%) of the then applicable Revolving Loan Commitment (the “PrepaymentPenalty”).  The parties agree that the amount payable pursuant to this subsection (ii) is a reasonable calculation of Lender’s lost profits in view of the difficulties and impracticality of determining actual damages resulting from an early termination of the Revolving Loan Commitment.  Notwithstanding the foregoing, the Prepayment Penalty shall be reduced  to  Two  and  One-Half  percent  (2.5%)  if  the  prepayment  and  termination  of  the Revolving Loan Commitment occurs after the first One-Hundred Eighty (180) days following the Closing Date.

(e)           Collections;LockBox.

(i)       To the extent any Customers make or pay any Receipts to any Borrower by a wire transfer or other form of electronic funds transfer, then each Borrower shall direct and instruct all of such Customers to make all such wire transfer or other electronic fund transfer payments directly to the Lock Box Account.  To the extent any Customers make or pay any Receipts to any Borrower by any other form other than wire transfer or electronic funds transfer (such as through a check), then each Borrower shall direct all of its Customers to make and send all such payments and Receipts directly to a post office box designated by, and under the exclusive control of, Lender (such post office box is referred to herein as the “LockBox”). The Borrowers hereby represent and warrant to Lender that less than five percent (5%) of their Receipts are made or received through the use of a credit or debit card.  In the event that at any time during the term of this Agreement, Receipts of the Borrowers collected through the use of credit or debit card transactions is five percent (5%) or more of their combined aggregate Receipts, then in such event, each applicable Borrower shall, at such time, modify its agreements with all credit/debit card payment processing companies with whom it has agreements or other payment processing relationships (the “PaymentProcessingCompanies”), so as to authorize, direct and cause: (A) all credit/debit card payments from any Customers; and (B) any reserves or holdbacks withheld by any of the Payment Processing Companies, if, as an when distributed or paid to each applicable Borrower, to be deposited directly into the Lock Box Account, rather than any other bank accounts of any Borrower.  In such event, the Borrowers shall cause each of the Payment Processing Companies to issue and deliver to Lender an estoppel certificate, disbursement direction or other similar document confirming and agreeing: (I) to the foregoing payment directions; (II) that such payment instructions and directions shall not be changed, amended or terminated, except upon written notice from Lender; and (III) that copies of all statements, notices and other communications sent by any Payment Processing Companies to Borrowers, also be delivered to Lender.  Each Borrower hereby agrees to undertake any and all required actions, execute any required documents, instruments or agreements, or to otherwise do any other thing required or requested by Lender in order to effectuate the foregoing.   Lender shall maintain an account at a financial institution acceptable to Lender in its sole and absolute discretion (the “LockBoxAccount”), which Lock Box Account shall be maintained in Lender’s name, and into which all Receipts, whether through wires, or any other form, and all other monies, checks, notes, drafts or other payments of any kind owing or payable to any of the Borrowers shall be deposited.  If any Borrower, any Affiliate or Subsidiary, any shareholder, officer, director, employee or agent of any Borrower or any Affiliate or Subsidiary, or any other Person acting for or in concert with any Borrower, shall receive any monies, checks, notes, drafts or other payments or Receipts (including any Receipts generated through the minimal use of credit and debit card transactions), the applicable Borrower and each such Person shall receive

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

all such items in trust for, and as the sole and exclusive property of, Lender, and, immediately upon receipt thereof, shall remit the same (or cause the same to be remitted) in kind to the Lock Box Account.  Borrowers and Lender agree that all payments made to such Lock Box Account, whether in respect of Receipts, as proceeds of Collateral, or otherwise (except for proceeds of Collateral which are required to be delivered to the holder of a Permitted Lien which is prior in right of payment), will be swept from the Lock Box Account to Lender on each Payment Date to be applied according to the following priorities: (1) to unpaid fees and expenses due hereunder including, without limitation, any recurring fees due pursuant to Section2.2 hereof; (2) to any custodian/back-up servicer (if applicable); (3) to accrued but unpaid interest owed under Sections 2.1(c)and2.4 hereof; (4) to any accrued but unpaid Receipts Collection Fee; (5) if at any time the Lender is not holding, in the Lock Box Account or otherwise, an amount equal to at least the Reserve Amount, then twenty percent (20%) of all Receipts received into the Lock Box Account shall be withheld and applied by Lender to amounts required to establish the Reserve Amount, until the Reserve Amount is reached, which Reserve Amount (or portion thereof) may be kept and maintained in the Lock Box Account during the duration of this Agreement as additional security for the Obligations; (6) to amounts payable pursuant to Section 2.1(d); and (7) upon the occurrence of an Event of Default, to Lender (including any Reserve Amount then in the Lock Box Account), to reduce the outstanding Revolving Loan balance to zero. Borrowers agree to pay all reasonable fees, costs and expenses in connection with opening and maintaining of the Lock Box, the Lock Box Account, or of creating, administering or switching any payment accounts with any of the Payment Processing Companies, if required.   All of such reasonable fees, costs and expenses, if not paid by Borrowers within five (5) business days of Lender’s written request, may be paid by Lender and in such event all amounts paid by Lender shall constitute Obligations hereunder, shall be payable to Lender by Borrowers upon demand, and, until paid, shall bear interest at the lowest rate then applicable to Loans hereunder.  It is intended that all Receipts, and all other checks, drafts, instruments and other items of payment or proceeds of Collateral at any time received, due or owing to any Borrower from a Customer, any other Person, or otherwise, shall be deposited directly into the Lock Box Account, and if not deposited directly into the Lock Box Account, shall be immediately remitted or endorsed by Borrowers to Lender into the Lock Box Account, and, if that remittance or endorsement of any such item shall not be immediately made for any reason, Lender is hereby irrevocably authorized to remit or endorse the same on each Borrower’s behalf.  For purpose of this Section, each Borrower irrevocably  hereby  makes,  constitutes  and  appoints  Lender  (and  all  Persons  designated  by Lender for that purpose) as each Borrower’s true and lawful attorney and agent-in-fact: (A) to endorse such Borrower’s name upon said Receipts or items of payment and/or proceeds of Collateral and upon any chattel paper, document, instrument, invoice or similar document or agreement relating to any Receipts of such Borrower; (B) to take control in any manner of any item of payment or proceeds thereof; (C) to the extent any Borrower is not depositing Receipts into the Lock Box Account as required hereby, to have access to such Borrower’s operating accounts, through such Borrower’s online banking system, or otherwise, to make remittances of any Receipts deposited therein into the Lock Box Account as required hereby; and (D) to have access to any lock box or postal box into which any of Borrowers’ mail is deposited, and open and process all mail addressed to any Borrower and deposited therein.

(ii)       Lender may, at any time and from time to time after the occurrence and during the continuance of an Event of Default, whether before or after notification to any Customer  and  whether  before  or  after  the  maturity  of  any  of  the  Obligations:  (A) enforce

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

collection of any of the Accounts and Receipts of any Borrower or other amounts owed to any Borrower by suit or otherwise; (B) exercise all of the rights and remedies of each Borrower with respect to proceedings brought to collect any Accounts, Receipts, or other amounts owed to each Borrower; (C) surrender, release or exchange all or any part of any Accounts, Receipts, or other amounts owed to each Borrower, or compromise or extend or renew for any period (whether or not longer than the original period) any indebtedness thereunder; (D) sell or assign any Account or Receipts of any Borrower, or other amount owed to any Borrower, upon such terms, for such amount and at such time or times as Lender deems advisable; (E) prepare, file and sign any Borrower’s name on any proof of claim in bankruptcy or other similar document against any Customer or other Person obligated to any Borrower; and (F) do all other acts and things which are necessary, in Lender’s sole discretion, to fulfill each Borrower’s obligations under this Agreement and the other Loan Documents and to allow Lender to collect the Accounts, Receipts, or other amounts owed to each Borrower.  In addition to any other provision hereof, Lender may at any time after the occurrence and during the continuance of an Event of Default, at Borrowers’ expense, notify any parties obligated on any of the Accounts and Receipts to make payment directly to Lender of any amounts due or to become due thereunder.

(iii)     On a monthly basis, Lender shall deliver to Borrowers an invoice and an account statement showing all Loans, charges and payments, which shall be deemed final, binding and conclusive upon Borrowers, unless Borrowers notify Lender in writing, specifying any error therein, within thirty (30) days of the date such account statement is sent to Borrowers and any such notice shall only constitute an objection to the items specifically identified.

2.2           Fees.

(a)           Intentionally Left Blank.

(b)       Asset Monitoring Fee.  Borrowers  agree  to  pay  to  Lender  an  asset monitoring fee (“AssetMonitoringFee”) equal to One Thousand Five-Hundred and No/100 Dollars ($1,500.00), which shall be due and payable on the Closing Date, and thereafter on the first day of each calendar quarter during the term of this Agreement.  The Asset Monitoring Fee shall be increased in increments of Five Hundred and No/100 Dollars ($500.00) each time the Revolving Loan Commitment amount is increased pursuant to Section2.1(b); provided that the Asset Monitoring Fee shall never exceed Two Thousand Five Hundred and No/100 Dollars ($2,500.00).

(c)       TransactionAdvisoryFee. Borrowers agree to pay to Lender a transaction advisory fee equal to four percent (4.0%) of the Revolving Loan Commitment as of the Closing Date, and two percent (2.0%) on the amount of any increase thereof pursuant to Section 2.1(b), which shall be due and payable on the Closing Date and on the date of any increase to the Revolving Loan Commitment pursuant to Section 2.1(b).

(d)       DueDiligenceFees.  Borrowers agree to pay a due diligence fee equal to Twelve Thousand Five Hundred and No/100 Dollars ($12,500.00), which shall be due and payable in full on the Closing Date, or any remaining portion thereof shall be due and payable on the Closing Date if a portion of such fee was paid upon the execution of any term sheet related to this Agreement.

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

(e)       DocumentReviewandLegalFees.  Borrowers agree to pay a document review and legal fee equal to Twelve Thousand Five Hundred and No/100 Dollars ($12,500.00) which shall be due and payable in full on the Closing Date, or any remaining portion thereof shall be due and payable on the Closing Date if a portion of such fee was paid upon the execution of any term sheet related to this Agreement.

(f)        OtherFees.  Each of the Borrowers also agrees to pay to the Lender (or any designee of the Lender), upon demand, or to otherwise be responsible for the payment of, any and all other costs, fees and expenses, including the reasonable fees, costs, expenses and disbursements of counsel for the Lender and of any experts and agents, which the Lender may incur  or  which  may  otherwise  be  due  and  payable  in  connection  with:  (i) the  preparation, negotiation, execution, delivery, recordation, administration, amendment, waiver, subordination, or other modification or termination of this Agreement or any other Loan Documents (provided that there shall be no fees for the preparation and negotiation of this Agreement other than as specifically set forth in this Section 2.2); (ii) any documentary stamp taxes, intangibles taxes, recording fees, filing fees, or other similar taxes, fees or charges imposed by or due to any Governmental Authority in connection with this Agreement or any other Loan Documents; (iii) the exercise or enforcement of any of the rights of the Lender under this Agreement or the Loan Documents; or (iv) the failure by any Borrower to perform or observe any of the provisions of this Agreement or any of the Loan Documents.  Included in the foregoing shall be the amount of all expenses paid or incurred by Lender in consulting with counsel concerning any of its rights under this Agreement or any other Loan Document or under applicable law.  All such costs and expenses, if not so immediately paid when due or upon demand thereof, shall bear interest from the date of outlay until paid, at the Default Rate.  All of such costs and expenses shall be additional Obligations of the Borrowers to Lender secured under the Loan Documents.  The provisions of this Subsection shall survive the termination of this Agreement.

(g)       MinimumMonthlyFee.  It is the intention of the parties hereto that, prior to an Event of Default, the aggregate sum of all recurring monthly fees and interest payable by Borrowers hereunder to Lender for each calendar month during the term hereof shall not be less than One and Fourth Tenths Percent (1.4%) of the then applicable Revolving Loan Commitment (the “MinimumFees”).   In the event during any calendar month during the term of this Agreement, the recurring monthly fees and interest payable by Borrowers to Lender hereunder are less than the Minimum Fees, then in addition to all such recurring monthly fees and interest payable, the Borrowers shall pay to Lender, on the next Payment Date, an amount determined by Lender such that when added to the recurring monthly fees and interest payable to Lender each calendar month hereunder, such amount shall never be less than the Minimum Fees.

(h)           Investment Banking Fee.

(i)        ShareIssuance.   The Issuing Borrower shall pay to Lender a fee for investment banking and advisory services provided by the Lender to the Borrowers prior to the Closing Date by issuing to Lender, on the Closing Date, 125,000 shares of the Issuing Borrower’s Series B Preferred Stock (the “FacilityFeeShares”), which Facility Fee Shares are expected and intended to have, when converted and monetized through sale of Common Stock received through the conversion of the Facility Fee Shares (the “FacilityFeeConversionShares”), an aggregate value equal to a dollar amount of $125,000.00 (the “ShareValue”).  The

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

shall, or shall cause the Transfer Agent to, deliver such certificates to Lender within five (5) Business Days from the Effective Date. In the event such certificates representing the Facility Fee Shares issuable hereunder shall not be delivered to the Lender within said five (5) Business Day period, same shall be an immediate default under this Agreement and the other Loan Documents. The Facility Fee Shares, and any Facility Fee Conversion Shares issued upon conversion of any Facility Fee Shares, when issued, shall be deemed to be validly issued, fully paid, and non-assessable shares of the Issuing Borrower’s capital stock. The Facility Fee Shares shall be deemed fully earned as of the date the Borrowers execute this Agreement, regardless of the amount or number of Revolving Loans made hereunder.

(ii) Adjustments. It is the intention of the Issuing Borrower and Lender that the Lender shall have generated net proceeds from the sale of Facility Fee Conversion Shares equal to the Share Value. The Lender shall have the right to convert Facility Fee Shares in accordance with the terms and provisions of the certificate of rights and designations governing the Facility Fee Shares (the “Certificate of Designations”), and to thereafter sell the Facility Fee Conversion Shares in the Principal Trading Market or otherwise, at any time in accordance with applicable securities laws. At any time and from time to time, the Lender may deliver to the Issuing Borrower a reconciliation statement showing the net proceeds actually received by the Lender from any prior sale of Facility Fee Conversion Shares (the “SaleReconciliation”), so that the parties may keep track of net proceeds received by Lender from all sales of Facility Fee Conversion Shares. Once the Lender receives net proceeds from the sale of Facility Fee Conversion Shares equal to the Share Value, to the extent Lender has any remaining Facility Fee Shares or Facility Fee Conversion Shares, the Lender shall return all such remaining Facility Fee Shares or Facility Fee Conversion Shares to the Issuing Borrower. In the event the Lender converts all Facility Fee Shares, and sells all Facility Fee Conversion Shares, and Lender does not receive net sales proceeds from the sale of all such Facility Fee Conversion Shares equal to at least the Share Value, then Lender shall deliver a Sale Reconciliation to the Issuing Borrower showing the shortfall between the Share Value and the net sales proceeds received by the Lender from the sale of all such Facility Fee Conversion Shares, and Borrowers shall be obligated to pay such shortfall to Lender in cash by wire transfer to an account designated by lender within five(5) Business Days after demand therefor from Lender. Notwithstanding anything contained in this Section 2.2(h) to the contrary, at any time on or prior to the “Mandatory Redemption Date” (as hereinafter defined), the Issuing Borrower shall have the right, at any time during such period, to redeem any Facility Fee Shares or Facility Fee Conversion Shares then in the Lender’s possession for an amount payable by the Issuing Borrower to Lender in cash equal to the Share Value, less any net cash proceeds received by the Lender from any previous sales of Facility Fee Conversion Shares. Upon Lender’s receipt of such cash payment in accordance with the immediately preceding sentence, the Lender shall return any then remaining Facility Fee Shares and Facility Fee Conversion Shares in its possession back to the Issuing Borrower and otherwise undertake any required actions reasonably requested by Issuing Borrower to have such then remaining Facility Fee Shares and Facility Fee Conversion Shares returned to Issuing Borrower. In the event the Lender elects to increase the Revolving Loan Commitment as permitted by this Agreement, the Borrowers agree to pay additional advisory service fees to Lender either in cash or in a similar manner as set forth

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

in this Section 2.2(h) through the issuance of additional Facility Fee Shares, at Lender’s sole discretion, in an amount to be determined by Lender not to exceed ten percent (10.0%) of the increase.

(iii)     MandatoryRedemption.   Notwithstanding anything contained in this Agreement to the contrary, in the event the Lender has not realized net proceeds from the sale of Facility Fee Conversion Shares equal to at least the Share Value by a date that is twelve months from the Effective Date (the “MandatoryRedemptionDate”), then at any time thereafter,  the  Lender  shall  have  the  right,  subject  to  compliance  with  applicable  state corporation laws (provided, however, if state corporate laws prohibit, impair or delay the mandatory redemption herein required, then such failure or delay to redeem all Facility Fee Shares and Facility Fee Conversion Shares as required hereby shall be deemed an Event of Default under this Agreement and the the other Loan Documents), upon written notice to the Issuing Borrower, to require that the Issuing Borrower redeem all Facility Fee Shares and Facility Fee Conversion Shares then in Lender’s possession for cash equal to the Share Value, less any cash proceeds received by the Lender from any previous sales of Facility Fee Shares and Facility Fee Conversion Shares, if any.  In the event such redemption notice is given by the Lender, the Issuing Borrower shall redeem the then remaining Facility Fee Shares and Facility Fee Conversion Shares in Lender’s possession for an amount of Dollars equal to the Share Value, less any cash proceeds received by the Lender from any previous sales of Facility Fee Shares and Facility Fee Conversion Shares, if any, payable by wire transfer to an account designated by Lender within five (5) Business Days from the date the Lender delivers such redemption notice to the Issuing Borrower.

(iv)      SurvivingObligations.   The Borrowers agree and acknowledge that notwithstanding the termination of this Agreement, or the payment in full of all of the Borrowers’ obligations hereunder or under any other Loan Documents, the Issuing Borrower’s obligations and liability under this Agreement and the other Loan Documents, and the Lender’s Lien and security interest on all Collateral, shall remain valid and effective and shall not be released or terminated, until the Issuing Borrower has fully complied with all of its obligations with respect to payment of the fee contemplated by this Section 2.2(h), and Lender has generated and received net proceeds from the sale of the Facility Fee Conversion Shares (or otherwise received equivalent payment thereof in cash as permitted hereunder) equal to the Share Value.

(i)           Matters with Respect to Common Stock.

(i)        IssuanceofConversionShares.   The parties hereto acknowledge that pursuant to the terms of the Revolving Note, Lender has the right, upon the occurrence of an Event of Default hereunder or any other Loan Documents, to convert amounts due under the Revolving Note into Common Stock in accordance with the terms of the Revolving Note.  In the event, for any reason, the Issuing Borrower fails to issue, or cause the Transfer Agent to issue, any portion of the Common Stock issuable upon conversion of the Revolving Note (the “ConversionShares”) to Lender in connection with the exercise by Lender of any of its conversion rights under the Revolving Note, then the parties hereto acknowledge that Lender shall irrevocably be entitled to deliver to the Transfer Agent, on behalf of itself and the Issuing Borrower, a “Conversion Notice” (as defined in the Revolving Note) requesting the issuance of the Conversion Shares then issuable in accordance with the terms of the Revolving Note, and the

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

Transfer Agent, provided they are the acting transfer agent for the Issuing Borrower at the time, shall, and the Issuing Borrower hereby irrevocably authorizes and directs the Transfer Agent to, without any further confirmation or instructions from the Issuing Borrower, issue the Conversion Shares applicable to the Conversion Notice then being exercised, and surrender to a nationally recognized overnight courier for delivery to Lender at the address specified in the Conversion Notice, a certificate of the Common Stock of the Issuing Borrower, registered in the name of Lender or its designee, for the number of Conversion Shares to which Lender shall be then entitled under the Revolving Note, as set forth in the Conversion Notice.

(ii)       IssuanceofFacilityFeeConversionSharesUnderSection2.2(h). The parties hereto acknowledge that pursuant to the terms of the Certificate of Designations applicable to the Facility Fee Shares, Lender has the right to convert Facility Fee Shares into Facility Fee Conversion Shares. In the event, for any reason, the Issuing Borrower fails to issue, or cause its Transfer Agent to issue, any portion of the Facility Fee Conversion Shares issuable to Lender upon conversion of the Facility Fee Shares, then the parties hereto acknowledge that Lender shall irrevocably be entitled to deliver to the Transfer Agent, on behalf of itself and the Issuing Borrower, a “Conversion Notice” (as used and defined in the Certificate of Designations) requesting the issuance of the Facility Fee Conversion Shares then issuable in accordance with the terms of the Certificate of Designation, and the Transfer Agent, provided they are the acting transfer agent for the Issuing Borrower at the time, shall, and the Issuing Borrower hereby irrevocably authorizes and directs the Transfer Agent to, without any further confirmation or instructions from the Issuing Borrower, issue the Facility Fee Conversion Shares applicable to the Conversion Notice then being exercised, and surrender to a nationally recognized overnight courier for delivery to Lender at the address specified in the Conversion Notice, a certificate of the Common Stock of the Issuing Borrower, registered in the name of Lender or its designee, for the number of Facility Fee Conversion Shares to which Lender shall be then entitled in accordance with the Certificate of Designations, as set forth in the Conversion Notice.

(iii)     RemovalofRestrictiveLegends.  In the event that Lender has any shares of the Issuing Borrower’s Common Stock bearing any restrictive legends, and Lender, through its counsel or other representatives, submits to the Transfer Agent any such shares for the removal of the restrictive legends thereon, whether in connection with a sale of such shares pursuant  to  anyexemption  to  the  registration  requirements  under  the  Securities  Act,  or otherwise, and the Issuing Borrower and or its counsel refuses or fails for any reason to render an opinion of counsel or any other documents, certificates or instructions required for the removal of the restrictive legends, then: (A) to the extent such legends could be lawfully removed under applicable laws, Issuing Borrower’s failure to provide the required opinion of counsel or any other documents, certificates or instructions required for the removal of the restrictive legends shall be an immediate Event of Default under this Agreement and all other Loan Documents; and (B) the Issuing Borrower hereby agrees and acknowledges that Lender is hereby irrevocably and expressly authorized to have counsel to Lender render any and all opinions and other certificates or instruments which may be required for purposes of removing such restrictive legends, and the Issuing Borrower hereby irrevocably authorizes and directs the Transfer Agent to, without any further confirmation or instructions from the Issuing Borrower, issue any such shares without restrictive legends as instructed by Lender, and surrender to a common carrier for overnight delivery to the address as specified by Lender, certificates, registered in the name of Lender or its designees, representing the shares of Common Stock to which Lender is entitled, without any

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

restrictive legends and otherwise freely transferable on the books and records of the Issuing Borrower.

(iv)      AuthorizedAgentoftheIssuing Borrower.  The Issuing Borrower hereby irrevocably appoints the Lender and its counsel and its representatives, each as the Issuing Borrower’s duly authorized agent and attorney-in-fact for the Issuing Borrower for the purposes of authorizing and instructing the Transfer Agent to process issuances, transfers and legend removals upon instructions from Lender, or any counsel or representatives of Lender, as specifically contemplated herein.  The authorization and power of attorney granted hereby is coupled with an interest and is irrevocable so long as any Obligations of the Borrowers under this Agreement or any other Loan Documents remain outstanding, and so long as the Lender owns or has the right to receive, any shares of the Issuing Borrower’s Common Stock hereunder or under the Revolving Note.   In this regard, the Issuing Borrower hereby confirms to the Transfer Agent and the Lender that it can NOT and will NOT give instructions, including stop orders or otherwise, inconsistent with the terms of this Agreement with regard to the matters contemplated herein, and that the Lender shall have the absolute right to provide a copy of this Agreement to the Transfer Agent as evidence of the Issuing Borrower’s irrevocable authority for Lender and Transfer Agent to process issuances, transfers and legend removals upon instructions from Lender, or any counsel or representatives of Lender, as specifically contemplated herein, without any further instructions, orders or confirmations from the Issuing Borrower.

(v)     Injunction and Specific Performance.   The Issuing Borrower specifically acknowledges and agrees that in the event of a breach or threatened breach by the Issuing Borrower of any provision of this Section 2.2(i), the Lender will be irreparably damaged and that damages at law would be an inadequate remedy if this Agreement were not specifically enforced.  Therefore, in the event of a breach or threatened breach of any provision of this Section 2.2(i) by the Issuing Borrower, the Lender shall be entitled to obtain, in addition to all other rights or remedies Lender may have, at law or in equity, an injunction restraining such breach, without being required to show any actual damage or to post any bond or other security, and/or to a decree for specific performance of the provisions of this Section 2.2(i).

2.3       RenewalofRevolvingLoans;Non-RenewalofRevolvingLoans;Fees.  On the Revolving Loan Maturity Date, so long as no Event of Default exists, and so long as no event has occurred that, with the passage of time, the giving of notice, or both, would constitute an Event of Default, Borrowers shall have the option to request a renewal of the Revolving Loan Commitment and extension of the Revolving Loan Maturity Date for one (1) additional six (6) month period.   To make such request, Borrowers shall give written notice to Lender of Borrowers’ request to renew the Revolving Loan Commitment and extend the Revolving Loan Maturity Date for an additional six (6) month period on or before the Revolving Loan Maturity Date.  Lender may elect to accept or reject Borrowers’ request for a renewal of the Revolving Loan Commitment and extension of the Revolving Loan Maturity Date in its sole and absolute discretion.  In the event Lender shall accept Borrowers’ request for renewal and extension, Borrowers shall, immediately upon demand from Lender and as a condition to the renewal and extension, deliver a renewal fee to Lender equal to two percent (2%) of the then outstanding Revolving Loan Commitment.

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

2.4       InterestandFeeComputation;CollectionofFunds.   Interest accrued hereunder shall be payable as set forth in Section2.1(d) hereof.  Except as otherwise set forth herein, all interest and fees shall be calculated on the basis of a year consisting of 360 days and shall be paid for the actual number of days elapsed.   Principal payments submitted in funds not immediately available shall continue to bear interest until collected.  If any payment to be made by Borrowers hereunder or under the Revolving Note shall become due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in computing any interest in respect of such payment.  Any Obligations which are not paid when due (subject to applicable grace periods) shall bear interest at the Default Rate.

2.5      Automatic Debit.    In  order  to  effectuate  the  timely  payment  of  any  of  the Obligations when due, each Borrower hereby authorizes and directs Lender, at Lender’s option, to: (i) debit, or cause or instruct the debit of, the amount of the Obligations to any ordinary deposit account of any Borrower; or (ii) make a Revolving Loan hereunder to pay the amount of the Obligations.

2.6      DiscretionaryDisbursements.  Lender, in its sole and absolute discretion, may immediately upon notice to Borrowers, disburse any or all proceeds of the Revolving Loans made or available to Borrowers pursuant to this Agreement to pay any fees, costs, expenses or other amounts required to be paid by Borrowers hereunder and not so paid.  All monies so disbursed shall be a part of the Obligations, payable by Borrowers on demand from Lender.

2.7      USDollars;CurrencyRisk.  All Receipts will be in Dollars.  In the event Receipts are not in Dollars, Borrowers shall bear the risk of Lender’s currency losses, and if Lender suffers a currency loss and the result is to increase the cost to Lender or to reduce the amount of any sum received or receivable by Lender under this Agreement or under the Revolving Note with respect thereto, then after demand by Lender (which demand shall be accompanied by a certificate setting forth reasonably detailed calculations of the basis of such demand), Borrowers shall pay to Lender such additional amount or amounts as will compensate Lender for such increased cost or such reduction.  Borrowers hereby authorize Lender to advance or cause an advance of Revolving Loans to pay for the increased costs or reductions associated with any such currency losses.

3.           CONDITIONS OF BORROWING.

Notwithstanding any other provision of this Agreement, the obligation of Lender to disburse or make all or any portion of any Loans is subject to satisfaction of all of the following conditions precedent (unless a condition is waived in writing by Lender) contained in this Article 3.

3.1      Intentionally Left Blank.

3.2       LoanDocumentstobeExecutedbyBorrowers.   As a condition precedent to Lender’s disbursal or making of the Loans pursuant to this Agreement, Borrowers shall have executed or cause to be executed and delivered to Lender all of the following documents, each of which must be satisfactory to Lender and Lender’s counsel in form, substance and execution:

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

(a)        CreditAgreement.   One (1) original of this Agreement duly executed by Borrowers;

(b)        Revolving  Note.    An  original Revolving Note  duly executed by Borrowers;

(c)        SecurityAgreement.  One (1) original of the Security Agreement dated as of the date of this Agreement, executed by Borrowers;

(d)       Intentionally Left Blank.

(e)       ValidityGuaranties. Validity Guarantees duly executed by such officers and directors of Borrowers as Lender shall require;

(f)       SearchResults.  Copies of UCC search reports dated such a date as is reasonably acceptable to Lender, listing all effective financing statements which name any Borrower, under its present name and any previous names, as debtors, together with copies of such financing statements;

(g)       Organizational and Authorization Documents.     A  certificate  of  the corporate secretary of each Borrower certifying and attaching: (i) copies of its articles of incorporation and bylaws; (ii) resolutions of the board of directors of such Borrower, approving and authorizing such Borrower’s issuance of the Revolving Note, and the execution, delivery and performance of the Loan Documents to which it is party and the transactions contemplated thereby; (iii) the signatures and incumbency of the officers of such Borrower executing any of the Loan Documents, each of which such Borrower hereby certifies to be true and complete, and in full force and effect without modification, it being understood that Lender may conclusively rely on each such document and certificate until formally advised by such Borrower of any changes therein; and (iv) good standing certificate in the state of incorporation of such Borrower and in each other state requested by Lender;

(h)       Insurance.  Evidence satisfactory to Lender of the existence of insurance required to be maintained pursuant to Section10.4, together with evidence that Lender has been named as additional insured and lender’s loss payee, as applicable, on all related insurance policies;

(i)        Opinion of Counsel.  A customary opinion of Borrowers’ counsel, in form reasonably satisfactory to Lender; and

(j)        AdditionalDocuments.  Such other agreements, documents, instruments, certificates, financial statements, schedules, resolutions, opinions of counsel, notes and other items which Lender shall require in connection with this Agreement.

3.3       IssuanceofStock.   The Issuing Borrower shall have issued and delivered to Lender an irrevocable issuance instruction letter and board resolution in form and substance acceptable to Lender, irrevocably authorizing the issuance of the Facility Fee Shares and irrevocably directing its Transfer Agent to issue and deliver the Facility Fee Shares to Lender or its designee.

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

3.4       Payment of Fees.    Borrowers  shall  have  paid  to  Lender  all  fees,  costs  and expenses, including, but not limited to, due diligence expenses, attorney’s fees, search fees, title fees, documentation and filing fees (including documentary stamps and taxes payable on the face amount of the Revolving Note).

3.5       EventofDefault.  No Event of Default, or event which, with notice or lapse of time, or both, would constitute an Event of Default, shall have occurred and be continuing.

3.6       Adverse Changes.  There shall not have occurred any Material Adverse Effect.

3.7       Litigation.  Except for litigation and pending claims set forth in Schedule7.12, no pending claim, investigation, litigation or governmental proceeding shall have been instituted against any Borrower or any of their respective Subsidiaries or any of their respective officers or shareholders.

3.8      Representations and Warranties.  No representation or warranty of Borrowers contained herein or in any Loan Documents shall be untrue or incorrect in any material respect as of the date of any Loans as though made on such date, except to the extent such representation or warranty expressly relates to an earlier date.

3.9       DueDiligence.  The business, legal and collateral due diligence review performed by Lender, including, but not limited to, a review of Borrowers’ historical performance and financial information, must be acceptable to Lender in its sole discretion.  Lender reserves the right to increase any and all aspects of its due diligence in Lender’s sole discretion.

3.10     KeyPersonnelInvestigations.   Lender shall be satisfied, in its sole discretion, with results from background investigations conducted on key members of Borrowers’ principals and management teams.

3.11     RepaymentofOutstandingIndebtedness.  Borrowers shall have repaid in full all outstanding indebtedness secured by Collateral, other than indebtedness giving rise to Permitted Liens.

4.           NOTES EVIDENCING LOANS.

The Revolving Loans shall be evidenced by the Revolving Note (together with any and all renewal, extension, modification or replacement notes executed by Borrowers and delivered to Lender and given in substitution therefor) duly executed by Borrowers and payable to the order of Lender.  At the time of the initial disbursement of a Revolving Loan and at each time an additional Revolving Loan shall be requested hereunder or a repayment made in whole or in part thereon, an appropriate notation thereof shall be made on the books and records of Lender.  All amounts recorded shall be, absent demonstrable error, conclusive and binding evidence of: (i) the principal amount of the Revolving Loans advanced hereunder; (ii) any unpaid interest owing on the Revolving Loans; and (iii) all amounts repaid on the Revolving Loans.  The failure to record any such amount or any error in recording such amounts shall not, however, limit or otherwise affect the obligations of Borrowers under the Revolving Note to repay the principal amount of the Revolving Loans, together with all interest accruing thereon.

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

5.           MANNER OF BORROWING.

5.1       LoanRequests.  Subject to Section2.1(a) and Article3 hereof, the Loans shall be made available to Borrowers upon Borrowers’ request, from any Person whose authority to so act has not been revoked by any Borrower in writing previously received by Lender. Borrowers may make requests for borrowing no more than one time every two (2) weeks up to the then applicable Revolving Loan Commitment; provided, however, that, notwithstanding anything contained in this Agreement or any other Loan Documents to the contrary, each Revolving Loan requested by Borrowers under this Agreement shall be subject to Lender’s approval, which approval may be given or withheld in Lender’s sole and absolute discretion.   A request for a Loan may only be made if no default or Event of Default shall have occurred or be continuing and shall be subject to: (i) Lender’s preparation of a Borrowing Base Certificate, showing that there is borrowing availability under the Revolving Loan Commitment; and (ii) Receipts deposited into the Lock Box Account and other Collateral being acceptable to Lender.  In addition, a request for a Loan must be received by no later than 11:00 a.m. eastern time the day it is to be funded and be in a minimum amount equal to Fifty Thousand Dollars and No/100 ($50,000.00).

5.2       Communications. Lender is authorized to rely on any written, verbal, electronic, telephonic or telecopy loan requests which Lender believes in its good faith judgment to emanate from the President or Chief Executive Officer, or any other authorized representative of Borrowers.  Each Borrower hereby irrevocably confirms, ratifies and approves all such advances by Lender and each of such Borrowers hereby indemnifies Lender against losses and expenses (including court costs, attorneys’ and paralegals’ fees) and shall hold Lender harmless with respect thereto.

6.           SECURITY FOR THE OBLIGATIONS.

To secure the payment and performance by Borrowers of the Obligations hereunder, each Borrower grants, under and pursuant to the Security Agreement executed by Borrowers dated as of the date hereof, to Lender, its successors and assigns, a continuing, first-priority security interest in, and does hereby assign, transfer, mortgage, convey, pledge, hypothecate and set over to Lender, its successors and assigns, all of the right, title and interest of each Borrower in and to the Collateral, whether now owned or hereafter acquired, and all proceeds (including, without limitation, all insurance proceeds) and products of any of the Collateral.  At any time upon Lender’s  request,  Borrowers  shall  execute  and  deliver  to  Lender  any  other  documents, instruments or certificates requested by Lender for the purpose of properly documenting and perfecting the security interests of Lender in and to the Collateral granted hereunder, including any additional security agreements, mortgages, control agreements, and financing statements.

7.           REPRESENTATIONS AND WARRANTIES OF BORROWERS.

To induce Lender to make the Loans, each Borrower makes the following representations and warranties to Lender, each of which shall be true and correct in all material respects as of the date of the execution and delivery of this Agreement and as of the date of each Loan made

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

hereunder, except to the extent such representation expressly relates to an earlier date, and which shall survive the execution and delivery of this Agreement:

7.1       Subsidiaries.  Other than Hangover Joe’s, Inc., a Colorado corporation, which is a wholly owned Subsidiary of the Issuing Borrower, no Borrower owns, directly or indirectly, any outstanding voting securities of or other interests in, or have any control over, any other Person.

7.2       Borrower Organization and Name.     Each  Borrower  is  a  corporation,  duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and has the full power and authority and all necessary Permits to: (i) enter into and execute this Agreement and the Loan Documents and to perform all of its obligations hereunder and thereunder; and (ii) own and operate its assets and properties and to conduct and carry on its business as and to the extent now conducted.   Each Borrower is duly qualified to transact business and is in good standing as a foreign corporation in each jurisdiction where the character of its business or the ownership or use and operation of its assets or properties requires such qualification.  The exact legal name of each Borrower is as set forth in the first paragraph of this Agreement, and no Borrower currently conducts, nor has any Borrower, during the last five (5) years conducted, business under any other name or trade name, other than Accredited Members Holding Corporation and Across American Real Estate Exchange, as disclosed in the Borrowers’ SEC Documents.

7.3       Authorization;Validity.   Each Borrower has full right, power and authority to enter into this Agreement, to make the borrowings and execute and deliver the Loan Documents as provided herein and to perform all of its duties and obligations under this Agreement and the Loan Documents and no other action or consent on the part of any Borrower, its board of directors, stockholders, or any other Person is necessary or required by any Borrower to execute this Agreement and the Loan Documents, consummate the transactions contemplated herein and therein, and perform all of its obligations hereunder and thereunder.  The execution and delivery of this Agreement and the Loan Documents will not, nor will the observance or performance of any of the matters and things herein or therein set forth, violate or contravene any provision of law or of any Borrower’s Articles of Incorporation or Bylaws, or other governing documents. All necessary and appropriate corporate action has been taken on the part of each Borrower to authorize  the  execution  and  delivery  of  this  Agreement  and  the  Loan  Documents  and  the issuance of the Revolving Note and the Facility Fee Shares.  This Agreement and the Loan Documents  are  valid  and  binding  agreements  and  contracts  of  each  Borrower,  enforceable against each Borrower in accordance with their respective terms, except to the extent that enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws enacted for the relief of debtors generally and other similar laws affecting the enforcement of creditors’ rights generally or by equitable principles which may affect the availability of specific performance and other equitable remedies.  No Borrower knows of any reason why any Borrower cannot perform any of its obligations under this Agreement, the Loan Documents or any related agreements.

7.4       Capitalization.  The authorized capital stock of each Borrower is as set forth in Schedule7.3attached hereto.  Schedule7.3shall specify, for each Borrower, the total number of authorized  shares  of  capital  stock,  and  of  such  authorized  shares,  the  number  which  are designated as common stock (“CommonStock”) and the number designated as preferred stock.

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

Schedule7.3shall also specify, for each Borrower, as of the date hereof, the number of shares of Common Stock issued and outstanding and the number of shares of preferred stock issued and outstanding. All of the outstanding shares of capital stock of each Borrower are validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws and none of such outstanding shares were issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities.  As of the date of this Agreement, no shares of any Borrower’s capital stock are subject to preemptive rights or any other similar rights or any Liens, claims or encumbrances suffered or permitted by any Borrower.  The Common Stock is currently quoted on the OTC Bulletin Board under the trading symbol “HJOE”.  The Issuing Borrower has received no notice, either oral or written, with respect to the continued eligibility of the Common Stock for quotation on the Principal Trading Market, and the Issuing Borrower has maintained all requirements on its part for the continuation of such quotation.  Except as set forth in Schedule7.3attached hereto and except for the securities to be issued pursuant to this Agreement, as of the date of this Agreement: (i) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of Issuing Borrower or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which Issuing Borrower or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Issuing Borrower or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of Issuing Borrower or any of its Subsidiaries; (ii) there are no outstanding debt securities, notes, credit agreements, credit facilities or other contracts or instruments evidencing indebtedness of Issuing Borrower or any of its Subsidiaries, or by which Issuing Borrower or any of its Subsidiaries is or may become bound; (iii) there are no outstanding registration statements with respect to Issuing Borrower or any of its Subsidiaries, or any of their respective securities, and there are no outstanding comment letters from the SEC, the Principal Trading Market, or any other Governmental Authority with respect to any securities of Issuing Borrower or any of its Subsidiaries; (iv) there are no agreements or arrangements under which Issuing Borrower or any of its Subsidiaries is obligated to register the sale of any of its securities under the Securities Act; (v) there are no financing statements filed with any Governmental Authority securing any obligations of Issuing Borrower or any of its Subsidiaries, or filed in connection with any assets or properties of Issuing Borrower or any of its Subsidiaries; (vi) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by this Agreement or any related agreement or the consummation of the transactions described herein or therein; and (vii) there are no outstanding securities or instruments of any Borrower which contain any redemption or similar provisions, and there are no contracts or agreements by which such Borrower is or may become bound to redeem a security of such Borrower (except pursuant to this Agreement).  Each Borrower has furnished to the Lender true, complete and correct copies of such Borrower’s Certificate of Incorporation, as amended and as in effect on the date hereof and such Borrower’s Bylaws, as in effect on the date hereof, and any other governing or organizational documents, as applicable.  Except for the documents delivered to Lender in accordance with the immediately preceding sentence, there are no other shareholder agreements, voting agreements, operating agreements, or other contracts or agreements of any nature or kind that restrict, limit or in any manner impose obligations, restrictions or limitations on the governance of each Borrower.

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

7.5       NoConflicts;ConsentsandApprovals.  The execution, delivery  and performance of this Agreement and the Loan Documents, and the consummation of the transactions contemplated hereby and thereby, including the issuance of the Facility Fee Shares, will not: (i) constitute a violation of or conflict with the Certificate of Incorporation, Bylaws, or any other organizational or governing documents of any Borrower; (ii) constitute a violation of, or a default or breach under (either immediately, upon notice, upon lapse of time, or both), or conflicts with, or gives to any other Person any rights of termination, amendment, acceleration or cancellation of, any provision of any contract or agreement to which any Borrower is a party or by which any of its or their assets or properties may be bound; (iii) constitute a violation of, or a default or breach under (either immediately, upon notice, upon lapse of time, or both), or conflicts with, any order, writ, injunction, decree, or any other judgment of any nature whatsoever; (iv) constitute a violation of, or conflict with, any law, rule, ordinance or other regulation (including United States federal and state securities laws and the rules and regulations of any market or exchange on which the Common Stock is quoted); or (v) result in the loss or adverse modification of, or the imposition of any fine, penalty or other Lien, claim or encumbrance with respect to, any Permit granted or issued to, or otherwise held by or for the use of, any Borrower or any of their respective assets.  No Borrower is in violation of its Certificate of Incorporation, Bylaws, or other organizational or governing documents, as applicable, and no Borrower is in default or breach (and no event has occurred which with notice or lapse of time or both could put any Borrower in default or breach) under, and no Borrower has taken any action or failed to take any action that would give to any other Person any rights of termination, amendment, acceleration or cancellation of, any contract or agreement to which any Borrower is a party or by which any property or assets of any Borrower are bound or affected. No business of any Borrower is being conducted, and shall not be conducted, in violation of any law, rule, ordinance or other regulation. Except as specifically contemplated by this Agreement, no Borrower is required to obtain any consent or approval of, from, or with any Governmental Authority, or any other Person, in order for it to execute, deliver or perform any of its obligations under this Agreement or the Loan Documents in accordance with the terms hereof or thereof, or to issue the Facility Fee Shares in accordance with the terms hereof.  All consents and approvals which any Borrower is required to obtain pursuant to the immediately preceding sentence have been obtained or effected on or prior to the date hereof.

7.6      Issuanceof Securities. The Facility Fee Shares are duly authorized and, upon issuance in accordance with the terms hereof, shall be duly issued, fully paid and non-assessable, and free from all Liens, claims, charges, taxes, or other encumbrances with respect to the issue thereof, and will be issued in compliance with all applicable United States federal and state securities laws and the laws of any foreign jurisdiction applicable to the issuance thereof.  Except as provided in Schedule7.6, any shares issuable upon conversion of the Revolving Note, in accordance with the terms of the Revolving Note, are duly authorized and, upon issuance in accordance with the terms hereof, shall be duly issued, fully paid and non-assessable, and free from all Liens, claims, charges, taxes, or other encumbrances with respect to the issue thereof, and will be issued in compliance with all applicable United States federal and state securities laws and the laws of any foreign jurisdiction applicable to the issuance thereof.  The issuance of the Facility Fee Shares and any shares issuable upon conversion of the Revolving Note is and will be exempt from: (i) the registration and prospectus delivery requirements of the Securities Act; (ii) the registration and/or qualification provisions of all applicable state and provincial

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

securities and “blue sky” laws; and (iii) any similar registration or qualification requirements of any foreign jurisdiction or other Governmental Authority.

7.7       ComplianceWithLaws.  The nature and transaction of each Borrower’s business and operations and the use of its properties and assets, including, but not limited to, the Collateral or any real estate owned, leased, or occupied by each Borrower, do not and during the term of the Loans shall not, violate or conflict with any applicable law, statute, ordinance, rule, regulation or order of any kind or nature, including, without limitation, the provisions of the Fair Labor Standards Act or any zoning, land use, building, noise abatement, occupational health and safety or other laws, any Permit or any condition, grant, easement, covenant, condition or restriction, whether recorded or not, except to the extent such violation or conflict would not result in a Material Adverse Effect.

7.8       EnvironmentalLawsandHazardousSubstances.  Except to the extent that any of the following would not have a Material Adverse Effect (including financial reserves, insurance policies and cure periods relating to compliance with applicable laws and Permits) and are used in such amounts as are customary in the Ordinary Course of Business in compliance with all applicable Environmental Laws, each Borrower represents and warrants to Lender that, to its knowledge: (i) no Borrower has generated, used, stored, treated, transported, manufactured, handled, produced or disposed of any Hazardous Materials, on or off any of the premises of any Borrower (whether or not owned by any Borrower) in any manner which at any time violates any Environmental Law or any Permit, certificate, approval or similar authorization thereunder; (ii) the operations of each Borrower comply in all material respects with all Environmental Laws and all Permits certificates, approvals and similar authorizations thereunder; (iii) there has been no investigation, Proceeding, complaint, order, directive, claim, citation or notice by any Governmental Authority or any other Person, nor is any pending or, to any Borrower’s knowledge, threatened; and (iv) no Borrower has any liability, contingent or otherwise, in connection with a release, spill or discharge, threatened or actual, of any Hazardous Materials or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Material.

7.9       CollateralRepresentations.   No Person other than each Borrower, owns or has other rights in the Collateral, and the Collateral is free from any Lien of any kind, other than the Lien of Lender and Permitted Liens.

7.10     SEC Documents; Financial Statements.  The  Common  Stock  of  the  Issuing Borrower is registered pursuant to Section 12 of the Exchange Act, the Company is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, and the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC or any other Governmental Authority (all of the foregoing filed within the two (2) years preceding the date hereof or amended after the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein, being hereinafter referred to as the “SECDocuments”). The Issuing Borrower is current with its filing obligations under the Exchange Act and all SEC Documents have been filed on a timely basis or the Issuing Borrower has received a valid extension of such time of filing and has filed any such SEC Document prior to the expiration of any such extension. The Issuing Borrower represents and warrants that true and complete copies of the SEC Documents are available on the

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

SEC’s website (www.sec.gov) at no charge to Lender, and Lender acknowledges that it may retrieve all SEC Documents from such website and Lender’s access to such SEC Documents through such website shall constitute delivery of the SEC Documents to Lender; provided, however, that if Lender is unable to obtain any of such SEC Documents from such website at no charge, as result of such website not being available or any other reason beyond Lender’s control, then upon request from Lender, the Issuing Borrower shall deliver to Lender true and complete copies of such SEC Documents.  As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, Borrowers hereby disclose to Lender that prior to July 2012, the current principals and management team of the Borrowers were not involved with the then existing predecessor of the Borrowers; however, to the best knowledge and belief of the Borrowers, none of the SEC Documents filed by the predecessor to the Borrowers prior to July 2012 failed to comply with the foregoing standards and requirements.  None of the statements made in any such SEC Documents is, or has been, required to be amended or updated under applicable law (except for such statements as have been amended or updated in subsequent filings prior the date hereof, which amendments or updates are also part of the SEC Documents). As of their respective dates, the consolidated financial statements of the Issuing Borrower and its Subsidiaries included in the SEC Documents (the “Financial Statements”) complied in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. All of the Financial Statements have been prepared in accordance with GAAP, consistently applied, during the periods involved (except: (i) as may be otherwise indicated in such Financial Statements or the notes thereto; or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements),  and  fairly present in all material respects the consolidated financial position of the Borrower and all of its Subsidiaries as of the dates thereof and the consolidated results of its operations and cash flows for the periods then ended (subject, in the case of unaudited  statements,  to  normal  year-end  audit  adjustments).  To the knowledge of each Borrower and its officers, no other information provided by or on behalf of any Borrower to the Lender which is not included in the SEC Documents contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they are or were made, not misleading.

7.11           AbsenceofCertainChanges.  Since the date the last of the SEC Documents was filed with the SEC, none of the following have occurred:

(a)       There has been no event or circumstance of any nature whatsoever that has resulted in, or could reasonably be expected to result in, a Material Adverse Effect; or

(b)       Any transaction, event, action, development, payment, or any other matter of any nature whatsoever entered into by any Borrower other than in the Ordinary Course of Business.

7.12           LitigationandTaxes.  Except as set forth in Schedule7.12attached hereto, there is no Proceeding pending, or to each Borrower’s knowledge, threatened, against any Borrower or

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

their respective officers, managers, members or shareholders, or against or affecting any of their respective assets.  In addition, there is no outstanding judgments, orders, writs, decrees or other similar matters or items against or affecting any Borrower, its business or assets.  No Borrower has received any material complaint from any Customer, supplier, vendor or employee.  Except as set forth in Schedule7.12, each Borrower has duly filed all applicable income or other tax returns and has paid all income or other taxes when due.  There is no Proceeding, controversy or objection pending or threatened in respect of any tax returns of any Borrower.

7.13     EventofDefault.   No Event of Default has occurred and is continuing, and no event has occurred and is continuing which, with the lapse of time, the giving of notice, or both, would constitute such an Event of Default under this Agreement or any of the other Loan Documents, and except as set forth in Schedule7.18, no Borrower is in default (without regard to grace or cure periods) under any contract or agreement to which it is a party or by which any of their respective assets are bound.

7.14     ERISAObligations.  To the knowledge of each Borrower, all Employee Plans of each Borrower meet the minimum funding standards of Section 302 of ERISA, where applicable, and each such Employee Plan that is intended to be qualified within the meaning of Section 401 of the Internal Revenue Code of 1986 is qualified.  No withdrawal liability has been incurred under any such Employee Plans and no “Reportable Event” or “Prohibited Transaction” (as such terms are defined in ERISA), has occurred with respect to any such Employee Plans, unless approved by the appropriate governmental agencies.  To the knowledge of each Borrower, each Borrower has promptly paid and discharged all obligations and liabilities arising under the ERISA of a character which if unpaid or unperformed might result in the imposition of a Lien against any of its properties or assets.

7.15     Adverse  Circumstances.      No   condition,   circumstance,   event,   agreement, document, instrument, restriction, litigation or Proceeding (or threatened litigation or Proceeding or basis therefor) exists which: (i) could adversely affect the validity or priority of the Liens granted to Lender under the Loan Documents; (ii) could adversely affect the ability of any Borrower to perform its obligations under the Loan Documents; (iii) would constitute a default under any of the Loan Documents; (iv) would constitute such a default with the giving of notice or lapse of time or both; or (v) would constitute or give rise to a Material Adverse Effect.

7.16    Liabilities and Indebtedness of the Borrower.  No Borrower has any Funded Indebtedness or any liabilities or obligations of any nature whatsoever, except: (i) as disclosed in the Financial Statements; or (ii) liabilities and obligations incurred in the Ordinary Course of Business of each Borrower since the date of the last Financial Statements filed by the Issuing Borrower with the SEC which do not or would not, individually or in the aggregate, exceed Ten Thousand Dollars ($10,000) or otherwise have a Material Adverse Effect.

7.17           Real Estate.

(a)           RealPropertyOwnership.    Except for the Borrower Leases, Borrower does not own any Real Property.

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

(b)       RealPropertyLeases.  Except for ordinary office leases described in the SEC Documents (the “BorrowerLeases”), no Borrower leases any other Real Property.  With respect to each of the Borrower Leases: (i) each Borrower has been in peaceful possession of the property leased thereunder and neither Borrower nor the landlord is in default thereunder; (ii) no waiver, indulgence or postponement of any of the obligations thereunder has been granted by any Borrower or landlord thereunder; and (iii) there exists no event, occurrence, condition or act known to any Borrower which, upon notice or lapse of time or both, would be or could become a default thereunder or which could result in the termination of the Borrower Leases, or any of them, or have a Material Adverse Effect.  No Borrower has violated nor breached any provision of any such Borrower Leases, and all obligations required to be performed by any Borrower under any of such Borrower Leases have been fully, timely and properly performed.  Each Borrower has delivered to the Lender true, correct and complete copies of all Borrower Leases, including all modifications and amendments thereto, whether in writing or otherwise.   No Borrower has received any written or oral notice to the effect that any of the Borrower Leases will not be renewed at the termination of the term of such Borrower Leases, or that the Borrower Leases will be renewed only at higher rents.

7.18     Material Contracts.    An  accurate,  current  and  complete  copy  of  each  of  the Material Contracts has been furnished to Lender and/or is readily available as part of the SEC Documents, and each of the Material Contracts constitutes the entire agreement of the respective parties thereto relating to the subject matter thereof.   Except as set forth in  Schedule7.18attached hereto, there are no outstanding offers, bids, proposals or quotations made by any Borrower which, if accepted, would create a Material Contract with such Borrower.  Each of the Material Contracts is in full force and effect and is a valid and binding obligation of the parties thereto in accordance with the terms and conditions thereof.  To the knowledge of each Borrower and its officers, all obligations required to be performed under the terms of each of the Material Contracts by any party thereto have been fully performed by all parties thereto, and no party to any Material Contracts is in default with respect to any term or condition thereof, nor has any event occurred which, through the passage of time or the giving of notice, or both, would constitute a default thereunder or would cause the acceleration or modification of any obligation of any party thereto or the creation of any lien, claim, charge or other encumbrance upon any of the assets or properties of any Borrower.  Further, no Borrower has received any notice, nor does any Borrower have any knowledge, of any pending or contemplated termination of any of the Material Contracts and, no such termination is proposed or has been threatened, whether in writing or orally, except for the Warner Bros. license agreement, which is set to terminate on January 31, 2013; provided, however, Borrowers represent to Lender that they have negotiated and agreed upon an extension of such Warner Bros. license agreement which requires a payment of $100,000, which payment shall be withheld from the proceeds of the initial Revolving Loan funded hereunder and paid by Lender or its counsel directly to Warner Bros. in connection with the extension of such license agreement.  Borrowers shall provide payment information and other information required or requested by Lender and its counsel in order to allow and facilitate Lender or its counsel’s payment of such extension fee directly to Warner Bros. on or after the Closing Date.

7.19     TitletoAssets.   Each Borrower has good and marketable title to, or a valid leasehold interest in, all of its assets and properties which are material to its business and operations  as  presently  conducted,  free  and  clear  of  all  liens,  claims,  charges  or  other

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

encumbrances or restrictions on the transfer or use of same.  Except as would not have a Material Adverse Effect, the assets and properties of each Borrower are in good operating condition and repair, ordinary wear and tear excepted, and are free of any latent or patent defects which might impair their usefulness, and are suitable for the purposes for which they are currently used and for the purposes for which they are proposed to be used.

7.20    IntellectualProperty. Each Borrower owns or possesses adequate and legally enforceable  rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and all other intellectual property rights necessary to conduct its business as now conducted. No Borrower has any knowledge of any infringement by any Borrower of trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses,  service  names,  service  marks,  service  mark  registrations,  trade  secret  or  other intellectual property rights of others, and, to the knowledge of each Borrower, there is no claim, demand or Proceeding, or other demand of any nature being made or brought against, or to each Borrowers’ knowledge, being threatened against, any Borrower regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other intellectual property infringement; and no Borrower is aware of any facts or circumstances which might give rise to any of the foregoing.

7.21     LaborandEmploymentMatters.  No Borrower is involved in any labor dispute or, to the knowledge of any Borrower, is any such dispute threatened. To the knowledge of each Borrower and its officers, none of the employees of any Borrower is a member of a union and each Borrower believes that its relations with its employees are good.  To the knowledge of each Borrower and its officers, each Borrower has complied in all material respects with all laws, rules, ordinances and regulations relating to employment matters, civil rights and equal employment opportunities.

7.22     Insurance.    Each  Borrower  is  covered  by  valid,  outstanding  and  enforceable policies of insurance which were issued to it by reputable insurers of recognized financial responsibility, covering its properties, assets and business against losses and risks normally insured against by other corporations or entities in the same or similar lines of businesses as the Borrowers are engaged and in coverage amounts which are prudent and typically and reasonably carried  by  such  other  corporations  or  entities  (the  “Insurance Policies”).    Such  Insurance Policies are in full force and effect, and all premiums due thereon have been paid.  None of the Insurance Policies will lapse or terminate as a result of the transactions contemplated by this Agreement.  Each Borrower has complied with the provisions of such Insurance Policies.  No Borrower has been refused any insurance coverage sought or applied for and no Borrower has any reason to believe that it will not be able to renew its existing Insurance Policies as and when such Insurance Policies expire or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not materially and adversely affect the condition, financial or otherwise, or the earnings, business or operations of any Borrower.

7.23     Permits.  Each Borrower possesses all Permits necessary to conduct its business, and no Borrower has received any notice of, or is otherwise involved in, any Proceedings relating to the revocation or modification of any such Permits.  All such Permits are valid and in

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

full force and effect and each Borrower is in full compliance with the respective requirements of all such Permits.

7.24     Lending Relationship.     Each  Borrower  acknowledges  and  agrees  that  the relationship hereby created with Lender is and has been conducted on an open and arm’s length basis in which no fiduciary relationship exists and that no Borrower has relied, nor is relying on, any such fiduciary relationship in executing this Agreement and in consummating the Loans. Lender represents that it will receive the Revolving Note payable to its order as evidence of the Loans.

7.25     CompliancewithRegulationU.  No portion of the proceeds of the Loans shall be used by any Borrower, or any Affiliates of Borrower, either directly or indirectly, for the purpose of purchasing or carrying any margin stock, within the meaning of Regulation U as adopted by the Board of Governors of the Federal Reserve System.

7.26     GovernmentalRegulation.  No Borrower is, nor after giving effect to any Loan, will be, subject to regulation under the Public Utility Holding Borrower Act of 1935, the Federal Power Act or the Investment Company Act of 1940 or to any federal or state statute or regulation limiting its ability to incur indebtedness for borrowed money.

7.27     BankAccounts.   Schedule7.27sets forth, with respect to each account of each Borrower with any bank, broker, merchant processor, or other depository institution: (i) the name and account number of such account; (ii) the name and address of the institution where such account is held; (iii) the name of any Person(s) holding a power of attorney with respect to such account, if any; and (iv) the names of all authorized signatories and other Persons authorized to withdraw funds from each such account.

7.28     PlacesofBusiness.  The principal place of business of each Borrower is set forth on  Schedule 7.28and each Borrower shall promptly notify Lender of any change in such location.  No Borrower will remove or permit the Collateral to be removed from such locations without the prior written consent of Lender, except for: (i) certain heavy equipment kept at third party sites when conducting business or maintenance; (ii) vehicles, containers and rolling stock; (iii) Inventory sold or leased in the Ordinary Course of Business; and (iv) temporary removal of Collateral to other locations for repair or maintenance as may be required from time to time in each instance in the Ordinary Course of Business of each Borrower.

7.29     IllegalPayments.   No Borrower, nor any director, officer, member, manager, agent, employee or other Person acting on behalf of any Borrower has, in the course of his actions for, or on behalf of, any Borrower: (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

7.30     RelatedPartyTransactions.   Except for arm’s length transactions pursuant to which any Borrower makes payments in the Ordinary Course of Business upon terms no less favorable than such Borrower could obtain from third parties, or which are disclosed in the Financial Statements, or the indemnity agreement between the Issuing Borrower and Michael Jaynes executed in connection with this Agreement (provided, however, with respect to such indemnity agreement, Borrowers and Michael Jaynes recognize, agree and acknowledge that any and all obligations of the Borrowers to Mr. Jaynes thereunder are and constitute “Subordinated Debt” under the terms of the Subordination of Loans Agreement executed in connection with this Agreement), none of the officers, directors, managers, or employees of any Borrower, nor any stockholders, members or partners who own, legally or beneficially, five percent (5%) or more of the ownership interests of any Borrower (each a “MaterialShareholder”), is presently a party to any transaction with any Borrower (other than for services as employees, officers and directors), including any contract providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from, any officer, director or such employee or Material Shareholder or, to the best knowledge of each Borrower, any other Person in which any officer, director, or any such employee or Material Shareholder has a substantial or material interest in or of which any officer, director or employee of any Borrower or Material Shareholder is an officer, director, trustee or partner.  There are no claims, demands, disputes or Proceedings of any nature or kind between any Borrower and any officer, director or employee of any Borrower or any Material Shareholder, or between any of them, relating to any Borrower.

7.31    InternalAccountingControls.  Each Borrower maintains a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in  accordance  with  management’s  general  or  specific  authorizations;  (ii) transactions  are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

7.32     BrokerageFees.  Except for Meyers Associates, LP, there is no Person acting on behalf of any Borrower who is entitled to or has any claim for any brokerage or finder’s fee or commission in connection with the execution of this Agreement or the consummation of the transactions contemplated hereby.   Meyers Associates, LP, a FINRA registered securities brokerage firm, shall be paid a finder’s fee by the Borrowers, at Closing, in accordance with a separate agreement between the Borrowers and Meyers Associates, LP.

7.33     NoGeneralSolicitation.  No Borrower, nor any of their respective Affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or issuance of the Revolving Note, the Facility Fee Shares or the shares issuable upon conversion of the Revolving Note.

7.34     NoIntegratedOffering.  No Borrower, nor any of their respective Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

registration of the Revolving Note, the Facility Fee Shares or any securities issuable upon conversion  of  the  Revolving  Note  under  the  Securities  Act  or  cause  this  offering  of  such securities to be integrated with prior offerings by any Borrower for purposes of the Securities Act.

7.35    PrivatePlacement.  Assuming the accuracy of the Lender’s representations and warranties set forth in Section8 below, no registration under the Securities Act or the laws, rules or regulation of any other Governmental Authority is required for the issuance of the Revolving Note, the Facility Fee Shares or the shares issuable upon conversion of the Revolving Note as contemplated hereby.

7.36     CompleteInformation.  This Agreement and all financial statements, schedules, certificates, confirmations, agreements, contracts, and other materials submitted to Lender in connection with or in furtherance of this Agreement by or on behalf of any Borrower fully and fairly states the matters with which they purport to deal, and do not misstate any material fact nor,  separately  or  in  the  aggregate,  fail  to  state  any  material  fact  necessary  to  make  the statements made not misleading.

8.         REPRESENTATIONS AND WARRANTIES OF LENDER.

Lender makes the following representations and warranties to the Borrowers, each of which shall be true and correct in all material respects as of the date of the execution and delivery of this Agreement and as of the date of each Loan made hereunder, except to the extent such representation expressly relates to an earlier date, and which shall survive the execution and delivery of this Agreement:

8.1       Investment Purpose. Lender is acquiring the Revolving Note, the Facility Fee Shares or the shares issuable upon conversion of the Revolving Note, for its own account, and not on behalf of any other Person, for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted under the Securities Act.  Lender acknowledges and agrees that it did not become aware of the offering of the Revolving Note, the Facility Fee Shares or the shares issuable upon conversion of the Revolving Note through any means of public advertising or general solicitation.

8.2       Accredited Lender Status.  Lender  is  an  “Accredited  Lender”  as  that  term  is defined in Rule 501(a)(3) of Regulation D promulgated under the Securities Act.

8.3       Reliance on Exemptions. Lender understands that the Revolving Note, the Facility Fee Shares or the shares issuable upon conversion of the Revolving Note, are each being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that Borrowers are relying in part upon the truth and accuracy of, and Lender’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of Lender set forth herein in order to determine the availability of such exemptions and the eligibility of Lender to acquire such securities.

8.4       Information. Lender has been furnished with all materials relating to the business, finances and operations of Borrowers and information deemed material by Lender to making an

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

informed investment decision regarding the Revolving Note, which have been requested by Lender. Lender has been afforded the opportunity to ask questions of Borrowers and their management.  Neither such inquiries nor any other due diligence investigations conducted by Lender or its representatives shall modify, amend or affect Lender’s right to rely on Borrowers’ representations and warranties contained in Article7 above or in any other Loan Documents. Lender understands that its investment in the Revolving Note involves a high degree of risk. Lender is in a position regarding Borrowers, which, based upon economic bargaining power, enabled and enables Lender to obtain information from Borrowers in order to evaluate the merits and risks of this investment. Lender has sought such accounting, legal and tax advice, as it has considered necessary to make an informed investment decision with respect to the Revolving Note.

8.5       NoGovernmentalReview. Lender understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Revolving Note, or the fairness or suitability of the investment in the Revolving Note, nor have such authorities passed upon or endorsed the merits of the offering of the Revolving Note.

8.6       TransferorResale.  Lender understands that: (i) the Revolving Note, the Facility Fee Shares and the shares issuable upon conversion of the Revolving Note, have not been and are not being registered under the Securities Act or any other foreign or state securities laws, and may not be offered for sale, sold, assigned or transferred unless: (A) subsequently registered thereunder; or (B) Lender shall have delivered to Issuing Borrower an opinion of counsel, in a generally acceptable form, to the effect that such securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration requirements; and (ii) neither Borrower nor any other Person is under any obligation to register such securities under the Securities Act or any foreign or state securities laws or to comply with the terms and conditions of any exemption thereunder, except as otherwise set forth in this Agreement.

8.7       NoIllegalUse. Lender represents that to the best of its knowledge and belief, no part of the funds used by Lender for making any of the Revolving Loans was directly or indirectly derived from, or related to, any activity that may contravene federal, state, or international laws and regulations, including anti-money laundering laws and regulations. To the best of Lender’s knowledge and belief, Lender’s acquisition of the Revolving Note, the Facility Fee Shares and the shares issuable upon conversion of the Revolving Note shall not cause any Borrower to violate any applicable anti-money laundering laws and regulations including the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA Patriot Act) and regulations of the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC). Lender further represents that it and its Affiliates are not acting directly or indirectly for or on behalf of any person, group, entity, or nation named by any Executive Order of the U.S. as a terrorist, Specially Designated National and Blocked Person (SDN) or other banned or blocked person, entity, nation, or transaction pursuant to any law, order, rule, or regulation that is enforced or administered by OFAC. Lender further  represents  that  it  and  its  Affiliates  are  not  engaged  in  this  transaction,  directly  or indirectly, on behalf of, or instigating or facilitating this transaction, directly or indirectly, on behalf of any SDN.

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

8.8       Authorization, Enforcement.     This  Agreement  has  been  duly  and  validly authorized, executed and delivered on behalf of Lender and is a valid and binding agreement of Lender enforceable in accordance with its terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation  and  other  similar  laws  relating  to,  or  affecting  generally,  the  enforcement  of applicable creditors’ rights and remedies.

8.9           Intentionally Left Blank.

8.10     DueFormationofLender. Lender is an entity that has been formed and validly exists and has not been organized for the specific purpose of purchasing the Revolving Note and is not prohibited from doing so.

8.11     No Legal Advice from Borrower.  Lender  acknowledges  that  it  had  the opportunity to review this Agreement and the transactions contemplated by this Agreement with his or its own legal counsel and investment and tax advisors. Lender is relying solely on such counsel and advisors and not on any statements or representations of Borrowers or any of their representatives or agents for legal, tax or investment advice with respect to this investment, the transactions contemplated by this Agreement or the securities laws of any jurisdiction; provided, however, the foregoing shall not modify, amend or affect Lender’s right to rely on Borrowers’ representations and warranties contained in Article 7 above or in any other Loan Documents.

9.           NEGATIVE COVENANTS.

9.1       Indebtedness.   No Borrower shall, either directly or indirectly, create, assume, incur or have outstanding any Funded Indebtedness (including purchase money indebtedness), or become liable, whether as endorser, guarantor, surety or otherwise, for any debt or obligation of any other Person, except:

(a)           the Obligations;

(b)       endorsement for collection or deposit of any commercial paper secured in the Ordinary Course of Business;

(c)       obligations  for  taxes,  assessments,  municipal  or  other  governmental charges; provided, the same are being contested in good faith by appropriate proceedings and are insured against or bonded over to the satisfaction of Lender;

(d)       obligations for accounts payable, other than for money borrowed, incurred in the Ordinary Course of Business; provided that, any management or similar fees payable by any Borrower shall be fully subordinated in right of payment to the prior payment in full of the Loans made hereunder;

(e)           obligations  existing  on  the  date  hereof  which  are  disclosed  on  the Financial Statements;

(f)           unsecured intercompany Funded Indebtedness incurred in the Ordinary Course of Business;

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

(g)      Funded Indebtedness existing on the Closing Date and set forth in the Financial Statements, including any extensions or refinancings of the foregoing, which do not increase the principal amount of such Funded Indebtedness as of the date of such extension or refinancing; provided such Funded Indebtedness is subordinated to the Obligations owed to Lender pursuant to a subordination agreement, in form and content acceptable to Lender in its sole discretion, which shall include an indefinite standstill on remedies and payment blockage rights during any default;

(h)           Funded Indebtedness consisting of Capital Lease obligations or secured by

Permitted Liens of the type described in clause (g) of the definition thereof not to exceed

$250,000 in the aggregate at any time;

(i)       Contingent Liabilities arising with respect to customary indemnification obligations in favor of purchasers in connection with dispositions permitted hereunder;

(j)       Contingent Liabilities incurred in the Ordinary Course of Business with respect to surety and appeal bonds, performance bonds and other similar obligations;

(k)       Contingent Liabilities arising under indemnity agreements to title insurers to cause such title insurers to issue to Lender title insurance policies; and

(l)        Funded Indebtedness approved in writing by Lender, which approval shall not be unreasonably withheld, provided any such Funded Indebtedness shall be subordinated to the Obligations owed to Lender pursuant to a subordination agreement, in form and content acceptable  to  Lender  in  its  sole  discretion,  which  shall  include  an  indefinite  standstill  on remedies and payment blockage rights during any default.

9.2       Encumbrances.  No Borrower shall, either directly or indirectly, create, assume, incur or suffer or permit to exist any Lien or charge of any kind or character upon any asset of any Borrower or their Subsidiaries; whether owned at the date hereof or hereafter acquired, except Permitted Liens or as otherwise authorized by Lender in writing.

9.3     Investments.   No Borrower shall, either directly or indirectly, make or have outstanding any new investments (whether through purchase of stocks, obligations or otherwise) in, or loans or advances to, any other Person, or acquire all or any substantial part of the assets, business, stock or other evidence of beneficial ownership of any other Person except following:

(a)           The stock or other ownership interests in a Subsidiary existing as of the Closing Date;

(b)           investments in direct obligations of the United States or any state in the United States;

(c)           trade  credit  extended  by  any  Borrower  in  the  Ordinary  Course  of Business;

(d)           investments in securities of Customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such Customers;

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

(e)           investments existing on the Closing Date and set forth in the Financial Statements;

(f)           Contingent Liabilities permitted pursuant to Section 9.1;

(g)           Capital Expenditures permitted under Section 9.5; or

(h)           Investments first approved by Lender in writing.

9.4       Transfer; Merger.    No  Borrower  shall,  either  directly  or  indirectly,  permit  a Change in Control, merge, consolidate, sell, transfer, license, lease, encumber or otherwise dispose of all or any part of its property or business or all or any substantial part of its assets, or sell or discount (with or without recourse) any of its Notes (as defined in the UCC), Chattel Paper, Payment Intangibles or Accounts; provided, however, that any Borrower may:

(a)           sell or lease Inventory and Equipment in the Ordinary Course of Business;

(b)       upon not less than three (3) Business Days’ prior written notice to Lender, any Subsidiary of any Borrower may merge with (so long as the applicable Borrower remains the surviving entity), or dissolve or liquidate into, or transfer its property to any Borrower;

(c)           dispose of used, worn-out or surplus equipment in the Ordinary Course of Business;

(d)           discount  or  write-off  overdue  Accounts  for  collection  in  the  Ordinary

Course of Business;

(e)           sell or otherwise dispose (including cancellation of Funded Indebtedness) of any Investment permitted under Section 9.3 in the Ordinary Course of Business; and

(f)           grant Permitted Liens.

9.5       CapitalExpenditures.  Without Lender’s prior consent, no Borrower shall make or incur obligations for any Capital Expenditures in any fiscal year, except for Capital Expenditures that are for less than Two Hundred Thousand Dollars ($200,000) and which are incurred in the Ordinary Course of Business of a Borrower.

9.6           Intentionally Left Blank.

9.7       Distributions;RestrictedPayments.   No Borrower shall: (i) purchase or redeem any shares of its stock or declare or pay any dividends or distributions, whether in cash or otherwise, set aside any funds for any such purpose or make any distribution to its shareholders, make any distribution of its property or assets or make any loans, advances or extensions of credit  to,  or  investments  in,  any  Persons,  including,  without  limitation,  such  Borrower’s Affiliates, officers, partners or employees, without the prior written consent of Lender; (ii) make any payments of any Funded Indebtedness other than as permitted hereunder; or (iii) increase the annual salary paid to any officers of any Borrower as of the Closing Date, unless any such

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

increase is part of a written employment contract with any such officers entered into prior to the Closing Date, a copy of which has been delivered to and approved by the Lender.

9.8       UseofProceeds.  No Borrower, nor any of their Subsidiaries or Affiliates, shall use any portion of the proceeds of the Loans, either directly or indirectly, for the purpose of purchasing any securities underwritten by any Affiliate of Lender.  In addition, no Borrower, nor any of their Subsidiaries or Affiliates, shall use any portion of the proceeds of the Loans, either directly or indirectly, for any of the following purposes: (i) to make any payment towards any Funded Indebtedness of any Borrower or any Subsidiaries or Affiliates thereof; (ii) to pay any taxes of any nature or kind that may be due by any Borrower or any Subsidiaries or Affiliates thereof that are past due or for years prior to 2013, or otherwise incurred for matters not in the Ordinary Course of Business; (iii) to pay any obligations or liabilities of any nature or kind due or owing to any officers, directors, employees, or Material Shareholders of any Borrower or any Subsidiaries or Affiliates thereof.  Borrowers shall only use any portion of the proceeds of the Loans for the purposes set forth in a “UseofProceedsConfirmation” to be executed by Borrowers on the Closing Date, unless Borrowers obtain the prior written consent of Lender to use proceeds of Loans for any other purpose, which consent may be granted or withheld by Lender in its sole and absolute discretion.

9.9       BusinessActivities;ChangeofLegalStatusandOrganizationalDocuments.  No Borrower shall: (i) engage in any line of business other than the businesses engaged in on the date hereof and business reasonably related thereto; (ii) change its name, Organizational Identification Number, its type of organization, its jurisdictions of organization or other legal structure; or (iii) permit its Articles of Incorporation, Bylaws, Articles of Organization or Operating Agreement, or other organizational documents to be amended or modified in any way which could reasonably be expected to adversely affect the interests of Lender.

9.10     TransactionswithAffiliates.  No Borrower shall enter into any transaction with any of its Affiliates, except in the Ordinary Course of Business and upon fair and reasonable terms that are no less favorable to such Borrower than it would obtain in a comparable arm’s length transaction with a Person not an Affiliate of such Borrower.

9.11    Bank Accounts.  No Borrower shall maintain any bank, deposit or credit card payment processing accounts with any financial institution, Payment Processing Companies, or any other Person, for any Borrower or any Affiliate of any Borrower, other than Borrowers’ respective accounts listed in the attached Schedule7.27, and other than the Lock Box Account established pursuant to this Agreement.  Specifically, no Borrower may change, modify, close or otherwise affect the Lock Box Account or any of the other accounts listed in Schedule7.27, without Lender’s prior written approval, which approval may be withheld or conditioned in Lender’s sole and absolute discretion.

10.           AFFIRMATIVE COVENANTS.

10.1     CompliancewithRegulatoryRequirements.  Upon demand by Lender, Borrowers shall reimburse Lender for Lender’s additional costs and/or reductions in the amount of principal or interest received or receivable by Lender if at any time after the date of this Agreement any law, treaty or regulation or any change in any law, treaty or regulation or the interpretation

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

thereof by any governmental authority charged with the administration thereof or any other authority having jurisdiction over Lender or the Loans, whether or not having the force of law, shall impose, modify or deem applicable any reserve and/or special deposit requirement against or in respect of assets held by or deposits in or for the account of the Loans by Lender or impose on Lender any other condition with respect to this Agreement or the Loans, the result of which is to either increase the cost to Lender of making or maintaining the Loans or to reduce the amount of principal or interest received or receivable by Lender with respect to such Loans.  Said additional costs and/or reductions will be those which directly result from the imposition of such requirement or condition on the making or maintaining of such Loans.

10.2     CorporateExistence.  Each Borrower shall at all times preserve and maintain its: (i) existence and good standing in the jurisdiction of its organization; and (ii) its qualification to do business and good standing in each jurisdiction where the nature of its business makes such qualification necessary (other than such jurisdictions in which the failure to be qualified or in good standing could not reasonably be expected to have a Material Adverse Effect), and shall at all times continue as a going concern in the business which such Borrower is presently conducting.

10.3     MaintainProperty.  Each Borrower shall at all times maintain, preserve and keep its plants, properties and equipment, including, but not limited to, any Collateral, in good repair, working order and condition, normal wear and tear excepted, and shall from time to time, as each Borrower deems appropriate in its reasonable judgment, make all needful and proper repairs, renewals, replacements, and additions thereto so that at all times the efficiency thereof shall be fully preserved and maintained.  Each Borrower shall permit Lender to examine and inspect such plant, properties and equipment, including, but not limited to, any Collateral, at all reasonable times upon reasonable notice during business hours.  During the continuance of any Event of Default, Lender shall, at Borrowers’ expense, have the right to make additional inspections without providing advance notice.

10.4     MaintainInsurance.   Each Borrower shall at all times insure and keep insured with insurance companies acceptable to Lender, all insurable property owned by each Borrower which is of a character usually insured by companies similarly situated and operating like properties, against loss or damage from environmental, fire and such other hazards or risks as are customarily insured against by companies similarly situated and operating like properties; and shall similarly insure employers’, public and professional liability risks.  Prior to the date of the funding of any Loans under this Agreement, each Borrower shall deliver to Lender a certificate setting forth in summary form the nature and extent of the insurance maintained pursuant to this Section.  All such policies of insurance must be satisfactory to Lender in relation to the amount and term of the Obligations and type and value of the Collateral and assets of each Borrower, shall identify Lender as sole/lender’s loss payee and as an additional insured.  In the event any Borrower fail to provide Lender with evidence of the insurance coverage required by this Section or at any time hereafter shall fail to obtain or maintain any of the policies of insurance required above, or to pay any premium in whole or in part relating thereto, then Lender, without waiving or releasing any obligation or default by any Borrower hereunder, may at any time (but shall be under no obligation to so act), obtain and maintain such policies of insurance and pay such premium and take any other action with respect thereto, which Lender deems advisable.  This insurance coverage: (i) may, but need not, protect any Borrower’s interest in such property,

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

including, but not limited to, the Collateral; and (ii) may not pay any claim made by, or against, any Borrower in connection with such property, including, but not limited to, the Collateral. Any  Borrower  may  later  cancel  any  such  insurance  purchased  by  Lender,  but  only  after providing Lender with evidence that the insurance coverage required by this Section is in force. The costs of such insurance obtained by Lender, through and including the effective date such insurance coverage is canceled or expires, shall be payable on demand by Borrowers to Lender, together with interest at the Default Rate on such amounts until repaid and any other charges by Lender in connection with the placement of such insurance.  The costs of such insurance, which may be greater than the cost of insurance which any Borrower may be able to obtain on its own, together with interest thereon at the Default Rate and any other charges by Lender in connection with the placement of such insurance may be added to the total Obligations due and owing to the extent not paid by any applicable Borrower.

10.5      Tax Liabilities.

(a)       Each Borrower shall at all times pay and discharge all property, income and other taxes, assessments and governmental charges upon, and all claims (including claims for labor, materials and supplies) against such Borrower or any of its properties, Equipment or Inventory, before the same shall become delinquent and before penalties accrue thereon, unless and to the extent that the same are being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP are being maintained.

(b)       Each Borrower shall be solely responsible for the payment of any and all documentary stamps and other taxes imposed by the State of Florida in connection with the execution of this Agreement, the Security Agreement and the Revolving Note.

10.6     ERISALiabilities;EmployeePlans.  Each Borrower shall: (i) keep in full force and effect any and all Employee Plans which are presently in existence or may, from time to time, come into existence under ERISA, and not withdraw from any such Employee Plans, unless such withdrawal can be effected or such Employee Plans can be terminated without liability to such Borrower; (ii) make contributions to all of such Employee Plans in a timely manner and in a sufficient amount to comply with the standards of ERISA, including the minimum funding standards of ERISA; (iii) comply with all material requirements of ERISA which relate to such Employee Plans; (iv) notify Lender immediately upon receipt by such Borrower of any notice concerning the imposition of any withdrawal liability or of the institution of any proceeding or other action which may result in the termination of any such Employee Plans or the appointment of a trustee to administer such Employee Plans; (v) promptly advise Lender of the occurrence of any “Reportable Event” or “Prohibited Transaction” (as such terms are defined in ERISA), with respect to any such Employee Plans; and (vi) amend any Employee Plan that is intended to be qualified within the meaning of Section 401 of the Internal Revenue Code of 1986 to the extent necessary to keep the Employee Plan qualified, and to cause the Employee Plan to be administered and operated in a manner that does not cause the Employee Plan to lose its qualified status.

10.7    FinancialStatements.  Each Borrower shall at all times maintain a system of accounting capable of producing its individual and consolidated financial statements in compliance with GAAP (provided that monthly financial statements shall not be required to have

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

footnote disclosure, are subject to normal year end adjustments and need not be consolidated), and shall furnish to Lender or its authorized representatives such information regarding the business affairs, operations and financial condition of such Borrower as Lender may from time to time request or require, including, but not limited to:

(a)       If the Revolving Loan Maturity Date is extended beyond the original term, as soon as available, and in any event, within ninety (90) days after the close of each fiscal year, a copy of the annual audited financial statements of each Borrower, including balance sheet, statement of income and retained earnings, statement of cash flows for the fiscal year then ended, in reasonable detail, prepared and reviewed by an independent certified public accountant reasonably acceptable to Lender, containing an unqualified opinion of such accountant (except for so-called “going concern” qualifications, to the extent applicable and included in the opinion of such accountant);

(b)       as soon as available, and in any event, within sixty (60) days after the close of each fiscal quarter, a copy of the quarterly financial statements of each Borrower, including balance sheet, statement of income and retained earnings, statement of cash flows for the fiscal year then ended, in reasonable detail, prepared and certified as accurate in all material respects by the President or Chief Financial Officer of each Borrower;

(c)       as soon as available, and in any event, within thirty (30) days following the end of each calendar month, a copy of the financial statements of each Borrower regarding such month, including balance sheet, statement of income and retained earnings, statement of cash flows for the month then ended, in reasonable detail, prepared and certified as accurate in all material respects by the President or Chief Financial Officer of each Borrower.

No change with respect to such accounting principles shall be made by any Borrower without giving prior notification to Lender. Each Borrower represents and warrants to Lender that the financial statements delivered to Lender at or prior to the execution and delivery of this Agreement and to be delivered at all times thereafter accurately reflect and will accurately reflect the financial condition of each Borrower in all material respects. Lender shall have the right at all times (and on reasonable notice so long as there then does not exist any Event of Default) during business hours to inspect the books and records of each Borrower and make extracts therefrom.  Each Borrower shall at all times comply with all reporting requirements of the SEC to the extent applicable.

Each Borrower agrees to advise Lender immediately, in writing, of the occurrence of any Material Adverse Effect, or the occurrence of any event, circumstance or other happening that could be reasonably expected to lead to or become a Material Adverse Effect.

10.8           AdditionalReportingRequirements. Each Borrower shall provide the following reports and statements to Lender as follows:

(a)       On  the  Closing  Date,  Borrowers  shall  provide  to  Lender  an  income statement projection showing, in reasonable detail, the Borrowers’ income statement projections for the twelve (12) calendar months following the Closing Date (the “IncomeProjections”).  In addition, within thirty (30) days after the end of every calendar month after the Closing Date, the

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

Borrowers shall provide to Lender a report comparing the Income Projections to actual results. Any variance in the year-to-date Income Projections to actual results that is more than ten percent (10%) (either above or below) will require the Borrowers to submit to Lender written explanations as to the nature and circumstances for the variance.

(b)      Borrowers shall submit to Lender true and correct copies of all bank statements received by any Borrower within ten (10) days after such Borrower’s receipt thereof from its bank.

(c)       Promptly upon receipt thereof, Borrowers shall provide to Lender copies of interim and supplemental reports, if any, submitted to any Borrower by independent accountants in connection with any interim audit or review of the books of any Borrower.

10.9     AgedAccounts/PayablesSchedules.  Each Borrower shall, within thirty (30) days after the end of each calendar month, deliver to Lender an aged schedule of the Accounts of each Borrower, listing the name and amount due from each Customer and showing the aggregate amounts due from: (i) 0-30 days; (ii) 31-60 days; (iii) 61-90 days; (iv) 91-120 days; and (v) more than 120 days, and certified as accurate by the Chief Financial Officer or the President of each Borrower. Each Borrower shall, within thirty (30) days after the end of each calendar month, deliver to Lender an aged schedule of the accounts payable of each Borrower, listing the name and amount due to each creditor and showing the aggregate amounts due from: (v) 0-30 days; (w) 31-60 days; (x) 61-90 days;  (y) 91-120 days; and (z) more than 120 days, and certified as accurate by the Chief Financial Officer or the President of each Borrower.

10.10  FailuretoProvideReports.  If at any time during the term of this Agreement, Borrowers shall fail to timely provide any reports required to be provided by Borrowers to Lender under this Agreement or any other Loan Document, in addition to all other rights and remedies that Lender may have under this Agreement and the other Loan Documents, Lender shall have the right to require, at each instance of any such failure, upon written notice to Borrowers, that the Borrowers redeem Facility Fee Shares, for cash, in an amount equal to 8.33% of the Share Value, which cash redemption payment shall be due and payable by wire transfer to an account designated by Lender within five (5) Business Days from the date the Lender delivers such redemption notice to the Borrowers.

10.11   CovenantCompliance. Borrowers shall, within thirty (30) days after the end of each calendar month, deliver to Lender a Compliance Certificate showing compliance by Borrowers  with  the  covenants  therein,  and  certified  as  accurate  by  the  President  or  Chief Financial Officer of Borrowers.

10.12   ContinuedDueDiligence/FieldAudits.  Borrowers acknowledge that during the term of this Agreement, Lender and its agents and representatives undertake ongoing and continuing due diligence reviews of Borrowers and their business and operations.  Such ongoing due diligence reviews may include, and each Borrower does hereby allow Lender, to conduct site visits and field examinations of the office locations of each Borrower and the assets and records of each Borrower, the results of which must be satisfactory to Lender in Lender’s sole and absolute discretion.  In this regard, in order to cover Lender’s expenses of the ongoing due diligence reviews and any site visits or field examinations which Lender may undertake from

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

time to time while this Agreement is in effect, the Borrowers shall pay to Lender, within five (5) Business Days after receipt of an invoice or demand therefor from Lender, a fee of up to $8,000 per year (based on expected filed audits and ongoing due diligence of $2,000 per quarter) to cover such ongoing expenses.  Failure to pay such fee as and when required shall be deemed an Event of Default under this Agreement and all other Loan Documents.   The foregoing notwithstanding, from and after the occurrence of an Event of Default or any event which with notice, lapse of time or both, would become an Event of Default, Lender may conduct site visits, field examinations and other ongoing reviews of each Borrower’s records, assets and operations at any time, in its sole discretion, without any limitations in terms of number of site visits or examinations and without being limited to the fee hereby contemplated, all at the sole expense of Borrowers.

10.13   Notice and Other Reports.  Borrowers  shall  provide  prompt  written  notice  to Lender if at any time any Borrower fails to comply with any of the covenants in Section11 herein.  In addition, Borrowers shall, within such period of time as Lender may reasonably specify, deliver to Lender such other schedules and reports as Lender may reasonably require.

10.14   CollateralRecords. Each Borrower shall keep full and accurate books and records relating to the Collateral and shall mark such books and records to indicate Lender’s Lien in the Collateral including, without limitation, placing a legend, in form and content reasonably acceptable to Lender, on all Chattel Paper created by Borrowers indicating that Lender has a Lien in such Chattel Paper.

10.15   NoticeofProceedings.  Each Borrower shall, promptly, but not more than five (5) days after knowledge thereof shall have come to the attention of any officer of such Borrower, give written notice to Lender of all threatened or pending actions, suits, and proceedings before any court or governmental department, commission, board or other administrative agency which may have a Material Adverse Effect.

10.16   NoticeofDefault.   Each Borrower shall, promptly, but not more than five (5) days after the commencement thereof, give notice to Lender in writing of the occurrence of an Event of Default or of any event which, with the lapse of time, the giving of notice or both, would constitute an Event of Default hereunder.

10.17   EnvironmentalMatters.  If any release or threatened release or other disposal of Hazardous Substances shall occur or shall have occurred on any real property or any other assets of any Borrower or any Subsidiary or Affiliate of any Borrower, such Borrower shall cause the prompt containment and/or removal of such Hazardous Substances and the remediation and/or operation of such real property or other assets as necessary to comply with all Environmental Laws and to preserve the value of such real property or other assets.  Without limiting the generality of the foregoing, each Borrower shall comply with any Federal or state judicial or administrative order requiring the performance at any real property of any Borrower of activities in response to the release or threatened release of a Hazardous Substance.  To the extent that the transportation of Hazardous Substances is permitted by this Agreement, Borrowers shall dispose of such Hazardous Substances, or of any other wastes, only at licensed disposal facilities operating in compliance with Environmental Laws.

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

10.18   ReportingStatus;Listing.  So long as this Agreement remains in effect, and for so long as Lender owns, legally or beneficially, any of the Facility Fee Shares or other shares of Common Stock, the Issuing Borrower shall: (i) file in a timely manner all reports required to be filed under the Securities Act, the Exchange Act or any securities laws and regulations thereof applicable to the Borrower of any state of the United States, or by the rules and regulations of the Principal Trading Market, and, to provide a copy thereof to the Lender promptly after such filing; (ii) not terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would otherwise permit such termination; (iii) if required by the rules and regulations of the Principal Trading Market, promptly secure the listing of the Facility Fee Shares and any other shares of the Issuing Borrower’s Common Stock issuable to Lender under any Loan Documents upon the Principal Trading Market (subject to official notice of issuance) and, take all reasonable action under its control to maintain the continued listing, quotation and trading of its Common Stock on the Principal Trading Market, and the Issuing Borrower shall comply in all respects with the Issuing Borrower’s reporting, filing and other obligations under the bylaws or rules of the Principal Trading Market, the Financial Industry Regulatory Authority, Inc. and such other Governmental Authorities, as applicable. The Issuing Borrower shall promptly provide to Lender copies of any notices it receives from the SEC or any Principal Trading Market, to the extent any such notices could in any way have or be reasonably expected to have a Material Adverse Effect.

10.19   Rule144.  With a view to making available to Lender the benefits of Rule 144 under the Securities Act (“Rule144”), or any similar rule or regulation of the SEC that may at any time permit Lender to sell the Facility Fee Shares or other shares of Common Stock issuable to Lender under any Loan Documents to the public without registration, the Issuing Borrower represents and warrants that: (i) the Issuing Borrower is, and has been for a period of at least ninety (90) days immediately preceding the date hereof, subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act; (ii) the Issuing Borrower has filed all required reports under Section 13 or 15(d) of the Exchange Act, as applicable, during the twelve (12) months preceding the Closing Date (or for such shorter period that the Issuing Borrower was required to file such reports); (iii) the Issuing Borrower is not an issuer defined as a “Shell Company” (as hereinafter defined); and (iv) if the Issuing Borrower has, at any time, been an issuer defined as a Shell Company, the Issuing Borrower has: (A) not been an issuer defined as a Shell Company for at least six (6) months prior to the Closing Date; and (B) has satisfied the requirements of Rule

144(i) (including, without limitation, the proper filing of “Form 10 information” at least six (6) months prior to the Closing Date).  For the purposes hereof, the term “ShellCompany” shall mean an issuer that meets the description defined under Rule 144.  In addition, so long as Lender owns, legally or beneficially, any securities of the Issuing Borrower, the Issuing Borrower shall, at its sole expense:

(a)           Make,  keep  and  ensure  that  adequate  current  public  information  with respect to the Issuing Borrower, as required in accordance with Rule 144, is publicly available;

(b)           furnish to the Lender, promptly upon reasonable request: (A) a written statement by the Issuing Borrower that it has complied with the reporting requirements of Rule

144, the Securities Act and the Exchange Act; and (b) such other information as may be reasonably requested by Lender to permit the Lender to sell any of the Facility Fee Shares or

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

other shares of Common Stock acquired hereunder or under the Revolving Note pursuant to Rule 144 without limitation or restriction; and

(c)       promptly at the request of Lender, give the Issuing Borrower’s transfer agent (the “TransferAgent”) instructions to the effect that, upon the Transfer Agent’s receipt from Lender of a certificate (a “Rule144Certificate”) certifying that Lender’s holding period (as determined in accordance with the provisions of Rule 144) for any portion of the Facility Fee Shares or shares of Common Stock issuable upon conversion of the Revolving Note which Lender proposes to sell (or any portion of such shares which Lender is not presently selling, but for which Lender desires to remove any restrictive legends applicable thereto) (the “SecuritiesBeingSold”) is not less than six (6) months, and receipt by the Transfer Agent of the “Rule 144

Opinion” (as hereinafter defined) from the Issuing Borrower or its counsel (or from Lender and its counsel as permitted below), the Transfer Agent is to effect the transfer (or issuance of a new certificate without restrictive legends, if applicable) of the Securities Being Sold and issue to Lender or transferee(s) thereof one or more stock certificates representing the transferred (or re- issued)  Securities  Being  Sold  without  any  restrictive  legend  and  without  recording  any restrictions on the transferability of such shares on the Transfer Agent’s books and records.  In this regard, upon Lender’s request, the Issuing Borrower shall have an affirmative obligation to cause its counsel to promptly issue to the Transfer Agent a legal opinion providing that, based on the Rule 144 Certificate, the Securities Being Sold may be sold pursuant to the provisions of Rule 144, even in the absence of an effective registration statement (the “Rule144Opinion”). If the Transfer Agent requires any additional documentation in connection with any proposed transfer (or re-issuance) by Lender of any Securities Being Sold, the Issuing Borrower shall promptly deliver or cause to be delivered to the Transfer Agent or to any other Person, all such additional documentation as may be necessary to effectuate the transfer (or re-issuance) of the Securities Being Sold and the issuance of an unlegended certificate to any such Lender or any transferee thereof, all at the Issuing Borrower’s expense.  Any and all fees, charges or expenses, including, without limitation, attorneys’ fees and costs, incurred by Lender in connection with issuance of any such shares, or the removal of any restrictive legends thereon, or the transfer of any such shares to any assignee of Lender, shall be paid by the Issuing Borrower, and if not paid by the Issuing Borrower, the Lender may, but shall not be required to, pay any such fees, charges or expenses, and the amount thereof, together with interest thereon at the highest non-usurious rate permitted by law, from the date of outlay, until paid in full, shall be due and payable by the Issuing Borrower to Lender immediately upon demand therefor, and all such amounts advanced by the Lender shall be additional Obligations due under this Agreement and the Revolving Note and secured under the Loan Documents.   In the event that the Issuing Borrower and/or its counsel refuses or fails for any reason to render the Rule 144 Opinion or any other documents, certificates or instructions required to effectuate the transfer (or re-issuance) of the Securities Being Sold and the issuance of an unlegended certificate to any such Lender or any transferee thereof, then: (A) to the extent the Securities Being Sold could be lawfully transferred (or re- issued)  without  restrictions  under  applicable  laws,  Issuing  Borrower’s  failure  to  promptly provide the Rule 144 Opinion or any other documents, certificates or instructions required to effectuate the transfer (or re-issuance) of the Securities Being Sold and the issuance of an unlegended certificate to any such Lender or any transferee thereof shall be an immediate Event of Default under this Agreement and all other Loan Documents; and (B) the Issuing Borrower hereby agrees and acknowledges that Lender is hereby irrevocably and expressly authorized to have counsel to Lender render any and all opinions and other certificates or instruments which

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

may be required for purposes of effectuating the transfer (or re-issuance) of the Securities Being Sold and the issuance of an unlegended certificate to any such Lender or any transferee thereof, and  the  Issuing  Borrower  hereby  irrevocably  authorizes  and  directs  the  Transfer  Agent  to, without any further confirmation or instructions from the Issuing Borrower, transfer or re-issue any such Securities Being Sold as instructed by Lender and its counsel.

10.20  Reservation ofShares.  The Issuing Borrower shall take all action reasonably necessary to at all times to insure that by no later than July 1, 2013, the Issuing Borrower shall have authorized, and reserved for the purpose of issuance, such number of shares of Common Stock as shall be necessary to effect the full conversion of the Revolving Note in accordance with its terms (the “ShareReserve”).  If at any time after July 1, 2013, the Share Reserve is insufficient to effect the full conversion of the Revolving Note then outstanding, the Issuing Borrower shall increase the Share Reserve accordingly.  If, after July 1, 2013, the Issuing Borrower does not have sufficient authorized and unissued shares of Common Stock available to increase the Share Reserve, the Issuing Borrower shall call and hold a special meeting of the shareholders within sixty (60) days of such occurrence, or take action by the written consent of the holders of a majority of the outstanding shares of Common Stock, if possible, for the sole purpose of increasing the number of shares authorized.  Issuing Borrower’s management shall recommend to the shareholders to vote in favor of increasing the number of shares of Common Stock authorized.

11.       FINANCIAL COVENANTS.

11.1     RevenueCovenant.  For each calendar quarter while this Agreement remains in effect, Borrowers, collectively, shall have sales revenues that are not less than seventy-five percent (75%) of the sales revenues shown on the most recent of the Financial Statements.

12.       EVENTS OF DEFAULT.

Borrowers,  without  notice  or  demand  of  any  kind,  shall  be  in  default  under  this Agreement upon the occurrence of any of the following events (each an “Event of Default”):

12.1     NonpaymentofObligations.  Any amount due and owing on the Revolving Note or any of the Obligations, whether by its terms or as otherwise provided herein, is not paid on the date such amount is due.

12.2     Misrepresentation.  Any written warranty, representation, certificate or statement of any Borrower in this Agreement, the Loan Documents or any other agreement with Lender shall be false or misleading in any material respect when made or deemed made.

12.3    Nonperformance.  Any failure to perform or default in the performance of any covenant, condition or agreement contained in this Agreement (not otherwise addressed in this Article12), which failure to perform or default in performance continues for a period of fifteen (15) days after Borrowers receive notice or knowledge from any source of such failure to perform or default in performance (provided that if the failure to perform or default in performance is not capable of being cured, in Lender’s sole discretion, then the cure period set forth herein shall not be applicable and the failure or default shall be an immediate Event of Default hereunder).

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

12.4   Default under Loan Documents.   Any failure to perform or default in the performance by any Borrower that continues after applicable grace and cure periods under any covenant, condition or agreement contained in any of the other Loan Documents or any other agreement with Lender, all of which covenants, conditions and agreements are hereby incorporated in this Agreement by express reference.

12.5     DefaultunderOtherObligations.  Any default by any Borrower in the payment of principal, interest or any other sum for any other obligation beyond any period of grace provided with respect thereto or in the performance of any, other term, condition or covenant contained in any agreement (including, but not limited to, any capital or operating lease or any agreement in connection with the deferred purchase price of property), the effect of which default is to cause or permit the holder of such obligation (or the other party to such other agreement) to cause such obligation or agreement to become due prior to its stated maturity, to terminate such other agreement, or to otherwise modify or adversely affect such obligation or agreement in a manner that could have a Material Adverse Effect on such Borrower.

12.6     AssignmentforCreditors.  Any Borrower makes an assignment for the benefit of creditors, fails to pay, or admits in writing its inability to pay its debts as they mature; or if a trustee of any substantial part of the assets of any Borrower is applied for or appointed, and in the case of such trustee being appointed in a proceeding brought against such Borrower, such Borrower, by any action or failure to act indicates its approval of, consent to, or acquiescence in such appointment and such appointment is not vacated, stayed on appeal or otherwise shall not have ceased to continue in effect within sixty (60) days after the date of such appointment.

12.7     Bankruptcy.    Any  proceeding  involving  any  Borrower,  is  commenced  by  or against any Borrower under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law or statute of the federal government or any state government, and in the case of any such proceeding being instituted against any Borrower: (i) such Borrower, by any action or failure to act, indicates its approval of, consent to or acquiescence therein; or (ii) an order shall be entered approving the petition in such proceedings and such order is not vacated, stayed on appeal or otherwise shall not have ceased to continue in effect within sixty (60) days after the entry thereof.

12.8     Judgments.  The entry of any judgment, decree, levy, attachment, garnishment or other process, or the filing of any Lien against the property of any Borrower for an amount in excess of $50,000 and which is not fully covered by insurance and such judgment or other process would have a Material Adverse Effect on the ability of such Borrower to perform under this Agreement or under Loan Documents, as determined by Lender in its sole discretion, unless such judgment or other process shall have been, within sixty (60) days from the entry thereof: (i) bonded over to the satisfaction of Lender and appealed; (ii) vacated; or (iii) discharged.

12.9    Material Adverse Effect. A Material Adverse Effect shall occur.

12.10  ChangeinControl.  Except as permitted under this Agreement, any Change in Control shall occur; provided, however, a Change in Control shall not constitute an Event of Default if: (i) it arises out of an event or circumstance beyond the reasonable control of any Borrower (for example, but not by way of limitation, a transfer of ownership interest due to death

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

or incapacity); and (ii) within sixty (60) days after such Change in Control, such Borrower provides Lender with information concerning the identity and qualifications of the individual or individuals who will be in Control, and such individual or individuals shall be acceptable to Lender, in Lender’s sole discretion.

12.11  CollateralImpairment.  The entry of any judgment, decree, levy, attachment, garnishment or other process, or the filing of any Lien against, any of the Collateral or any collateral  under  a  separate  security  agreement  securing  any  of  the  Obligations,  and  such judgment or other process shall not have been, within thirty (30) days from the entry thereof: (i) bonded over to the satisfaction of Lender and appealed; (ii) vacated; or (iii) discharged, or the loss, theft, destruction, seizure or forfeiture, or the occurrence of any material deterioration or impairment of any of the Collateral or any of the Collateral under any security agreement securing any of the Obligations, or any material decline or depreciation in the value or market price thereof (whether actual or reasonably anticipated), which causes the Collateral, in the sole opinion of Lender acting in good faith, to become unsatisfactory as to value or character, or which  causes  Lender  to  reasonably  believe  that  it  is  insecure  and  that  the  likelihood  for repayment of the Obligations is or will soon be impaired, time being of the essence.  The cause of such deterioration, impairment, decline or depreciation shall include, but is not limited to, the failure by any Borrower to do any act deemed reasonably necessary by Lender to preserve and maintain the value and collectability of the Collateral.

13.       REMEDIES.

Upon the occurrence and during the continuance of an Event of Default, Lender shall have all rights, powers and remedies set forth in the Loan Documents, in any written agreement or instrument (other than this Agreement or the Loan Documents) relating to any of the Obligations or any security therefor, or as otherwise provided at law or in equity. Without limiting the generality of the foregoing, Lender may, at its option, upon the occurrence and during the continuance of an Event of Default, declare its commitments to Borrowers to be terminated and all Obligations to be immediately due and payable; provided, however, that upon the occurrence of an Event of Default under either Section 12.6, “Assignment for Creditors”, or Section 12.7, “Bankruptcy”, all commitments of Lender to Borrowers shall immediately terminate and all Obligations shall be automatically due and payable, all without demand, notice or further action of any kind required on the part of Lender. The Borrowers hereby waive any and all presentment, demand, notice of dishonor, protest, and all other notices and demands in connection with the enforcement of Lender’s rights under the Loan Documents, and hereby consent to, and waive notice of release, with or without consideration, of the Borrowers or of any Collateral, notwithstanding anything contained herein or in the Loan Documents to the contrary.

No Event of Default shall be waived by Lender, except and unless such waiver is in writing and signed by Lender.  No failure or delay on the part of Lender in exercising any right, power or remedy hereunder shall operate as a waiver of the exercise of the same or any other right at any other time; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder.  There shall be no obligation on the part of Lender to exercise any remedy available to Lender in any order. The remedies provided for herein are cumulative and not exclusive of any remedies provided at law or in equity.   Each Borrower agrees that in the event that any

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

Borrower fails to perform, observe or discharge any of its Obligations or liabilities under this Agreement, the Revolving Note, and other Loan Documents, or any other agreements with Lender, no remedy of law will provide adequate relief to Lender, and further agrees that Lender shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages.

14.       MISCELLANEOUS.

14.1           ObligationsAbsolute.  None of the following shall affect the Obligations of any Borrower to Lender under this Agreement or Lender’s rights with respect to the Collateral:

(a)       acceptance or retention by Lender of other property or any interest in property as security for the Obligations;

(b)       release by Lender of all or any part of the Collateral or of any party liable with respect to the Obligations (other than Borrowers);

(c)       release, extension, renewal, modification or substitution by Lender of the

Revolving Note, or any note evidencing any of the Obligations; or

(d)       failure of Lender to resort to any other security or to pursue Borrowers or any other obligor liable for any of the Obligations before resorting to remedies against the Collateral.

14.2     Entire Agreement.  This Agreement and the other Loan Documents: (i) are valid, binding and enforceable against the each of the Borrowers and Lender in accordance with its provisions and no conditions exist as to their legal effectiveness; (ii) constitute the entire agreement between the parties; and (iii) are the final expression of the intentions of the Borrowers and Lender. No promises, either expressed or implied, exist between the Borrowers and Lender, unless contained herein or in the Loan Documents. This Agreement and the Loan Documents supersede all negotiations, representations, warranties, commitments, offers, contracts (of any kind or nature, whether oral or written) prior to or contemporaneous with the execution hereof.

14.3     Amendments;Waivers.  No amendment, modification, termination, discharge or waiver  of  any  provision  of  this  Agreement  or  of  the  Loan  Documents,  or  consent  to  any departure by Borrowers therefrom, shall in any event be effective unless the same shall be in writing and signed by Lender, and then such waiver or consent shall be effective only for the specific purpose for which given.

14.4   WAIVER  OF DEFENSES.  THE  CREDIT  PARTIES  WAIVE  EVERY PRESENT AND FUTURE DEFENSE, CAUSE OF ACTION, COUNTERCLAIM OR SETOFF WHICH THE CREDIT PARTIES MAY HAVE AS OF THE DATE HEREOF TO ANY ACTION BY LENDER IN ENFORCING THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.  THE CREDIT PARTIES WAIVE ANY IMPLIED COVENANT OF GOOD FAITH AND RATIFY AND CONFIRM WHATEVER LENDER MAY DO PURSUANT TO THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AS OF THE

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

DATE OF THIS AGREEMENT.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER GRANTING ANY FINANCIAL ACCOMMODATION TO BORROWER.

14.5     WAIVER OF JURY TRIAL.  LENDER  AND  EACH  OF  THE  CREDIT PARTIES, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES, IRREVOCABLY, THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE REVOLVING NOTE, ANY LOAN DOCUMENT OR ANY OF THE OBLIGATIONS, THE COLLATERAL, OR ANY OTHER AGREEMENT EXECUTED OR CONTEMPLATED TO BE EXECUTED IN CONJUNCTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT OR COURSE OF DEALING IN WHICH LENDER  AND  BORROWER  (OR  EITHER  GUARANTOR)  ARE  ADVERSE  PARTIES. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER GRANTING ANY FINANCIAL ACCOMMODATION TO BORROWER.

14.6    JURISDICTION.  TO INDUCE LENDER TO MAKE THE LOANS, EACH BORROWER IRREVOCABLY AGREES THAT ALL ACTIONS ARISING, DIRECTLY OR INDIRECTLY, AS A RESULT OR CONSEQUENCE OF THIS AGREEMENT, THE REVOLVING  NOTE,  ANY  OTHER  AGREEMENT  WITH  LENDER  OR  THE COLLATERAL, SHALL BE INSTITUTED AND LITIGATED ONLY IN COURTS HAVING THEIR SITUS IN THE COUNTY OF CLARK, NEVADA, PROVIDED THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION. EACH BORROWER HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION AND VENUE OF ANY STATE OR FEDERAL COURT HAVING ITS SITUS IN SAID COUNTY, AND EACH WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS. EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND CONSENT THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO A BORROWER, AS APPLICABLE, AS SET FORTH HEREIN IN THE MANNER PROVIDED BY APPLICABLE STATUTE, LAW, RULE OF COURT OR OTHERWISE.

14.7     Assignability. Lender may at any time assign Lender’s rights in this Agreement, the Revolving Note, any Loan Document, the Obligations, or any part thereof and transfer Lender’s rights in any or all of the Collateral, and Lender thereafter shall be relieved from all liability with respect to such Collateral.  In addition, Lender may at any time sell one or more participations in the Loans. The Credit Parties may not sell or assign this Agreement, any Loan Document or any other agreement with Lender, or any portion thereof, either voluntarily or by operation of law, nor delegate any of its duties of obligations hereunder or thereunder, without the  prior  written  consent  of Lender,  which  consent  may  be  withheld in  Lender’s  sole  and absolute discretion.  This Agreement shall be binding upon Lender and the Credit Parties and their respective legal representatives, successors and permitted assigns.  All references herein to a Borrower shall be deemed to include any successors, whether immediate or remote.  In the case of a joint venture or partnership, the term “Borrower” shall be deemed to include all joint venturers or partners thereof, who shall be jointly and severally liable hereunder.

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

14.8     Confidentiality. Each of the parties hereto shall keep confidential any information obtained from the other party (except information publicly available or in such party’s domain prior to disclosure of such information from the other party hereto, and except as required by applicable laws) and shall promptly return to the other party all schedules, documents, instruments, work papers and other written information without retaining copies thereof, previously furnished by it as a result of this Agreement or in connection herewith.

14.9     Publicity.  Borrowers and Lender shall have the right to approve, before issuance, any press release or any other public statement with respect to the transactions contemplated hereby made by any party; provided, however, that Borrowers shall be entitled, without the prior approval of Lender, to issue any press release or other public disclosure with respect to such transactions required under applicable securities or other laws or regulations.  Notwithstanding the foregoing, Borrowers shall use their best efforts to consult Lender in connection with any such press release or other public disclosure prior to its release and Lender shall be provided with a copy thereof upon release thereof.

14.10   Binding Effect. This  Agreement  shall  become  effective  upon  execution  by Borrowers and Lender.

14.11   GoverningLaw.  This Agreement, the Loan Documents and the Revolving Note shall be delivered and accepted in and shall be deemed to be contracts made under and governed by the internal laws of the State of Nevada, and for all purposes shall be construed in accordance with the laws of such State, without giving effect to the choice of law provisions of such State.

14.12  Enforceability.  Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by, unenforceable or invalid under any jurisdiction, such provision shall as to such jurisdiction, be severable and be ineffective to the extent of such prohibition or invalidity, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction

14.13 Survival  of  Borrower’s  Representations.      All covenants, agreements, representations and warranties made by any Borrower herein shall, notwithstanding any investigation by Lender, be deemed material and relied upon by Lender and shall survive the making and execution of this Agreement and the Loan Documents and the issuance of the Revolving Note, and shall be deemed to be continuing representations and warranties until such time as each Borrower has fulfilled all of its Obligations to Lender, and Lender has been paid in full. Lender, in extending financial accommodations to Borrowers, is expressly acting and relying on the aforesaid representations and warranties. relying on the aforesaid representations and warranties.

14.14   ExtensionsofLender’sCommitmentandtheRevolvingNote.  This Agreement shall secure and govern the terms of any extensions or renewals of Lender’s commitment hereunder and the Revolving Note pursuant to the execution of any modification, extension or renewal note executed by Borrowers and accepted by Lender in its sole and absolute discretion in substitution for the Revolving Note.

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

14.15   TimeofEssence.  Time is of the essence in making payments of all amounts due Lender under this Agreement and in the performance and observance by each Borrower of each covenant, agreement, provision and term of this Agreement.

14.16   Counterparts.  This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute one and the same instrument.

14.17   ElectronicSignatures. Lender is hereby authorized to rely upon and accept as an original any Loan Documents or other communication which is sent to Lender by facsimile, telegraphic or other electronic transmission (each, a “Communication”) which Lender in good faith believes has been signed by a Borrower and has been delivered to Lender by a properly authorized representative of a Borrower, whether or not that is in fact the case.  Notwithstanding the foregoing, Lender shall not be obligated to accept any such Communication as an original and may in any instance require that an original document be submitted to Lender in lieu of, or in addition to, any such Communication.

14.18  Notices.  Any notices, consents, waivers, or other communications required or permitted to be given under the terms of this Agreement must be in writing and in each case properly addressed to the party to receive the same in accordance with the information below, and  will  be  deemed  to  have  been  delivered:  (i)  if  mailed  by  certified  mail,  return  receipt requested, postage prepaid and properly addressed to the address below, then three (3) business days after deposit of same in a regularly maintained U.S. Mail receptacle; or (ii) if mailed by Federal Express, UPS or other nationally recognized overnight courier service, next business morning delivery, then one (1) business day after deposit of same in a regularly maintained receptacle of such overnight courier; or (iii) if hand delivered, then upon hand delivery thereof to the address indicated on or prior to 5:00 p.m., EST, on a Business Day.  Any notice hand delivered after 5:00 p.m., EST, shall be deemed delivered on the following Business Day. Notwithstanding the foregoing, notice, consents, waivers or other communications referred to in this Agreement may be sent by facsimile, e-mail, or other method of delivery, but shall be deemed to have been delivered only when the sending party has confirmed (by reply e-mail or some  other  form  of  written  confirmation)  that  the  notice  has  been  received  by  the  other party.  The addresses and facsimile numbers for such communications shall be as set forth below, unless such address or information is changed by a notice conforming to the requirements hereof.  No notice to or demand on Borrower in any case shall entitle Borrower to any other or further notice or demand in similar or other circumstances:

If to any Borrower:   Hangover Joe’s Holding Corp. 9457 S. University Blvd., Suite 349 Highlands Ranch, CO 80126 Attention: Mr. Michael Jaynes, CEO E-Mail:mike@hangoverjoes.com

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

With a copy to:   Burns Figa & Will, PC 6400 S. Fiddlers Green Circle, Suite 1000 Greenwood Village, CO 80111 Attn: Theresa Mehringer Telephone: (303)-796-2626 Facsimile: (303)-796-2777 E-Mail: tmehringer@bfwlaw.com

If to the Lender: TCA Global Credit Master Fund, LP 1404 Rodman Street Hollywood, Florida 33020 Attention: Robert Press, Director Telephone:(786) 323-1650 Facsimile: (786) 323-1651 E-Mail:                 bpress@trafcap.com

With a Copy to: David Kahan, P.A. 6420 Congress Ave., Suite 1800 Boca Raton, Florida 33487 Telephone:(561) 672-8330 Facsimile: (561) 672-8301 E-Mail:                 david@dkpalaw.com

14.19  Indemnification.  Each Borrower agrees to defend, protect, indemnify and hold harmless Lender and all of its officers, directors, employees and agents (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (each, a “LenderIndemnitee” and collectively, the “LenderIndemnitees”) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and distributions of any kind or nature (including, without limitation, the disbursements and the reasonable fees of counsel for each Lender Indemnitee thereto), which may be imposed on, incurred by, or asserted against, any Lender Indemnitee (whether direct, indirect or consequential and whether based on any federal, state or local laws or regulations, including, without limitation, securities, Environmental Laws and commercial laws and regulations, under common law or in equity, or based on contract or otherwise) in any manner relating to or arising out of this Agreement or any of the Loan Documents, or any act, event or transaction related or attendant thereto, the preparation, execution and delivery of this Agreement and the Loan Documents, including, but not limited to, the making or issuance and management of the Loans, the use or intended use of the proceeds of the Loans, the enforcement of Lender’s rights and remedies under this Agreement, the Loan Documents, the Revolving Note, any other instruments and documents delivered hereunder, or under any other agreement between Borrowers and Lender; provided, however, that Borrowers shall not have any obligations hereunder to any Lender Indemnitee with respect to matters caused by or resulting from the willful misconduct or gross negligence of such Lender Indemnitee.  To the extent that the undertaking to indemnify set forth in the preceding sentence may be unenforceable because it violates any law or public policy, Borrowers shall satisfy such undertaking to the maximum extent permitted by applicable law.  Any liability, obligation, loss, damage, penalty, cost or expense covered by this indemnity shall be paid to each Lender Indemnitee on demand, and, failing prompt payment, shall, together with interest thereon at the Default Rate from the date incurred by each Lender Indemnitee until paid by Borrowers, be added to the Obligations of

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

Borrowers and be secured by the Collateral.   The provisions of this Section shall survive the satisfaction and payment of the other Obligations and the termination of this Agreement.

14.20   Release.  In consideration of the mutual promises and covenants made herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, each Borrower hereby agrees to fully, finally and forever release and forever discharge and covenant not to sue Lender, and/or and its parent companies, subsidiaries, affiliates, divisions, and their respective attorneys, officers, directors, agents, shareholders, members, employees, predecessors, successors, assigns, personal representatives, partners, heirs and executors from any and all debts, fees, attorneys’ fees, liens, costs,  expenses,  damages,  sums  of  money,  accounts,  bonds,  bills,  covenants,  promises, judgments, charges, demands, claims, causes of action, suits, liabilities, expenses, obligations or contracts of any kind whatsoever, whether in law or in equity, whether asserted or unasserted, whether known or unknown, fixed or contingent, under statute or otherwise, from the beginning of time through the Closing Date, including, without  limiting the generality of the foregoing, any and all claims relating to or arising out of any financing transactions, credit facilities, debentures, security agreements, and other agreements including, without limitation, each of the Loan Documents, entered into by any Borrower with Lender and any and all claims that any Borrower does  not  know  or  suspect  to  exist,  whether  through  ignorance,  oversight,  error, negligence, or otherwise, and which, if known, would materially affect their decision to enter into this Agreement or the related Loan Documents.

14.21  Interpretation.  If any provision in this Agreement requires judicial or similar interpretation, the judicial or other such body interpreting or construing such provision shall not apply the assumption that the terms hereof shall be more strictly construed against one party because of the rule that an instrument must be construed more strictly against the party which itself or through its agents prepared the same.  The parties hereby agree that all parties and their agents have participated in the preparation hereof equally.

14.22   CompliancewithFederalLaw.  The Credit Parties shall: (i) ensure that no Person who owns a controlling interest in or otherwise controls a Credit Party is or shall be listed on the Specially Designated Nationals and Blocked Person List or other similar lists maintained by the Office of Foreign Assets Control (“OFAC”), the Department of the Treasury, included in any Executive Orders or any other similar lists from any government, foreign or national; (ii) not use or permit the use of the proceeds of the Loans to violate any of the foreign asset control regulations of OFAC or any enabling statute or Executive Order relating thereto, or any other similar national or foreign governmental regulations; and (iii) comply, and cause each of such Credit Party’s Subsidiaries to comply, with all applicable Lender Secrecy Act (“BSA”) laws and regulations, as amended.  As required by federal law and Lender’s policies and practices, Lender may need to obtain, verify and record certain customer identification information and documentation in connection with opening or maintaining accounts or establishing or continuing to provide services.

14.23  JointandSeveralLiability.  The liability of all Borrowers hereunder for the Obligations, or for the performance of any other term, condition, covenant or agreement of any Borrower hereunder, shall be joint and several.

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

IN WITNESS WHEREOF, Borrowers and Lender have executed this Credit Agreement as of the date first above written.

BORROWERS: HANGOVER JOE’S HOLDING CORP.,  a Colorado corporation			HANGOVER JOE’S, INC.,  a Colorado corporation
By:	/s/ Michael Jaynes	By:	/s/ Michael Jaynes
Name:	Michael Jaynes	Name:	Michael Jaynes
Title:	President	Title:	President

LENDER: TCA GLOBAL CREDIT MASTER FUND, LP
By:	TCAGlobalCreditFundGP,Ltd.
Its:	GeneralPartner
By:	/s/ Robert Press
	Robert Press, Director

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

Exhibit A

Form of Covenant Compliance Certificate

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request. 

Exhibit B

Form of Revolving Note

 The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

Exhibit C

Form of Security Agreement

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.
 

Exhibit D

Form of Validity Guaranties

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

EX-10.2

Exhibit 10.2

FIRSTAMENDMENTTOCREDITAGREEMENT

This FIRST AMENDMENT TO CREDIT AGREEMENT (the “Amendment”) is dated effective as of the 15th day of February, 2013, by and between HANGOVER JOE’S HOLDING CORP., a Colorado corporation (the “Issuing Borrower”) and HANGOVER JOE’S, INC., a Colorado corporation (each of the foregoing, including the Issuing Borrower, hereinafter sometimes individually referred to as a “Borrower” and all such entities sometimes hereinafter collectively referred to as “Borrowers”), and TCA GLOBAL CREDIT MASTER FUND, LP, a Cayman Islands limited partnership (the “Lender”).

RECITALS

WHEREAS, the Borrower and the Lender executed that certain Credit Agreement dated as of as of December 31, 2012, but made effective as of January 10, 2013 (the “CreditAgreement”); and

WHEREAS, pursuant to the Credit Agreement, the Borrowers executed and delivered to Lender that certain Revolving Note dated as of as of December 31, 2012, but made effective as of January 10, 2013, evidencing a Revolving Loan under the Credit Agreement in the amount of Four Hundred Twenty- Five Thousand Dollars ($425,000) (the “RevolvingNote”); and

WHEREAS, in connection with the Credit Agreement and the Revolving Note, the Borrowers executed and delivered to the Lender various ancillary documents referred to in the Credit Agreement as the Loan Documents; and

WHEREAS, the Borrowers’ obligations under the Credit Agreement and the Revolving Note are secured by the following, all of which are included within the Loan Documents: (i) a Security Agreement dated as of as of December 31, 2012, but made effective as of January 10, 2013, from the Borrowers in favor of the Lender (the “SecurityAgreement”), pursuant to which the Lender has a continuing, perfected, first-priority security interest encumbering all of the “Collateral” (as defined in the Credit Agreement and the Security Agreement) of the Borrowers; and (ii) UCC-1 Financing Statement for the Borrowers, as debtors, and Lender, as secured party, filed with the Colorado Secretary of State (the “UCC-1”); and

WHEREAS, the Borrowers and the Lender desire to amend the Credit Agreement as more specifically set forth herein;

NOW, THEREFORE, in consideration of the premises and the mutual covenants of the parties hereinafter expressed and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, each intending to be legally bound, agree as follows:

1.          Recitals. The recitations set forth in the preamble of this Amendment are true and correct and incorporated herein by this reference.

2.          CapitalizedTerms.  All capitalized terms used in this Amendment shall have the same meaning ascribed to them in the Credit Agreement, except as otherwise specifically set forth herein.  In addition, the other definitional and interpretation provisions of Sections 1.2, 1.3 and 1.4 of the Credit Agreement shall be deemed to apply to all terms and provisions of this Amendment, unless the express context otherwise requires.

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

3.          Conflicts.   In the event of any conflict or ambiguity by and between the terms and provisions of this Amendment and the terms and provisions of the Credit Agreement, the terms and provisions of this Amendment shall control, but only to the extent of any such conflict or ambiguity.

4.          RenewalofCreditAgreement.  Section 2.3 of the Credit Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:

“RenewalofRevolvingLoans;Non-Renewal ofRevolvingLoans;Fees.  On the Revolving Loan Maturity Date, so long as no Event of Default exists, and so long as no event has occurred that, with the passage of time, the giving of notice, or both, would constitute an Event of Default, Borrower shall have the right to request a renewal of the Revolving Loan Commitment and extension of the Revolving Loan Maturity Date for one (1) additional six (6) month period.  To make such request, Borrower shall give written notice to Lender of Borrower’s request to renew the Revolving Loan Commitment and extend the Revolving Loan Maturity Date for an additional six (6) month period on or before the Revolving Loan Maturity Date, and provided that no Event of Default exists, and that no event has occurred that, with the passage of time, the giving of notice, or both, would constitute an Event of Default, Lender shall agree to Borrower’s request for a renewal of the Revolving Loan Commitment and extension of the Revolving Loan Maturity Date, subject to execution by Borrower of any documents or instruments reasonably requested by Lender to evidence such extension, and subject to Borrowers’ payment to Lender, immediately upon demand from Lender and as a condition to the renewal and extension, of a renewal fee equal to two percent (2%) of the then outstanding Revolving Loan Commitment.”

5.         Representations andWarranties.   The Borrowers hereby confirm and affirm that all representations and warranties made by the Borrowers under the Credit Agreement and all other Loan Documents (specifically including under  Section  7  of  the  Credit  Agreement) are  true,  correct  and complete as of the date of the Credit Agreement, and hereby confirm and affirm that all such representations and warranties remain true, correct and complete as of the date of this Amendment, and by this reference, the Borrowers do hereby re-make each and every one of such representations and warranties herein as of the date of this Amendment, as if each and every one of such representations and warranties was set forth and re-made in its entirety in this Amendment by each of the Borrowers, as same may be qualified by revised disclosure schedules attached to this Amendment, if any (if no revised disclosures are attached to this Amendment, then no such revised disclosure schedules shall be deemed to exist or to qualify any of the representations and warranties hereby re-made).

6.          Affirmation. The Borrowers hereby affirm all of their Obligations to the Lender under all of the Loan Documents and agree and affirm as follows: (i) that as of the date hereof, the Borrowers have performed, satisfied and complied in all material respects with all the covenants, agreements and conditions under each of the Loan Documents to be performed, satisfied or complied with by the Borrowers; (ii) that the Borrowers shall continue to perform each and every covenant, agreement and condition set forth in each of the Loan Documents and this Amendment, and continue to be bound by each and all of the terms and provisions thereof and hereof; (iii) that as of the date hereof, no default or Event of Default has occurred or is continuing under the Credit Agreement or any other Loan Documents, and no event has occurred that, with the passage of time, the giving of notice, or both, would constitute a default or an Event of Default under the Credit Agreement or any other Loan Documents; and (iv) that as of the date hereof, no event, fact, or other set of circumstances has occurred which could reasonably be expected to have a Material Adverse Effect.

7.          Ratification.   The Borrowers hereby acknowledge, represent, warrant and confirm to Lender that: (i) each of the Loan Documents executed by the Borrowers are valid and binding obligations of the Borrowers, enforceable against the Borrowers in accordance with their respective terms; (ii) all Obligations of the Borrowers under the Credit Agreement, all other Loan Documents and this Amendment, shall be and continue to be and remain secured by and under the Loan Documents, including the Security Agreement and the UCC-1; (iii) there are no defenses, setoffs, counterclaims, cross-actions or equities in favor of the Borrowers, to or against the enforcement of any of the Loan Documents; and (iv) no oral representations, statements, or inducements have been made by Lender, or any agent or representative of Lender, with respect to the Credit Agreement, this Amendment or any other Loan Documents.

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

8.          AdditionalConfirmations.   The Borrowers hereby represent, warrant and covenant as follows: (i) that the Lender’s Liens and security interests in all of the “Collateral” (as such term is defined in the Credit Agreement and the Security Agreement) are and remain valid, perfected, first-priority security interests in such Collateral, subject only to Permitted Liens, and the Borrowers have not granted any other Liens or security interests of any nature or kind in favor of any other Person affecting any of such Collateral.

9.          Lender’s Conduct.     As  of  the  date  of  this  Amendment,  the  Borrowers  hereby acknowledge and admit that: (i) the Lender has acted in good faith and has fulfilled and fully performed all of its obligations under or in connection with the Credit Agreement or any other Loan Documents; and (ii) that there are no other promises, obligations, understandings or agreements with respect to the Credit Agreement or the Loan Documents, except as expressly set forth herein, or in the Credit Agreement and other Loan Documents.

10.        RedefinedTerms.  The term “Loan Documents,” as defined in the Credit Agreement and as used in this Amendment, shall be deemed to refer to and include this Amendment and all other documents or instruments executed in connection with this Amendment. The term “SEC Documents,” as defined in  the Credit Agreement, shall be deemed to  refer to  and include all filings made by  the Borrowers with the SEC between the Effective Date and the date of this Amendment.

11.       Representations andWarrantiesoftheBorrowers.   The Borrowers hereby make the following representations and warranties to the Lender:

(a)        Authorityand Approvalof Agreement;BindingEffect.    The  execution and delivery by the Borrowers of this Amendment, and all other documents executed and delivered in connection herewith, and the performance by Borrowers of all of their Obligations hereunder, have been duly and validly authorized and approved by the Borrowers and their respective board of directors pursuant to all applicable Laws and no other corporate action or Consent on the part of the Borrowers, their board of directors, stockholders or any other Person is necessary or required by the Borrowers to execute this Amendment and the documents executed and delivered in connection herewith, to consummate  the  transactions  contemplated  herein,  or  perform  all  of  the  Borrowers’  Obligations hereunder.  This Amendment and each of the documents executed and delivered in connection herewith have been duly and validly executed by the Borrowers (and the officer executing this Amendment and all such other documents for each Borrower is duly authorized to act and execute same on behalf of each Borrower) and constitute the valid and legally binding agreements of the Borrowers, enforceable against the Borrowers in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

12.        Indemnification.  Each Borrower hereby indemnifies and holds the Lender Indemnitees, and  each  of  them,  harmless  from  and  against  any  and  all  liabilities, obligations, losses,  damages, penalties, actions, judgments, suits, claims, costs, expenses and distributions of any kind or nature, payable by any of the Lender Indemnitees to any Person, including reasonable attorneys’ and paralegals’ fees and expenses, court costs, settlement amounts, costs of investigation and interest thereon from the time such amounts are due at the highest non-usurious rate of interest permitted by applicable law (collectively, the “Claims”), through all negotiations, mediations, arbitrations, trial and appellate levels, as a result of, or arising out of, or relating to any matters relating to this Amendment.

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

13.        Release.  As a material inducement for Lender to enter into this Amendment, each of the Borrowers does hereby release, waive, discharge, covenant not to sue, acquit, satisfy and forever discharges each of the Lender Indemnitees and their respective successors and assigns, from any and all Claims whatsoever in law or in equity which the Borrowers ever had, now have, or which any successor or assign of the Borrowers hereafter can, shall or may have against any of the Lender Indemnitees, for, upon or by reason of any matter, cause or thing whatsoever related to the Credit Agreement, this Amendment or any other Loan Documents, through the date hereof.  The Borrowers further expressly agree that the foregoing release and waiver agreement is intended to be as broad and inclusive as permitted by the laws governing the Credit Agreement. In addition to, and without limiting the generality of foregoing, the Borrowers further covenant with and warrant unto the Lender and each of the other Lender Indemnitees, that as of the date hereof, there exists no claims, counterclaims, defenses, objections, offsets  or  other  Claims  against  Lender  or  any  other  Lender  Indemnitees, or  the  obligation of  the Borrowers to comply with the terms and provisions of the Credit Agreement, this Amendment and all other Loan Documents.

14.       EffectonAgreement andLoanDocuments.   Except as expressly amended by this Amendment, all of the terms and provisions of the Credit Agreement and the Loan Documents shall remain and continue in full force and effect after the execution of this Amendment, are hereby ratified and confirmed, and incorporated herein by this reference.

15.        Waiver.  This Amendment shall not be deemed or construed in any manner as a waiver by  the  Lender  of  any  Claims,  defaults,  Events  of  Default,  breaches  or  misrepresentations by  the Borrowers under the Credit Agreement, any other Loan Documents, or any of Lender’s rights or remedies in connection therewith.

16.        Execution.  This Amendment may be executed in one or more counterparts, all of which taken together shall be deemed and considered one and the same Amendment, and same shall become effective when counterparts have been signed by each party and each party has delivered its signed counterpart to the other party.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format file or other similar format file, such signature shall be deemed an original for all purposes and shall create a valid and binding obligation of the party executing same with the same force and effect as if such facsimile or “.pdf” signature page was an original thereof.

17.        FeesandExpenses.

(a)           Document ReviewandLegalFees;DueDiligence.  The Borrowers hereby agree to pay to the Lender or its counsel a legal fee equal to One Thousand Seven Hundred Fifty and No/100 Dollars ($1,750.00) for the preparation, negotiation and execution of this Amendment and all other documents in connection herewith.  Borrowers agree and acknowledge that Lender may pay this fee to its counsel directly, and in that event, Lender shall and is hereby authorized to deduct such fee from the Receipts collected into the Lock Box Account in accordance with Section 2.1(e)(1) of the Credit Agreement.

[Signatures on the following page]

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as of the day and year first above written.

BORROWERS: HANGOVER JOE’S HOLDING CORP.,  a Colorado corporation			HANGOVER JOE’S, INC.,  a Colorado corporation
By:	/s/ Michael Jaynes	By:	/s/ Michael Jaynes
Name:	Michael Jaynes	Name:	Michael Jaynes
Title:	President	Title:	President

LENDER: TCA GLOBAL CREDIT MASTER FUND, LP
By:	TCAGlobalCreditFundGP,Ltd.
Its:	GeneralPartner
By:	/s/ Robert Press
	Robert Press, Director

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

REVISED DISCLOSURE SCHEDULES

The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

EX-31.1

EXHIBIT 31.1

Certifications:

I, Michael Jaynes, certify that:

1. I have reviewed this annual report on Form 10-K of Hangover Joe’s Holding Corporation;

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 officers 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 we 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 changes in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting.

5. The registrant’s other certifying officers 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 registrant’s board of directors (or persons performing the equivalent function):

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 controls over financial reporting.

Dated: April 15, 2013	By	/s/ Michael Jaynes
		Michael Jaynes, Chief Executive Officer (Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

Certifications:

I, Michael Jaynes, certify that:

1. I have reviewed this annual report on Form 10-K of Hangover Joe’s Holding Corporation;

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 officers 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 we 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 changes in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting.

5. The registrant’s other certifying officers 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 registrant’s board of directors (or persons performing the equivalent function):

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 controls over financial reporting.

Dated: April 15, 2013	By:	/s/ Michael Jaynes
		Michael Jaynes, Chief Financial  Officer (Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

Certification of Principal Executive Officer

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the Annual Report of Hangover Joe’s Holding Corporation (the “Company”) on Form 10-K for the fiscal year ended December 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned certifies pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

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

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

Dated: April 15, 2013	By	/s/ Michael Jaynes
		Michael Jaynes, Chief Executive Officer (Principal Executive Officer)

EX-32.2

EXHIBIT 32.2

Certification of Principal Financial Officer

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the Annual Report of Hangover Joe’s Holding Corporation (the “Company”) on Form 10-K for the fiscal year ended December 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned certifies pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

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

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

Dated: April 15, 2013	By	/s/ Michael Jaynes
		Michael Jaynes, Chief Financial Officer (Principal Financial Officer)

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INCOME TAXES (Schedule of Deferred Tax Assets) (Details) (USD $)	Dec. 31, 2012
Deferred tax assets:
Allowance for doubtful accounts	$ 8,000
Accrued settlement costs	248,000
Accrued compensation	48,000
Stock-based compensation	44,000
Net operating loss carryforwards	397,000
Total net deferred tax assets	745,000
Less: valuation allowance	(745,000)
Net deferred tax asset

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STOCKHOLDERS' EQUITY (Stock Option Activity) (Narrative) (Details) (USD $)	0 Months Ended	1 Months Ended	12 Months Ended						12 Months Ended
	Apr. 12, 2013	Dec. 31, 2012	Dec. 31, 2012	Dec. 31, 2011	Apr. 12, 2013 2009 Plan [Member]	Mar. 11, 2009 2009 Plan [Member]	Apr. 12, 2013 2012 Plan [Member]	Jul. 26, 2012 2012 Plan [Member]	Dec. 31, 2012 Sales Development Employee [Member]	Dec. 31, 2012 Warrants [Member]	Apr. 30, 2012 Warrants [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized under plan					650,000	7,000,000	4,500,000	11,500,000
Authorized grants increase	13,350,000
Number of shares vesting in 2013 upon the achievement of certain performance objectives, subsequently cancelled									383,095		3,064,764
Number of shares vesting in 2014 upon the achievement of certain performance objectives									383,095		3,064,764
Granted		1,500,000	2,266,190	892,500					766,190
Weighted-average grant date fair value		$ 0.064	$ 0.055	$ 0.16					$ 0.0326
Share-based compensation expense, amount allocated			$ 95,690	$ 0						$ 17,549
Share-based compensation expense, amount not yet recognized		42,159	42,159
Share-based compensation expense, period of recognition			1 year 3 months 18 days
Options to acquire shares not expected to vest		766,190	766,190
Number of shares called by warrants										100,000	6,129,528
Exercise price of warrants	0.12									0.11	0.0326
Contributed services			$ 50,000	$ 150,000

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SIGNIFICANT ACCOUNTING POLICIES (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
SIGNIFICANT ACCOUNTING POLICIES [Abstract]
Sample costs reclassified from prior year	$ 86,000
Shipping and handling costs reclassified from prior year	30,000
Allowance for doubtful accounts	21,624
Sales incentives and discounts	43,100	17,800
Advertising expense	122,000	27,000
Freight-out costs	$ 47,000	$ 30,000
Antidilutive stock options, warrants and common shares	10,355,726	3,638,070
Trade Accounts Receivable [Member]
Significant Accounting Policies Line Items
Number of customers	2	3
Concentration percentage	78.00%	76.00%
Net Revenue [Member]
Significant Accounting Policies Line Items
Number of customers	4	3
Concentration percentage	54.00%	36.00%
Major Customer One [Member] | Trade Accounts Receivable [Member]
Significant Accounting Policies Line Items
Concentration percentage	65.00%
Major Customer One [Member] | Net Revenue [Member]
Significant Accounting Policies Line Items
Concentration percentage	18.00%
Major Customer Two [Member] | Trade Accounts Receivable [Member]
Significant Accounting Policies Line Items
Concentration percentage	13.00%
Major Customer Two [Member] | Net Revenue [Member]
Significant Accounting Policies Line Items
Concentration percentage	16.00%
Major Customer Three [Member] | Trade Accounts Receivable [Member]
Significant Accounting Policies Line Items
Concentration percentage		50.00%
Major Customer Three [Member] | Net Revenue [Member]
Significant Accounting Policies Line Items
Concentration percentage	10.00%
Major Customer Four [Member] | Trade Accounts Receivable [Member]
Significant Accounting Policies Line Items
Concentration percentage		15.00%
Major Customer Four [Member] | Net Revenue [Member]
Significant Accounting Policies Line Items
Concentration percentage	10.00%
Major Customer Five [Member] | Trade Accounts Receivable [Member]
Significant Accounting Policies Line Items
Concentration percentage		11.00%
Major Customer Five [Member] | Net Revenue [Member]
Significant Accounting Policies Line Items
Concentration percentage		14.00%
Major Customer Six [Member] | Net Revenue [Member]
Significant Accounting Policies Line Items
Concentration percentage		12.00%
Major Customer Seven [Member] | Net Revenue [Member]
Significant Accounting Policies Line Items
Concentration percentage		10.00%
Canada Partner [Member] | Net Revenue [Member]
Significant Accounting Policies Line Items
Concentration percentage	16.00%
Australia Partner [Member] | Net Revenue [Member]
Significant Accounting Policies Line Items
Concentration percentage	10.00%

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INCOME TAXES (Schedule of Income Tax Benefit) (Details) (USD $)	12 Months Ended
	Dec. 31, 2012
Deferred tax benefit:
Federal	$ 686,000
State	59,000
Deferred tax benefit	745,000
Increase in valuation allowance	(745,000)
Net income tax benefit

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INVENTORY

12 Months Ended

Dec. 31, 2012

INVENTORY [Abstract]

INVENTORY

NOTE 3 - INVENTORY

Inventory as of December 31, 2012 and 2011, consists of the following:

	December 31, 2012		December 31, 2011
Raw materials (packing supplies)	$	26,634	$	27,515
Finished goods (bottled products)		-		19,230
	$	26,634	$	46,745

In connection with the Warner Brothers license renewal in January 2013, certain changes were made to images that were available to the Company under the original license agreement which required a re-design of certain packaging materials. The Company is able to use the existing packaging and promotional materials through March 31, 2013. Accordingly, the Company evaluated the carrying value of the packing material on hand as of December 31, 2012 and recorded a write-down of inventory of $75,376 in the fourth quarter of 2012. The inventory write-down is included in costs of goods sold in the consolidated statement of operations for the year-end December 31, 2012.

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ACCRUED EXPENSES (Details) (USD $)	1 Months Ended
	Jan. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
ACCRUED EXPENSES [Abstract]
Accrued expenses		$ 37,005	$ 46,842
Salary		45,960
Accrued settlement costs - paid for in common stock		652,500
Accrued consulting costs - paid for in common stock		225,000
Total accrued expenses		$ 960,465	$ 46,842
Shares issued for accrued settlement costs	4,500,000
Shares issued for accrued consulting costs	1,500,000

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INVENTORY FINANCING AND FACTORING ARRANGEMENTS (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Oct. 31, 2012	Sep. 30, 2012	Mar. 31, 2012	Dec. 31, 2011
INVENTORY FINANCING AND FACTORING ARRANGEMENTS [Abstract]
Maximum financing amount			$ 250,000	$ 250,000
Maximum financing percentage		100.00%
Financing fee, percentage of purchase order amount		3.85%		4.75%
Financing fee, percentage of receivables			2.50%
Additional fee, percent per day after remaining open for 30 days		0.13%	0.084%	0.16%
Additional fee, annualized rate		47.40%	30.70%	57.60%
Inventory financing payable	97,611				23,712
Inventory financing, interest expense	223
Inventory financing and factoring arrangement, interest expense	$ 6,302

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RELATED PARTY TRANSACTIONS (Details) (USD $)	1 Months Ended	12 Months Ended
	Jun. 15, 2013	Dec. 31, 2012	Dec. 31, 2011	Mar. 01, 2013
RELATED PARTY TRANSACTIONS [Abstract]
Advances payable to President/CEO		$ 89,422	$ 116,379
Promissory note payable				89,422
Interest rate				5.50%
Periodic principal payments to be paid in six installments	14,966
Net sales from related party		$ 10,700	$ 4,100
Ownership percentage in related party		32.00%	32.00%

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COMMITMENTS AND CONTINGENCIES (Details) (USD $)	1 Months Ended	12 Months Ended		12 Months Ended
	Nov. 30, 2012	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012 Board of Directors [Member]	Dec. 31, 2011 Board of Directors [Member]	Dec. 31, 2012 Design Services [Member]	Dec. 31, 2011 Design Services [Member]	Jan. 14, 2013 AMHC [Member]	Dec. 31, 2012 AMHC [Member]	Jan. 14, 2013 Independent Third Party [Member]
COMMITMENTS AND CONTINGENCIES [Abstract]
Management services agreement, monthly fee		$ 27,500
Management service agreement, term		24 months
Related party expenses		192,500
Consulting agreement, term	6 months
Consulting agreement, extension	180 days
Consulting agreement, retainer	10,000
Consulting agreement, monthly fee	10,000
Consulting agreement, deferral until capital raise amount	300,000
Consulting agreement, shares issuable	3,000,000
Consulting agreement, shares issuable on demand	1,500,000
Consulting agreement, shares issuable on specific date	1,500,000
Accrued consulting costs - paid for in common stock		225,000
Prepaid consulting costs		225,000
Consulting expense		81,383
Commitments And Contingencies [Line Items]
Sales commission, minimum percentage of individual sales				4.00%
Sales commission, maximum percentage of individual sales				6.00%
Royalty, percentage of all sales				3.00%		2.00%
Royalty expense				49,500	12,500	18,400	4,500
Settlement, shares issued								3,000,000		1,500,000
Settlement liability									652,500
Monthly draw against commission or royalty				6,000		3,000
Prepaid expenses				$ 28,000		$ 17,000

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SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2012

SIGNIFICANT ACCOUNTING POLICIES [Abstract]

SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its 100%-owned subsidiary. All intercompany accounts, transactions, and profits are eliminated in consolidation.

Reclassifications

Certain immaterial reclassifications have been made to the prior period consolidated financial statements in order to conform to the current year presentation. The Company has reclassified $86,000 in sample costs and $30,000 in shipping and handling costs from cost of goods sold to sales and marketing costs, respectively for the fiscal year ended December 31, 2011. The Company has determined that the reclassification more accurately reflects the economics of these transactions.

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant estimates are used in accounting for certain items such as allowance for doubtful accounts, revenue recognition, and stock-based compensation. Estimates are based on historical experience, where applicable, and assumptions that management believes are reasonable under the circumstances. Due to the inherent uncertainty involved with estimates, actual results may differ.

Accounts Receivable and Concentration of Credit Risk

The Company is subject to credit risk through trade receivables. This credit risk is mitigated by the diversification of the Company's operations, as well as its customer base. The Company grants varying payment terms to its customers. Payment terms for customers can vary from due upon receipt up to net 45 days.

Two customers comprise approximately 78% of trade accounts receivable at December 31, 2012; these individual customer balances represent approximately 65% and 13% of the net trade accounts receivable. Three customers comprise approximately 76% of the trade accounts receivable at December 31, 2011; these individual customer balances represent approximately 50%, 15%, and 11% of the total trade accounts receivable. Four customers accounted for 54% of net sales for the year ended December 31, 2012; these individual customer sales represent approximately 18%, 16%, 10%, and 10% of annual net sales. Three customers accounted for 36% of net sales for the year ended December 31, 2011; these individual customer sales represent approximately 14%, 12%, and 10% of annual net sales. During 2012, sales to distributors in Canada and Australia accounted for approximately 16% and 10% of annual net sales.

Ongoing credit evaluations of customers' financial condition are performed. Collateral is not required. The Company maintains an allowance when necessary for doubtful accounts that is the Company's best estimate of potentially uncollectible trade receivables. Provisions are made based upon a specific review of all significant outstanding invoices that are considered potentially uncollectible in whole or in part. For those invoices not specifically reviewed or considered uncollectible, general provisions are provided at different rates, based upon the age of the receivable, historical experience, and other currently available evidence. The allowance estimates are adjusted as additional information becomes known or as payments are made. As of December 31, 2012, the allowance for doubtful accounts was $21,624. There was no allowance at December 31, 2011.

Inventory

Inventory is valued at the lower of cost (first-in, first-out) or market value.

License and Royalties

The Company has a license with Warner Bros. Consumer Products, Inc. ("WBCP") that allows the Company the use of the costumes, artwork, logos and other elements depicted in the 2009 movie, The Hangover. This license, as amended, expires January 31, 2016. The terms of the WBCP license provide for royalties based on a percentage of products sold, as defined, subject to agreed-upon guaranteed minimum royalties. Guaranteed minimum royalty payments are made periodically over the term of the license and are recorded when paid as a prepaid expense in the balance sheet. The prepaid expense is amortized to royalties in cost of goods sold at a ratio of current period revenues to the total revenues expected to be recorded over the term of the license. The Company reviews its sales projections quarterly to determine the likely recoverability of its prepaid asset, as well as any unpaid minimum obligation. If management determines that the prepaid expense is unlikely to be recovered by product sales, prepaid license expense is charged to cost of goods sold, based on current and expected revenues, in the period in which such determination is made.

Revenue Recognition

The Company has contractual agreements with certain third-party distributors. Under the agreements, the Company is not guaranteed any minimum level of sales or transactions. The Company also offers its products for sale through its website at www.hangoverjoes.com.

The Company recognizes revenue when all of the following have occurred: (1) persuasive evidence of an arrangement exists; (2) delivery to third party distributors and consumers via the Company's website has occurred; (3) the sales price is fixed or determinable; and (4) collectability is reasonably assured. Delivery is not considered to have occurred until the title and the risk of loss passes to the customer according to the terms of the contract between the Company and the customer. For sales to distributors, revenue is usually recognized at the time of delivery. For sales through the Company's website, revenue is recognized at time of shipment.

Management evaluates the terms of its sales in consideration of the criteria outlined in Principal Agent Consideration with regards to its determination of gross versus net reporting of revenue for transactions with customers. The Company sells, through its website, Hangover Joe's Recovery Shots. In these transactions, management has determined that the Company (i) acts as principal; (ii) has the risks and rewards of ownership, including the risk of loss for collection, delivery or returns; and (iii) has latitude in establishing price with the customer. For these transactions, the Company recognizes revenue on a gross basis.

The Company offers a variety of incentives and discounts to distributors, customers and consumers through various programs to support the distribution of its products. These incentives and discounts include cash discounts, price allowances, volume based rebates and product placement fees. These incentives and discounts are reflected as a reduction of gross sales to arrive at net sales. The aggregate deductions from gross sales recorded in relation to these programs were approximately $43,100 and $17,800 for the years ended December 31, 2012 and 2011, respectively.

Cost of Goods Sold

Cost of goods sold consists of the costs of raw materials utilized in the production of its product, co-packing fees, and in-bound freight charges. Raw material costs account for the largest portion of the cost of goods sold. Raw materials include bottles, ingredients and packaging materials. The manufacturer is responsible for the ingredients. Costs of goods sold also include license and royalty expenses.

Supplier/Manufacturer Concentration

The Company relies on its third-party suppliers for raw materials necessary for its products, and it relies on third-party manufacturers for the production of its product. Although the Company believes that it could utilize alternative suppliers and manufacturers, any delay in locating and establishing relationships with other suppliers/manufacturers could result in product shortages and back orders for the products, with a resulting loss of net sales and profitability. The Company's third-party manufacturer acquires some ingredients from suppliers outside of the United States. Purchasing these ingredients is subject to the risks generally associated with importing raw materials from other countries, including, among other factors, delays in shipments, changes in economic and political conditions, quality assurance, tariffs, trade disputes and foreign currency fluctuations. These factors could result in a delay in or disruption of the supply of certain raw materials. Any significant delay in or disruption of the supply of raw materials could have a material adverse effect on the Company's business.

Sales and Marketing Expenses

Sales and marketing costs include selling expenses such as distribution expenses to transport products to customers and warehousing expenses after manufacture, as well as expenses for advertising, sampling and in-store demonstration costs, costs for merchandise displays, point-of-sale materials, trade shows, other marketing expenses and product design expenses.

Advertising Expenses

Advertising costs are expensed as incurred and are included in sales and marketing expense in the accompanying consolidated statements of operations. Total advertising expenses were approximately $122,000 and $27,000 for the years ended December 31, 2012 and 2011, respectively.

Freight-Out Costs

Freight-out costs incurred to ship product to customers are included in sales and marketing expense in the accompanying consolidated statements of operations. Total freight-out costs were approximately $47,000 and $30,000 for the years ended December 31, 2012 and 2011, respectively.

Income Taxes

Prior to March 2012, no provision for income taxes was provided in the accompanying financial statements because HOJ LLC (as a limited liability company), and HOJ JV (as a partnership), elected to file as partnerships, and therefore management believes that prior to March 31, 2012 the Company was not subject to income taxes, and, that such taxes were the responsibility of the individual member/partners.

Beginning in March 2012, as a corporation, the Company now records a provision for deferred income tax assets and liabilities in order to reflect the net tax effects of temporary differences between (i) the tax basis of assets and liabilities and (ii) their reported amounts in the financial statements. The provision is based upon enacted tax laws and rates in effect for the years in which the differences are expected to affect taxable income. The Company establishes a valuation allowance when necessary to reduce deferred income tax assets to the amounts expected to be realized. The Company expects to file income tax returns in the US Federal jurisdiction and various State jurisdictions.

The Company assesses the likelihood of the financial statement effect of a tax position that should be recognized when it is more likely than not that the position will be sustained upon examination by a taxing authority based on the technical merits of the tax position, circumstances, and information available as of the reporting date. All tax years remain open and subject to U.S. Federal tax examination. Management does not believe that there are any current tax positions that would result in an asset or liability for taxes being recognized in the accompanying financial statements.

The Company's policy is to classify tax related interest and penalties as income tax expense. There is no interest or penalties estimated on the underpayment of income taxes as a result of unrecognized tax benefits.

Stock-Based Compensation

Stock-Based Compensation is recognized for an award of equity instruments in the financial statements and is measured based on the grant date fair value of the award. Stock-Based Compensation expense is recognized over the period of service in exchange for the award (generally the vesting period). The Company estimates the fair value of each stock option at the grant date by using an option pricing model, typically the Black-Scholes model.

For shares issued to non-employees for goods or services, the Company accounts for these shares in accordance with ASC 505-50. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable (a) goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of the performance commitment date or performance completion date.

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss applicable to common shareholders by the weighted-average number of shares of common stock outstanding for the period. Historical loss per share of the accounting acquirer (HOJ) has been adjusted retroactively to reflect the new capital structure of the Company as a result of the Merger Agreement. Diluted net loss per share reflects the potential dilution that could occur if dilutive securities were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company, unless the effect of such inclusion would reduce a loss or increase earnings per share. For each of the periods presented in the accompanying consolidated financial statements, the effect of the inclusion of dilutive shares would have resulted in a decrease in loss per share. Stock options, warrants, and common shares underlying convertible preferred stock in the aggregate of 10,355,726 and 3,638,070 shares as of December 31, 2012 and 2011, respectively, were not included in the calculation of diluted net loss per common share because the effect would have been anti-dilutive.

Fair Value of Financial Instruments

ASC 820 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available.

The three levels of inputs required by the standard that the Company uses to measure fair value are summarized below.

· Level 1: Quoted prices in active markets for identical assets or liabilities.

· Level 2: Observable inputs other than Level 1 inputs such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.

· Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Under fair value accounting, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. As of December 31, 2012 and 2011, the Company had no financial assets or liabilities required to be reported for fair value purposes.

The carrying value of the Company's financial instruments, including cash, accounts receivable, accounts payable, and the inventory financing payable approximate fair value at December 31, 2012 and 2011, due to the relatively short maturity of the respective instruments. The fair value of related party payables is not practicable to estimate due to the related party nature of the underlying transactions.

Recent Accounting Pronouncements

In May 2011, the FASB issued Accounting Standards Update ("ASU") No. 2011-04, "Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS." This pronouncement was issued to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards ("IFRS"). ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements particularly for level 3 fair value measurements. ASU 2011-04 became effective for the Company on January 1, 2012. The adoption of ASU 2011-04 did not have any impact on the Company's financial position, results of operations or liquidity.

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STOCKHOLDERS' EQUITY (Narrative) (Details) (USD $)	0 Months Ended	1 Months Ended			3 Months Ended	12 Months Ended
	Jul. 25, 2012	Jul. 31, 2012	May 30, 2012	Apr. 30, 2012	Dec. 31, 2012	Dec. 31, 2012	Dec. 31, 2011	Feb. 15, 2013
Class of Stock [Line Items]
Preferred stock, shares authorized					10,000,000	10,000,000
Preferred stock, par value per share					$ 0.10	$ 0.10
Conversion of preferred to common stock, shares						13,336
Common Stock, shares authorized					150,000,000	150,000,000
Common Stock, par value per share					$ 0.001	$ 0.001
Number of shares issued for business acquisition	83,514,827					83,514,827
Dissenting Shareholder, cash at closing								$ 5,000
Dissenting Shareholder, cash within 90 days								15,000
Dissenting shareholder, interest rate for accrued interest payable								5.00%
Dissenting Shareholder, shares issuable								50,000
Dissenting Shareholder, fair value of shares issuable								5,500
Shares issued to founders, shares				4,290,669		4,290,669
Price per share of common stock issued		$ 0.065	$ 0.0326		$ 0.07
Share-based compensation expense, amount allocated						95,690	0
Issuance of common shares upon incorporation and legal reorganization of entities under common control, shares						61,295,271
Proceeds from issuance of common stock, shares		3,218,002	15,323,838		242,858	18,541,840
Proceeds from issuance of common stock		210,000	500,000		17,000	710,000
Common shares issued to reduce payables, shares						267,526
Common shares issued to reduce payables						18,727
Common shares cancelled due to dissenters right, shares		612,953				(612,953)
Shares cancelled due to dissenters right		$ (20,000)				$ 20,000
Series A Preferred Stock [Member]
Class of Stock [Line Items]
Preferred stock, shares authorized					425,000	425,000
Number of shares issued for each share of convertible preferred stock that is converted prior to 'Financial Milestones' being reached					8	8
Number of shares issued for each share of convertible preferred stock that is converted after 'Financial Milestones' are reached and before October 8, 2013 deadline					28.8	28.8
Number of shares issued for each share of convertible preferred stock that is converted after 'Financial Milestones' are reached and after October 8, 2013 deadline.					8	8
Number of preferred stock shares converted to common stock during period						1,667
Conversion of preferred to common stock, shares						13,336

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SUBSEQUENT EVENTS (Details) (USD $)	0 Months Ended	1 Months Ended				1 Months Ended	0 Months Ended
	Apr. 12, 2013	Nov. 30, 2012	Jan. 10, 2013	Dec. 31, 2012	Dec. 31, 2011	Jan. 31, 2013 Founder's Shares [Member]	Feb. 15, 2013 Investor Relations Agreement [Member]	Mar. 01, 2013 Chief Operating Officer [Member]
Subsequent Event [Line Items]
Line of credit, maximum borrowing capacity			$ 6,000,000
Line of credit, initial borrowing capacity			425,000
Line of credit, advance			425,000
Banking fee, Series B Preferred Shares issued			125,000
Bank fee, value of shares issued			125,000
Finders' fee, shares issued			194,954
Surrender of shares						4,500,000
Consulting agreement, monthly fee		10,000					25,000
Consulting agreement, shares issuable		3,000,000					100,000
Consulting agreeement, warrants issuable							100,000
Salary				45,960				100,000
Newly authorized convertible preferred shares	5,000,000
Voting rights per share	3
Common shares issuable for convertible preferred shares	200,000,000
Subscription agreement, Giltex investment	1,000,000
Subscription agreement, number of common shares	15,000,000
Subscription agreement, number of Series C Preferred shares	5,000,000
Subscription agreement, number of common shares called by warrants	500,000
Exercise price of warrants	0.12
Warrant term	5 years
Proceeds from subscription agreement	500,000
Subscription agreement, common shares issued at closing	15,000,000
Subscription agreement, warrants to purchase common shares issued at closing	250,000
Proceeds from subscription agreement, second tranche	$ 500,000
Subscription agreement, Series C Preferred Stock issued in exchanged for second tranche investment	5,000,000
Subscription agreement, warrants to purchase common shares issued in exchange for second tranche investment	250,000

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CONSOLIDATED BALANCE SHEETS (USD $)	Dec. 31, 2012	Dec. 31, 2011
CURRENT ASSETS
Cash	$ 8,779	$ 53,048
Accounts receivable, net	131,273	19,105
Inventory	26,634	46,745
Prepaid expenses	188,570	2,233
Deposits		7,500
Total current assets	355,256	128,631
PROPERTY AND EQUIPMENT,NET	3,215	1,750
TOTAL ASSETS	358,471	130,381
CURRENT LIABILITIES
Accounts payable	594,866	92,010
Accrued expenses	960,465	46,842
Payable to shareholder	20,000
Advances payable, related parties	89,422	116,379
Inventory financing payable	97,611	23,712
Total liabilities (all current)	1,762,364	278,943
COMMITMENTS AND CONTINGENCIES
DEFICIT
Preferred stock; $0.10 par value; authorized shares - 10,000,000 Series A; 425,000 authorized shares, 87,501 shares issued and outstanding	315,078
Common stock; $0.001 par value; 150,000,000 authorized shares, 120,846,348 shares issued and outstanding	120,847
Additional paid-in capital	623,790	169,931
Accumulated deficit	(2,463,608)	(318,493)
Total deficit	(1,403,893)	(148,562)
TOTAL LIABILITIES AND DEFICIT	$ 358,471	$ 130,381

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss	$ (2,145,115)	$ (256,673)
Adjustments to reconcile net loss to net cash used in operating activities:
Contributed services	50,000	150,000
Amortization of prepaid consulting services paid for in common stock	81,383
Settlement expense	652,500
Depreciation expense	1,097	700
Bad debt expense	21,624
Stock-based compensation	114,378
Changes in operating assets and liabilities:
Accounts receivable	(133,792)	(19,105)
Prepaid expenses	(42,720)	(2,233)
Deposits	7,500	(7,500)
Inventory	20,111	(46,745)
Accounts payable	521,583	92,010
Accrued expenses	36,123	46,843
Net cash used in operating activities	(815,328)	(42,703)
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(2,562)
Cash received in sale of subsidiary interests	10,044
Net cash provided by investing activities	7,482
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock	727,214
Increase in inventory financing payable	73,899	23,712
Advances (paid to) received from related party	(26,957)	83,044
Withdrawals	(10,579)	(11,069)
Net cash provided by financing activities	763,577	95,687
Net (decrease) increase in cash	(44,269)	52,984
Cash, beginning of period	53,048	64
Cash, end of period	8,779	53,048
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid	6,524	5,583
SUPPLEMENTAL DISCLOSURE NON-CASH ITEMS
Common shares issued for payables	18,727
Common shares issued for preferred shares	6,003
Shareholder payable	$ 20,000

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STOCKHOLDERS EQUITY (Schedule of Stock Option Activity) (Details) (USD $)	1 Months Ended	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2012	Dec. 31, 2011
Weighted Average Grant Date Fair Value
Granted	$ 0.064	$ 0.055	$ 0.16
Stock Options [Member]
Shares Under Options
Outstanding, beginning balance		2,087,070	2,294,570
Granted		2,266,190	892,500
Exercised
Forfeited/Cancelled		1,437,070	(1,100,000)
Outstanding, ending balance	2,916,190	2,916,190	2,087,070
Vested or Expected to Vest	2,150,000	2,150,000
Exercisable	2,150,000	2,150,000
Weighted Average Exercise Price
Outstanding, beginning balance		$ 0.42	$ 0.48
Granted		$ 0.06	$ 0.16
Exercised
Forfeited/Cancelled		$ 0.30	$ 0.18
Outstanding, ending balance	$ 0.11	$ 0.11	$ 0.42
Vested or Expected to Vest	$ 0.14	$ 0.14
Exercisable	$ 0.14	$ 0.14
Weighted Average Grant Date Fair Value
Outstanding, weighted average remaining contractual life		2 years 9 months 4 days	2 years 11 months 19 days
Vested or Expected to Vest, weighted average remaining contractual life		2 years 11 months 5 days
Exercisable, weighted average remaining contractual life		2 years 11 months 5 days
Outstanding, aggregate intrinsic value	$ 32,486	$ 32,486	$ 39,049
Vested or Expected to Vest, aggregate intrinsic value
Exercisable, aggregate intrinsic value
Nonvested Stock Options [Member]
Shares Under Options
Outstanding, beginning balance		603,217	888,798
Granted		2,266,190	892,500
Vested		(1,546,684)	(619,748)
Forfeited/Cancelled		(556,533)	(558,333)
Outstanding, ending balance	766,190	766,190	603,217
Weighted Average Grant Date Fair Value
Outstanding, beginning balance		$ 0.10	$ 0.31
Granted		$ 0.06	$ 0.16
Vested		$ 0.07	$ 0.22
Forfeited/Cancelled		$ 0.27	$ 0.18
Outstanding, ending balance	$ 0.06	$ 0.06	$ 0.10
Warrants [Member]
Shares Under Options
Outstanding, beginning balance		1,551,000
Granted		6,229,528
Exercised
Forfeited/Cancelled		(1,041,000)
Outstanding, ending balance	6,739,528	6,739,528
Vested or Expected to Vest	610,000	610,000
Exercisable	610,000	610,000
Weighted Average Exercise Price
Outstanding, beginning balance		$ 0.29
Granted		$ 0.03
Exercised
Forfeited/Cancelled		$ 0.29
Outstanding, ending balance	$ 0.05	$ 0.05
Vested or Expected to Vest	$ 0.27	$ 0.27
Exercisable	$ 0.27	$ 0.27
Weighted Average Grant Date Fair Value
Outstanding, weighted average remaining contractual life		2 years 2 months 9 days
Vested or Expected to Vest, weighted average remaining contractual life		2 months 5 days
Exercisable, weighted average remaining contractual life		2 months 5 days
Outstanding, aggregate intrinsic value	259,892	259,892
Vested or Expected to Vest, aggregate intrinsic value
Exercisable, aggregate intrinsic value

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STOCKHOLDERS' EQUITY (Tables)

12 Months Ended

Dec. 31, 2012

STOCKHOLDERS' EQUITY [Abstract]

Schedule of Weighted Average Assumptions Used to Value Stock Options

Risk free interest rate	0.25 - 0.33%
Expected volatility	186%
Expected term	2-3 years
Expected dividend yield	n/a

Schedule of Stock Option Activity

						Weighted
				Weighted		Average
	Shares			average		Remaining		Aggregate
	under			exercise		contractual		intrinsic
Options	Option			price		Life		value
Outstanding at January 1, 2011		2,294,570		$	0.48
Granted		892,500		$	0.16
Exercised		-		$	-
Forfeited/Cancelled		(1,100,000	)	$	0.18
Outstanding at December 31, 2011		2,087,070		$	0.42	2.97		39,049
Granted		2,266,190		$	0.06
Exercised		-		$	-
Forfeited/Cancelled		(1,437,070	)	$	0.30
Outstanding at December 31, 2012		2,916,190		$	0.11		2.76	$	32,486
Vested or Expected to Vest at December 31, 2012		2,150,000		$	0.14		2.93	$	-
Exercisable at December 31, 2012		2,150,000		$	0.14		2.93	$	-

Schedule of Nonvested Share Activity

				Weighted
	Number			Average
	Of			grant date
	Options			fair value
Non-vested options at January 1, 2011		888,798		$	0.31
Granted		892,500		$	0.16
Vested		(619,748	)	$	0.22
Forfeited/cancelled		(558,333	)	$	0.18
Non-vested options at December 31, 2011		603,217		$	0.10
Granted		2,266,190		$	0.06
Vested		(1,546,684	)	$	0.07
Forfeited/Cancelled		(556,533	)	$	0.27
Non-vested options at December 31, 2012		766,190		$	0.06

Schedule of Warrant Activity

						Weighted
				Weighted		Average
				average		Remaining		Aggregate
				exercise		contractual		intrinsic
Warrants	Shares			Price		Life		value
Outstanding at January 1, 2012		1,551,000		$	0.29
Issued for Services		6,229,528		$	0.03
Exercised		-		$	-
Forfeited/Cancelled		(1,041,000	)	$	0.29
Outstanding at December 31, 2012		6,739,528		$	0.05	$	2.19	$	259,892
Vested or Expected to Vest at December 31, 2012		610,000		$	0.27	$	0.81	$	-
Exercisable at December 31, 2012		610,000		$	0.27	$	0.81	$	-

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INCOME TAXES (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2012
INCOME TAXES [Abstract]
Deferred tax assets, valuation allowance	745,000
Operating Loss Carryforwards [Line Items]
Net operating loss carry forwards	1,000,000
Minimum [Member]
Operating Loss Carryforwards [Line Items]
Expiration	2029
Maximum [Member]
Operating Loss Carryforwards [Line Items]
Expiration	2032

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ORGANIZATION, DESCRIPTION OF BUSINESS, AND MANAGEMENT'S PLANS (Details) (USD $)	0 Months Ended		12 Months Ended
	Apr. 12, 2013	Jul. 25, 2012	Dec. 31, 2012	Dec. 31, 2011	Jan. 10, 2013	Jul. 27, 2012
ORGANIZATION, DESCRIPTION OF BUSINESS AND MANAGEMENT'S PLANS [Abstract]
Common stock, shares outstanding		36,807,801	120,846,348
Cash paid for acquired company						$ 10,044
Number of shares issued for business acquisition		83,514,827	83,514,827
Existing shareholders new ownership percentage in company after merger and reorganization		31.00%
HOJ shareholders new ownership percentage in company after merger and reorganization		69.00%
Net loss			(2,145,115)	(256,673)
Working capital deficiency			(1,407,000)
Accumulated deficit			(2,463,608)	(318,493)
Line of credit, maximum borrowing capacity					6,000,000
Line of credit, initial borrowing capacity					425,000
Line of credit, advance					425,000
Subscription agreement, Giltex investment	1,000,000
Subscription agreement, number of common shares	15,000,000
Subscription agreement, number of Series C Preferred shares	5,000,000
Subscription agreement, number of common shares called by warrants	500,000
Exercise price of warrants	0.12
Warrant term	5 years
Proceeds from subscription agreement	500,000
Subscription agreement, common shares issued at closing	15,000,000
Subscription agreement, warrants to purchase common shares issued at closing	250,000
Proceeds from subscription agreement, second tranche	$ 500,000
Subscription agreement, Series C Preferred Stock issued in exchanged for second tranche investment	5,000,000
Subscription agreement, warrants to purchase common shares issued in exchange for second tranche investment	250,000

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ORGANIZATION, DESCRIPTION OF BUSINESS, AND MANAGEMENT'S PLANS

12 Months Ended

Dec. 31, 2012

ORGANIZATION, DESCRIPTION OF BUSINESS AND MANAGEMENT'S PLANS [Abstract]

ORGANIZATION, DESCRIPTION OF BUSINESS AND MANAGEMENT'S PLANS

NOTE 1 - ORGANIZATION, DESCRIPTION OF BUSINESS, AND MANAGEMENT'S PLANS

Organization:

Hangover Joe's Holding Corporation ("HJHC" or the "Company") was originally incorporated in the State of Colorado in December 2005 as Across American Real Estate Exchange, Inc. ("AAEX") to facilitate the exchange of real estate properties between individuals under Section 1031 of the Internal Revenue Code. In February 2010, Accredited Members, Inc. ("AMI"), a provider of investor research and management services, was merged with and into a wholly-owned subsidiary of AAEX, and AMI became a wholly-owned subsidiary of the Company. In May 2010, AAEX changed its name to Accredited Members Holding Corporation ("AMHC").

On July 25, 2012, the Company entered into an Agreement and Plan of Merger and Reorganization (the "Merger Agreement") with Hangover Joe's, Inc., a privately-held Colorado corporation ("HOJ"), whereby on July 25, 2012, the Company acquired HOJ in a reverse triangular merger (the "Acquisition"). Prior to the Acquisition, the Company had 36,807,801shares outstanding. Upon closing the Acquisition, the Company issued 83,514,827 common shares to the HOJ shareholders in exchange for all of their ownership interests in HOJ such that the former owners of HOJ owned approximately 69% of the Company post Acquisition. The shareholders of the Company prior to the Acquisition owned approximately 31% of the Company post Acquisition. In connection with the Acquisition on July 25, 2012, the Company changed its name to Hangover Joe's Holding Corporation.

The Merger Agreement further provided that within five business days after the closing of the Acquisition, the Company would sell to Accredited Members Acquisition Corporation ("Buyer") all of the equity interests in three of the Company's subsidiaries (the "Sale"), being Accredited Members, Inc., AMHC Managed Services, Inc. and World Wide Premium Packers, Inc. (collectively, the "Subsidiaries"). Buyer is a privately-held Colorado corporation owned by two former directors of the Company, JW Roth and David Lavigne. The parties closed the Sale on July 27, 2012. The Buyer paid $10,044 and assumed all liabilities related to the business of the Subsidiaries in exchange for all of the shares in the Subsidiaries owned by the Company.

HOJ is a Colorado corporation formed on March 5, 2012. HOJ was formed for the purpose of acquiring all of the assets of both Hangover Joe's Products LLC ("HOJ LLC") and Hangover Joe's Joint Venture ("HOJ JV"). HOJ LLC had conducted operations through HOJ JV, with the owner of HOJ LLC being one of the same owners and control persons of HOJ JV. Effective March 30, 2012, HOJ acquired the net assets of HOJ LLC and HOJ JV through the issuance of common stock of HOJ. Because HOJ had no significant assets or business operations prior to the merger and each of these entities were owned by the same control group, this transaction was accounted for as a reorganization of entities under common control. Accordingly, the historical results of operations of HOJ LLC and HOJ JV prior to March 30, 2012 are included in the results of operations of the Company.

Because all of the operating businesses of AMHC were contemporaneously sold within five business days after the Acquisition, the transaction has been accounted for as a recapitalization of HOJ. Accordingly, the accompanying consolidated financial statements include the financial position, results of operations and cash flows of HOJ and its predecessor entities, HOJ LLC and HOJ JV, prior to the date of Acquisition. The historical results operations and cash flows of AMHC and the Subsidiaries prior to the date of the Acquisition have been excluded from the accompanying consolidated financial statements. The stockholders' equity of HOJ prior to the Acquisition has been retroactively restated for the equivalent number of shares received in the exchange after giving effect to any differences in the par value of the AMHC and HOJ common stock, with an offset to additional paid-in capital. The restated consolidated accumulated deficit of the accounting acquirer (HOJ) has been carried forward after the exchange.

Description of Business:

The Company sells an all-natural, two-ounce beverage, formulated to help relieve the symptoms associated with alcohol induced hangovers - the Hangover Recovery Shot. The Hangover Recovery Shot is an officially licensed product of The Hangover movie series from Warner Brothers. The Company has registered the trademark "Hangover Joe's Get Up & Go" with the U.S. Patent and Trademark office. The assets consist of intellectual property relating to Hangover Joe's Recovery Shot, including but not limited to a license agreement dated July 19, 2011, between HOJ LLC and Warner Bros. Consumer Products, Inc. The license agreement permits HOJ to use the costumes, artwork logos, and other elements depicted in the 2009 movie "The Hangover" during the term of the license agreement, as amended, which expires January 31, 2016. The Company sells its products primarily to convenience stores, liquor stores, and grocery stores through distribution agreements, as well as through online internet sales. The Company began selling a hangover recovery shot in February 2011 and began selling the licensed Hangover Joe's Recovery Shot in July 2011. HOJ is actively seeking to expand the distribution of the Hangover Joe's Recovery Shot, and has recently entered into distribution agreements to expand its reach to Australia, New Zealand and Canada.

Management's plans

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company reported a net loss of approximately $2,145,000 for the year ended December 31, 2012, and a working capital deficiency and accumulated deficit of approximately $1,407,000 and $2,464,000, respectively, at December 31, 2012. The Company has a limited operating history and has relied primarily on debt financing and private placements of its common stock to fund its operations. The Company cannot provide any assurance it will be able to raise funds through a future issuance of debt or equity to carry out its business plan. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets, or the amounts or classification of liabilities that may result from the possible inability of the Company to continue as a going concern. Management's plans with regards to these conditions are described below.

Management has taken various steps to increase capital resources and improve liquidity.

- In January 2013, the Company entered into a senior secured lending arrangement with TCA Global Credit Master Fund LP ("TCA") for up to a maximum borrowing of $6,000,000. The credit facility has an initial line of credit of $425,000 with a six month term (and six month renewal option) and is collateralized by the assets of the Company. At closing, the Company was advanced $425,000, less fees and closing costs.

- On April 12, 2013, the Company executed a term sheet with an accredited investor ("Investor") for a proposed investment of $1,000,000 in the Company in exchange for 15,000,000 shares of common stock, 5,000,000 shares of newly authorized Series C Preferred Stock (convertible into 15,000,000 shares of common stock) and warrants to acquire 500,000 shares of common stock at $0.12 per share for a period of five years. The first tranche of $500,000 is to be deposited on or before April 17, 2013 in exchange for 15,000,000 shares of common stock and warrants to acquire 250,000 common shares described above. The second tranche of $500,000 is to be deposited on or before April 26, 2013 in exchange for 5,000,000 shares of Series C Preferred Stock and warrants to acquire 250,000 common shares described above (See Note 11). On April 12, the Company received $50,000 toward the first investment tranche.

- Management has also taken steps to reduce its operating costs. As part of this effort, certain executive officers and consultants agreed to defer a portion of their compensation effective October 1, 2012.

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CONSOLIDATED BALANCE SHEETS (Parentheticals) (USD $)	Dec. 31, 2012	Dec. 31, 2011
Preferred stock, par value per share	$ 0.10
Preferred stock, shares authorized	10,000,000
Common Stock, par value per share	$ 0.001
Common Stock, shares authorized	150,000,000
Common Stock, shares issued	120,846,348
Common stock, shares outstanding	120,846,348
Series A Preferred Stock [Member]
Preferred stock, shares authorized	425,000
Preferred stock, shares issued	87,501
Preferred stock, shares outstanding	87,501

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SUBSEQUENT EVENTS

12 Months Ended

Dec. 31, 2012

SUBSEQUENT EVENTS [Abstract]

SUBSEQUENT EVENTS

NOTE 11 - SUBSEQUENT EVENTS

Revolving Credit Facility

On January 10, 2013, the Company entered into a senior secured lending arrangement with TCA Global Credit Master Fund LP ("TCA") for up to a maximum borrowing of $6,000,000. The credit facility provides for an initial line of credit of $425,000 based upon accounts receivables and projected sales and is to be used only as permitted under the specified use of proceeds for working capital purposes. The line of credit has a six month term from the date of closing with a six month renewal option. The lending arrangement is secured by all of the assets of the Company. As a partial guaranty under the TCA lending arrangement, the Company's CEO executed a validity guaranty thereby personally guaranteeing certain representations made by the Company to TCA. At closing, the Company was advanced $425,000 less fees and closing costs.

In connection with the agreement above, TCA was issued an investment banking fee consisting of 125,000 shares of newly-authorized Series B Preferred Shares in the Company equating to an aggregate of $125,000 in the Company's capital stock. The shares are convertible into the Company's common shares after July 1, 2013. Also in connection with the TCA agreement, the Company issued 194,954 shares of common stock to Meyers Associates LP as consideration for a finder's fee for this transaction.

Surrender of Founder's shares

In January 2013, a shareholder of the Company surrendered 4,500,000 shares of common stock to the Company's treasury for no consideration. The shares were initially issued to a founder in March 2012 and were returned to increase the number of common shares available.

Investor Relations Agreement

On February 15, 2013, the Company entered into an investor relations agreement with a firm which requires the Company to pay a consulting fee of $2,500 per month and to provide 100,000 shares of the Company common stock per month and warrants to purchase 100,000 shares of the Company's common stock per month.

Interim Chief Operating Officer

Effective March 1, 2013, the Board of Directors appointed Eric Skae to serve as interim Chief Operating Officer ("COO"). Mr. Skae will be paid an annual salary of $100,000 in the same manner as other officers of the Company.

Series C Preferred Stock

In April 2013, the Board of Directors approved the authorization of 5,000,000 shares of Series C Preferred Stock (the "Series C Preferred Stock"). The Series C Preferred shares have voting rights equal to three votes per share and contain an automatic conversion into 15,000,000 common shares immediately upon the Company obtaining shareholder approval of, and filing with the Colorado Secretary of State, an increase in authorized common stock to at least 200,000,000 shares.

Private Placement

On April 12, 2013, the Company executed a term sheet with an accredited investor ("Investor") for a proposed investment of $1,000,000 in the Company in exchange for 15,000,000 shares of common stock, 5,000,000 shares of Series C Preferred Stock, and warrants to acquire 500,000 shares of common stock at $0.12 per share for a period of five years. The first tranche of $500,000 is to be deposited on or before April 17, 2012 in exchange for 15,000,000 shares of common stock and warrants to acquire 250,000 common shares described above. The second tranche of $500,000 is to be deposited on or before April 26, 2013 in exchange for 5,000,000 shares of Series C Preferred Stock and warrants to acquire 250,000 common shares described above. On April 12, 2013, the Company received $50,000 toward the first investment tranche.

The common shares and underlying common shares attributable to the Series C Preferred Stock and warrants will have piggyback registration rights that will be triggered if the Company files a registration statement with the Securities and Exchange Commission for the resale of other securities. The warrants may be redeemed by the Company if certain conditions are met, including that the shares underlying the warrants have been registered and the common stock trades at or above $.20 per share for 20 trading days. The Investor will be entitled to one seat on the Company's Board of Directors, and certain other development and distribution rights, as defined.

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Document and Entity Information (USD $)	12 Months Ended
	Dec. 31, 2012	Apr. 08, 2013	Jun. 30, 2012
Document And Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2012
Entity Registrant Name	Hangover Joe's Holding Corp
Entity Central Index Key	0001388132
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2012
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Common Stock, Shares Outstanding		122,591,301
Entity Public Float			$ 1,667,000

XML

SIGNIFICANT ACCOUNTING POLICIES (Policy)

12 Months Ended

Dec. 31, 2012

SIGNIFICANT ACCOUNTING POLICIES [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its 100%-owned subsidiary. All intercompany accounts, transactions, and profits are eliminated in consolidation.

Reclassifications

Reclassifications

Certain immaterial reclassifications have been made to the prior period consolidated financial statements in order to conform to the current year presentation. The Company has reclassified $86,000 in sample costs and $30,000 in shipping and handling costs from cost of goods sold to sales and marketing costs, respectively for the fiscal year ended December 31, 2011. The Company has determined that the reclassification more accurately reflects the economics of these transactions.

Use of estimates

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant estimates are used in accounting for certain items such as allowance for doubtful accounts, revenue recognition, and stock-based compensation. Estimates are based on historical experience, where applicable, and assumptions that management believes are reasonable under the circumstances. Due to the inherent uncertainty involved with estimates, actual results may differ.

Accounts Receivable and Concentration of Credit Risk

Accounts Receivable and Concentration of Credit Risk

The Company is subject to credit risk through trade receivables. This credit risk is mitigated by the diversification of the Company's operations, as well as its customer base. The Company grants varying payment terms to its customers. Payment terms for customers can vary from due upon receipt up to net 45 days.

Two customers comprise approximately 78% of trade accounts receivable at December 31, 2012; these individual customer balances represent approximately 65% and 13% of the net trade accounts receivable. Three customers comprise approximately 76% of the trade accounts receivable at December 31, 2011; these individual customer balances represent approximately 50%, 15%, and 11% of the total trade accounts receivable. Four customers accounted for 54% of net sales for the year ended December 31, 2012; these individual customer sales represent approximately 18%, 16%, 10%, and 10% of annual net sales. Three customers accounted for 36% of net sales for the year ended December 31, 2011; these individual customer sales represent approximately 14%, 12%, and 10% of annual net sales. During 2012, sales to distributors in Canada and Australia accounted for approximately 16% and 10% of annual net sales.

Ongoing credit evaluations of customers' financial condition are performed. Collateral is not required. The Company maintains an allowance when necessary for doubtful accounts that is the Company's best estimate of potentially uncollectible trade receivables. Provisions are made based upon a specific review of all significant outstanding invoices that are considered potentially uncollectible in whole or in part. For those invoices not specifically reviewed or considered uncollectible, general provisions are provided at different rates, based upon the age of the receivable, historical experience, and other currently available evidence. The allowance estimates are adjusted as additional information becomes known or as payments are made. As of December 31, 2012, the allowance for doubtful accounts was $21,624. There was no allowance at December 31, 2011.

Inventory

Inventory

Inventory is valued at the lower of cost (first-in, first-out) or market value.

License and Royalties

License and Royalties

The Company has a license with Warner Bros. Consumer Products, Inc. ("WBCP") that allows the Company the use of the costumes, artwork, logos and other elements depicted in the 2009 movie, The Hangover. This license, as amended, expires January 31, 2016. The terms of the WBCP license provide for royalties based on a percentage of products sold, as defined, subject to agreed-upon guaranteed minimum royalties. Guaranteed minimum royalty payments are made periodically over the term of the license and are recorded when paid as a prepaid expense in the balance sheet. The prepaid expense is amortized to royalties in cost of goods sold at a ratio of current period revenues to the total revenues expected to be recorded over the term of the license. The Company reviews its sales projections quarterly to determine the likely recoverability of its prepaid asset, as well as any unpaid minimum obligation. If management determines that the prepaid expense is unlikely to be recovered by product sales, prepaid license expense is charged to cost of goods sold, based on current and expected revenues, in the period in which such determination is made.

Revenue Recognition

Revenue Recognition

The Company has contractual agreements with certain third-party distributors. Under the agreements, the Company is not guaranteed any minimum level of sales or transactions. The Company also offers its products for sale through its website at www.hangoverjoes.com.

The Company recognizes revenue when all of the following have occurred: (1) persuasive evidence of an arrangement exists; (2) delivery to third party distributors and consumers via the Company's website has occurred; (3) the sales price is fixed or determinable; and (4) collectability is reasonably assured. Delivery is not considered to have occurred until the title and the risk of loss passes to the customer according to the terms of the contract between the Company and the customer. For sales to distributors, revenue is usually recognized at the time of delivery. For sales through the Company's website, revenue is recognized at time of shipment.

Management evaluates the terms of its sales in consideration of the criteria outlined in Principal Agent Consideration with regards to its determination of gross versus net reporting of revenue for transactions with customers. The Company sells, through its website, Hangover Joe's Recovery Shots. In these transactions, management has determined that the Company (i) acts as principal; (ii) has the risks and rewards of ownership, including the risk of loss for collection, delivery or returns; and (iii) has latitude in establishing price with the customer. For these transactions, the Company recognizes revenue on a gross basis.

The Company offers a variety of incentives and discounts to distributors, customers and consumers through various programs to support the distribution of its products. These incentives and discounts include cash discounts, price allowances, volume based rebates and product placement fees. These incentives and discounts are reflected as a reduction of gross sales to arrive at net sales. The aggregate deductions from gross sales recorded in relation to these programs were approximately $43,100 and $17,800 for the years ended December 31, 2012 and 2011, respectively.

Cost of Goods Sold

Cost of Goods Sold

Cost of goods sold consists of the costs of raw materials utilized in the production of its product, co-packing fees, and in-bound freight charges. Raw material costs account for the largest portion of the cost of goods sold. Raw materials include bottles, ingredients and packaging materials. The manufacturer is responsible for the ingredients. Costs of goods sold also include license and royalty expenses.

Supplier/Manufacturer Concentration

Supplier/Manufacturer Concentration

The Company relies on its third-party suppliers for raw materials necessary for its products, and it relies on third-party manufacturers for the production of its product. Although the Company believes that it could utilize alternative suppliers and manufacturers, any delay in locating and establishing relationships with other suppliers/manufacturers could result in product shortages and back orders for the products, with a resulting loss of net sales and profitability. The Company's third-party manufacturer acquires some ingredients from suppliers outside of the United States. Purchasing these ingredients is subject to the risks generally associated with importing raw materials from other countries, including, among other factors, delays in shipments, changes in economic and political conditions, quality assurance, tariffs, trade disputes and foreign currency fluctuations. These factors could result in a delay in or disruption of the supply of certain raw materials. Any significant delay in or disruption of the supply of raw materials could have a material adverse effect on the Company's business.

Sales and Marketing Expenses

Sales and Marketing Expenses

Sales and marketing costs include selling expenses such as distribution expenses to transport products to customers and warehousing expenses after manufacture, as well as expenses for advertising, sampling and in-store demonstration costs, costs for merchandise displays, point-of-sale materials, trade shows, other marketing expenses and product design expenses.

Advertising Expenses

Advertising Expenses

Advertising costs are expensed as incurred and are included in sales and marketing expense in the accompanying consolidated statements of operations. Total advertising expenses were approximately $122,000 and $27,000 for the years ended December 31, 2012 and 2011, respectively.

Freight-Out Costs

Freight-Out Costs

Freight-out costs incurred to ship product to customers are included in sales and marketing expense in the accompanying consolidated statements of operations. Total freight-out costs were approximately $47,000 and $30,000 for the years ended December 31, 2012 and 2011, respectively.

Income Taxes

Income Taxes

Prior to March 2012, no provision for income taxes was provided in the accompanying financial statements because HOJ LLC (as a limited liability company), and HOJ JV (as a partnership), elected to file as partnerships, and therefore management believes that prior to March 31, 2012 the Company was not subject to income taxes, and, that such taxes were the responsibility of the individual member/partners.

Beginning in March 2012, as a corporation, the Company now records a provision for deferred income tax assets and liabilities in order to reflect the net tax effects of temporary differences between (i) the tax basis of assets and liabilities and (ii) their reported amounts in the financial statements. The provision is based upon enacted tax laws and rates in effect for the years in which the differences are expected to affect taxable income. The Company establishes a valuation allowance when necessary to reduce deferred income tax assets to the amounts expected to be realized. The Company expects to file income tax returns in the US Federal jurisdiction and various State jurisdictions.

The Company assesses the likelihood of the financial statement effect of a tax position that should be recognized when it is more likely than not that the position will be sustained upon examination by a taxing authority based on the technical merits of the tax position, circumstances, and information available as of the reporting date. All tax years remain open and subject to U.S. Federal tax examination. Management does not believe that there are any current tax positions that would result in an asset or liability for taxes being recognized in the accompanying financial statements.

The Company's policy is to classify tax related interest and penalties as income tax expense. There is no interest or penalties estimated on the underpayment of income taxes as a result of unrecognized tax benefits.

Stock-Based Compensation

Stock-Based Compensation

Stock-Based Compensation is recognized for an award of equity instruments in the financial statements and is measured based on the grant date fair value of the award. Stock-Based Compensation expense is recognized over the period of service in exchange for the award (generally the vesting period). The Company estimates the fair value of each stock option at the grant date by using an option pricing model, typically the Black-Scholes model.

For shares issued to non-employees for goods or services, the Company accounts for these shares in accordance with ASC 505-50. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable (a) goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of the performance commitment date or performance completion date.

Net Loss Per Share

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss applicable to common shareholders by the weighted-average number of shares of common stock outstanding for the period. Historical loss per share of the accounting acquirer (HOJ) has been adjusted retroactively to reflect the new capital structure of the Company as a result of the Merger Agreement. Diluted net loss per share reflects the potential dilution that could occur if dilutive securities were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company, unless the effect of such inclusion would reduce a loss or increase earnings per share. For each of the periods presented in the accompanying consolidated financial statements, the effect of the inclusion of dilutive shares would have resulted in a decrease in loss per share. Stock options, warrants, and common shares underlying convertible preferred stock in the aggregate of 10,355,726 and 3,638,070 shares as of December 31, 2012 and 2011, respectively, were not included in the calculation of diluted net loss per common share because the effect would have been anti-dilutive.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

ASC 820 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available.

The three levels of inputs required by the standard that the Company uses to measure fair value are summarized below.

· Level 1: Quoted prices in active markets for identical assets or liabilities.

· Level 2: Observable inputs other than Level 1 inputs such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.

· Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Under fair value accounting, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. As of December 31, 2012 and 2011, the Company had no financial assets or liabilities required to be reported for fair value purposes.

The carrying value of the Company's financial instruments, including cash, accounts receivable, accounts payable, and the inventory financing payable approximate fair value at December 31, 2012 and 2011, due to the relatively short maturity of the respective instruments. The fair value of related party payables is not practicable to estimate due to the related party nature of the underlying transactions.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2011, the FASB issued Accounting Standards Update ("ASU") No. 2011-04, "Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS." This pronouncement was issued to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards ("IFRS"). ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements particularly for level 3 fair value measurements. ASU 2011-04 became effective for the Company on January 1, 2012. The adoption of ASU 2011-04 did not have any impact on the Company's financial position, results of operations or liquidity.

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CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS [Abstract]
NET SALES	$ 1,079,234	$ 279,961
COST OF GOODS SOLD	761,441	138,717
GROSS PROFIT	317,793	141,244
OPERATING EXPENSES
Selling and marketing	840,823	200,496
General and administrative	770,574	191,838
Management fees - related party	192,500
Settlement costs	652,500
Total operating expenses	2,456,397	392,334
LOSS FROM OPERATIONS	(2,138,604)	(251,090)
OTHER INCOME (EXPENSE)
Interest income	14
Interest expense	6,525	5,583
NET LOSS	$ (2,145,115)	$ (256,673)
BASIC AND DILUTED NET LOSS PER COMMON SHARE	$ (0.02)
BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING	92,551,863	61,295,271

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ACCRUED EXPENSES

12 Months Ended

Dec. 31, 2012

ACCRUED EXPENSES [Abstract]

ACCRUED EXPENSES

NOTE 6 - ACCRUED EXPENSES

Accrued expenses as of December 31, 2012 and 2011 consist of the following:

	December 31,		December 31,
	2012		2011
Accrued expenses	$	37,005	$	46,842
Deferred salaries		45,960		-
Accrued settlement costs - paid for in common stock		652,500		-
Accrued consulting costs - paid for in common stock		225,000		-
	$	960,465	$	46,842

In January 2013, the Company issued 4,500,000 and 1,500,000 common shares for the accrued settlement costs and accrued consulting costs, respectively. See Note 8 for further discussion of accrued settlement costs and accrued consulting costs.

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IINVENTORY FINANCING AND FACTORING ARRANGEMENTS

12 Months Ended

Dec. 31, 2012

INVENTORY FINANCING AND FACTORING ARRANGEMENTS [Abstract]

INVENTORY FINANCING AND FACTORING ARRANGEMENTS

NOTE 5 - INVENTORY FINANCING AND FACTORING ARRANGEMENTS

Through March 2012, the Company had an agreement with a finance company which provided financing up to $250,000, secured by the specific goods underlying the goods ordered from the Company's third-party manufacturer. The finance company made the required payment to the third-party manufacturer at the time a purchase order was placed, and was entitled to demand payment from the Company when the goods were delivered. The Company paid a financing fee equal to 4.75% of the purchase order amount for each transaction, plus administrative fees. Additional charges of 0.16% per day (57.6% annualized) were incurred if the financing remained open for more than 30 days. The inventory financing payable was $23,712 at December 31, 2011, and interest expense during the year ended December 31, 2012 was $223 (none in 2011). Amounts outstanding under this agreement were paid in full when the agreement expired in April 2012.

In September 2012, the Company entered into a factoring agreement with the same finance company described above which provided financing up to $250,000, secured by the accounts receivable and inventory of the Company. The finance company advanced to the Company up to 80% of eligible accounts receivable and was entitled to collect receivables directly from the Company's customers. The Company paid a financing fee equal to 2.5% for receivable amounts outstanding up to 30 days and an additional rate of 0.084% per day (30.7% annualized) after the initial 30 days with a maximum exposure of 60 days.

In October 2012, the Company entered into a purchase order financing arrangement with this same finance company which supplements the factoring agreement above. The finance company advanced up to 100% of the manufacturing and shipping costs at the time a Company purchase order is submitted to the manufacturer. The Company paid a financing fee equal to 3.85% of the purchase order amount for each transaction and an additional rate of 0.13% per day (47.4% annualized) after the initial 30 days. As of December 31, 2012, the inventory financing payable under the purchase order financing and factoring arrangement was $97,611. Interest expense during the year ended December 31, 2012 was $6,302 (none in 2011). Amounts outstanding under this agreement were paid in full in January 2013 when the Company entered into the revolving credit facility described in Note 11.

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INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2012

INCOME TAXES [Abstract]

Schedule of Income Tax Benefit

Deferred tax benefit:
Federal	$	686,000
State		59,000
		745,000
Increase in valuation allowance		(745,000	)
Net income tax benefit	$	-

Schedule of Income Tax Rate Reconciliation

U.S. Federal tax benefit at statutory rate	$	(751,000	)
State income taxes, net of federal tax benefit		(65,000	)
Permanent differences		3,000
Income tax losses allocated to partners		68,000
Increase in valuation allowance		745,000
Net income tax benefit	$	-

Schedule of Deferred Tax Assets

Deferred tax assets:
Allowance for doubtful accounts	$	8,000
Accrued settlement costs		248,000
Accrued compensation		48,000
Stock-based compensation		44,000
Net operating loss carryforwards		397,000
Total net deferred tax assets		745,000
Less: valuation allowance		(745,000	)
Net deferred tax asset	$	-

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INVENTORY (Tables)

12 Months Ended

Dec. 31, 2012

INVENTORY [Abstract]

Schedule of Inventory

	December 31, 2012		December 31, 2011
Raw materials (packing supplies)	$	26,634	$	27,515
Finished goods (bottled products)		-		19,230
	$	26,634	$	46,745

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STOCKHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2012

STOCKHOLDERS' EQUITY [Abstract]

STOCKHOLDERS' EQUITY

NOTE 9 - STOCKHOLDERS' EQUITY

Preferred stock

The Company is authorized to issue up to 10,000,000 shares of Preferred stock, par value $0.10 per share. The Articles of Incorporation provide that the Preferred stock may be issued from time to time in one or more series and gives the Board of Directors authority to establish the designations, preferences, limitations, restrictions, and relative rights of each series of Preferred Stock

Series A Preferred Stock

Of the 10,000,000 shares of the Company's authorized Preferred Stock, ($0.10 par value per share), 425,000 shares are designated as Series A Convertible Preferred Stock (the "Series A Preferred"). The holders of outstanding shares of Series A Preferred are entitled to notice of any shareholders' meeting and to vote as a single class with the common stock upon any matter submitted for approval by the holders of common stock, on an as-converted basis, as defined. Each share of Series A Preferred shall have eight votes per share. If any dividend or distribution is declared or paid by the Company on common stock, whether payable in cash, property, securities or rights to acquire securities, the holders of the Series A Preferred will be entitled to participate with the holders of common stock in such dividend or distribution, as defined.

Additionally, upon liquidation, dissolution or winding up on the Company, the Series A Preferred shareholders are entitled to be paid together with the common shareholders on a pro-rata basis. The Series A Preferred holders may convert such shares of Series A Preferred in whole or in part, at any time, or from time-to-time upon written notice to the Company subject to the terms set forth below. The Series A Preferred may, or shall, be converted into shares of the Company's authorized but unissued common stock on the following bases: (i) At the option of the holder, at any time before the "Financial Milestone" is met each share of Series A Preferred shall be convertible into eight shares of the Company's common stock. (ii) Upon the "Financial Milestone" being met, each share of Series A Preferred shall automatically be converted into 28.8 shares of the Company's common stock. (iii) If the "Financial Milestone" has not been met by October 8, 2013, each share of Series A Preferred then outstanding shall automatically be converted into eight shares of the Corporation's Common Stock. Subsequent to the HOJ Merger on July 24, 2012 through December 31, 2012, one Series A Preferred holder converted 1,667 Series A Preferred Shares into 13,336 shares of the Company's common stock.

Common stock

The Company is authorized to issue up to 150,000,000 shares of $0.001 par value common stock. As discussed in Note 1, the Company entered into the Merger Agreement with HOJ, whereby the Company issued 83,514,827 common shares in exchange for all the outstanding shares of HOJ. This transaction has been accounted for as a recapitalization of HOJ and accordingly the historical stockholders' equity transactions of HOJ prior to the Acquisition has been retroactively restated for the equivalent number of shares received in the exchange after giving effect to any differences in the par value of the AMHC and HOJ common stock, with an offset to additional paid-in capital.

On March 30, 2012, the owners of HOJ LLC and HOJ JV assigned the net assets of HOJ LLC and HOJ JV to HOJ in exchange for 61,295,271 shares of the Company's common stock. As a result, on March 30, 2012, the Company's equity accounts were reclassified to reflect this change in legal organization of the Company, with no impact on total equity (deficit).

In April 2012, 4,290,669 shares were issued as founders shares to three individuals. In May 2012, the Company completed a private placement of 15,323,838 shares at $0.0326 per share for cash proceeds of $500,000. In July 2012, the Company issued 3,218,002 shares of the Company's common stock at $0.065 per share for cash of $210,000. During the fourth quarter of 2012, the Company issued 242,858 shares of common stock at $0.07 per share for cash proceeds of $17,000. Also, the Company issued 267,526 shares of common stock in consideration for $18,727 of accounts payable.

Dissenting Shareholder

In connection with the Acquisition, an HOJ shareholder holding the equivalent of 612,953 shares of common stock asserted his rights as a dissenting shareholder under the Colorado Business Corporation Act and demanded payment for the fair value amount of his shares as of the date of the Acquisition. In July 2012, the Company estimated the fair value of these shares to be $20,000 and recorded a payable to shareholder in the amount of $20,000 and corresponding decrease to Equity.

On February 15, 2013, the Company entered into a settlement agreement with the dissenting HOJ shareholder. Under the terms of the settlement agreement, the Company agreed to pay $5,000 cash at closing and $15,000 plus accrued interest at 5% within 90 days. The Company also agreed to issue 50,000 shares of the Company's common stock. The fair value of the common stock at the date of settlement was $5,500.

Stock options

Effective March 11, 2009, AMHC established the 2009 Stock Option Plan ("the "2009 Plan). The 2009 Plan established by AMHC was retained by the Company after the Acquisition. Under the 2009 Plan, the Company may grant non-statutory and incentive options to employees, directors and consultants for up to a total of 7,000,000 shares of common stock. The exercise prices of the options granted are determined by the Plan Committee, whose members are appointed by the Board of Directors, and the exercise prices are generally to be established at the estimated fair value of the Company's common stock at the date of grant. Options granted have terms that do not exceed five years. As of December 31, 2012, stock options to purchase 650,000 shares of common stock are outstanding under the 2009 Plan.

On July 26, 2012, the Company's shareholders approved the 2012 Stock Option Plan (the "2012 Plan"). Under the Plan, the Company may grant stock options, restricted and other equity awarded to any employee, consultant, independent contractor, director or officer of the Company for up to a total of 11,500,000 shares of common stock. As of December 31, 2012, stock options to purchase 2,266,190 shares of common stock are outstanding under the 2012 Plan.

In April 2013, the Company's Board of Directors reduced the number of common shares reserved under the 2012 Stock Option Plan from 11,500,000 shares to 4,500,000 and reduced the number of common shares reserved under the 2009 Stock Option Plan from 7,000,000 shares to 650,000 shares thereby increasing the number of common shares available for issuance by 13,350,000.

The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton valuation model. Expected volatility is based upon weighted average of historical volatility over the expected term of the option and implied volatility. The expected term of stock options is based upon historical exercise behavior and expected exercised behavior. The risk-free interest rate is based upon implied yield on a U.S. Treasury zero-coupon issue with a remaining term equal to the expected term of the option. The dividend yield is assumed to be none as the Company does not anticipate paying any dividends in the foreseeable future.

A summary of the weighted average assumptions used to value stock options for the year ended December 31, 2012 is as follows:

Risk free interest rate	0.25 - 0.33%
Expected volatility	186%
Expected term	2-3 years
Expected dividend yield	n/a

During the year ended December 31, 2012, the Company granted options to purchase an aggregate of 2,266,190 shares of common stock with a weighted-average grant-date fair value of $0.055. Stock options to acquire 766,190 shares were granted to an employee for sales development and have an exercise price of $0.0326 per share and a term of three years. The options vest 383,095 each on April 5, 2013 and 2014 based upon the achievement of the performance objectives determined by management, as defined. Management has evaluated the performance criteria as of December 31, 2012 and determined it is unlikely that the performance objective will be met for 2013 or 2014 and accordingly has not recognized any stock-based compensation during the year ended December 31, 2012. In December 2012, the Company granted options to purchase 1,500,000 shares of common stock which vested immediately with a weighted average grant date fair value of $0.064. No options were exercised during the year ended December 31, 2012.

During the year ended December 31, 2011, AMHC granted options to purchase an aggregate of 892,500 shares of common stock with a weighted average grant date fair value of $0.16. No options were exercised during the year ended December 31, 2011.

The following is a summary of stock option activity for the years ended December 31, 2012 and 2011:

						Weighted
				Weighted		Average
	Shares			average		Remaining		Aggregate
	under			exercise		contractual		intrinsic
Options	Option			price		Life		value
Outstanding at January 1, 2011		2,294,570		$	0.48
Granted		892,500		$	0.16
Exercised		-		$	-
Forfeited/Cancelled		(1,100,000	)	$	0.18
Outstanding at December 31, 2011		2,087,070		$	0.42	2.97		39,049
Granted		2,266,190		$	0.06
Exercised		-		$	-
Forfeited/Cancelled		(1,437,070	)	$	0.30
Outstanding at December 31, 2012		2,916,190		$	0.11		2.76	$	32,486
Vested or Expected to Vest at December 31, 2012		2,150,000		$	0.14		2.93	$	-
Exercisable at December 31, 2012		2,150,000		$	0.14		2.93	$	-

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the estimated fair value of the Company's common stock on December 31, 2012, and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had they exercised their options on December 31, 2012.

As a result of the reorganization described in Note 1, the Company has not recognized any stock-based compensation cost previously recorded on the books of AMHC prior to the date of reorganization. During the year ended December 31, 2012, the Company recognized $95,690 of stock-based compensation related to stock options issued in general and administrative expenses. No stock-based compensation was recognized in 2011. As of December 31, 2012, the Company does not expect outstanding options to acquire 766,190 shares of common stock will vest due to the performance criteria outlined in the option agreement. Compensation cost is revised if subsequent information indicates that the actual number of options vested is likely to differ from previous estimates.

The following table summarizes the activity and value of non-vested options as of and for the years ended December 31, 2012 and 2011:

				Weighted
	Number			Average
	Of			grant date
	Options			fair value
Non-vested options at January 1, 2011		888,798		$	0.31
Granted		892,500		$	0.16
Vested		(619,748	)	$	0.22
Forfeited/cancelled		(558,333	)	$	0.18
Non-vested options at December 31, 2011		603,217		$	0.10
Granted		2,266,190		$	0.06
Vested		(1,546,684	)	$	0.07
Forfeited/Cancelled		(556,533	)	$	0.27
Non-vested options at December 31, 2012		766,190		$	0.06

As of December 31, 2012, there was $42,159 of total unrecognized compensation cost related to non-vested share based compensation arrangements granted under the qualified stock option plans. That cost is expected to be recognized over a weighted average period of 1.3 years if certain performance criteria are met.

Warrants:

Summarized information about warrants outstanding and exercisable at December 31, 2012 is as follows:

						Weighted
				Weighted		Average
				average		Remaining		Aggregate
				exercise		contractual		intrinsic
Warrants	Shares			Price		Life		value
Outstanding at January 1, 2012		1,551,000		$	0.29
Issued for Services		6,229,528		$	0.03
Exercised		-		$	-
Forfeited/Cancelled		(1,041,000	)	$	0.29
Outstanding at December 31, 2012		6,739,528		$	0.05	$	2.19	$	259,892
Vested or Expected to Vest at December 31, 2012		610,000		$	0.27	$	0.81	$	-
Exercisable at December 31, 2012		610,000		$	0.27	$	0.81	$	-

In April 2012, the Company granted a warrant to a sales consultant and director of the Company to purchase up to 6,129,528 shares of common stock in connection with a two-year service agreement. This warrant has a three-year term and an exercise price of $0.0326 per share with 3,064,764 shares vesting each on January 1, 2013 and January 1, 2014 if the Company's sales exceed certain thresholds in 2012 and 2013, respectively. On January 1, 2013, the board of directors concluded the sales target for 2012 was not met and warrants to purchase 3,064,764 shares of Company common stock were cancelled. Management has evaluated the performance criteria and currently does not anticipate that the sales thresholds for 2013 will be met and accordingly no stock-based compensation has been recognized during the year ended December 31, 2012. Compensation cost is revised if subsequent information indicates that the actual number of warrants vested is likely to differ from previous estimates.

In December 2012, the Company granted a warrant to an investor relations firm to purchase up to 100,000 shares of common stock that vested immediately. This warrant has a three-year term and an exercise price of $0.11 per share, and $17,549 of stock based compensation related to this warrant has been recognized in general and administrative expenses during the year ended December 31, 2012.

Contributed Services

Prior to March 31, 2012, the Company's owners/officers contributed management and administrative services to the Company. The fair value of those services has been recorded as an expense in the accompanying consolidated financial statements based on the estimated fair value for such services, with a corresponding credit to contributed capital. The fair value of the historical services was estimated based on the compensation per employment terms that were entered into in March 2012. Contributed services were $50,000 and $150,000 for the years ended December 31, 2012 and 2011, respectively.

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RELATED PARTY TRANSACTIONS

12 Months Ended

Dec. 31, 2012

RELATED PARTY TRANSACTIONS [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 7 - RELATED PARTY TRANSACTIONS

Advances payable, related party

The President/CEO of the Company has advanced funds to the Company from time to time for working capital. As of December 31, 2012 and December 31, 2011, advances payable to this party were $89,442 and $116,379, respectively. These advances were non-interest bearing, unsecured, and due on demand. On March 1, 2013, the Company converted the outstanding advance amount of $89,422 into a promissory note. Interest at the rate of 5.5% per annum is compounded and paid annually. Principal payments in the amount of $14,966 and accrued interest shall be payable in six installments with the first payment due on June 15, 2013.

Sales to Related Party

During fiscal years ended December 31, 2011 and 2012, the Company recorded net sales of $10,700 and $4,100, respectively for product sold to a company that is 32% owned by a member of the Company's board of directors.

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COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2012

COMMITMENTS AND CONTINGENCIES [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 8 - COMMITMENTS AND CONTINGENCIES

WBCP License Agreement

The Company has a license with WBCP that allows the Company the use of the costumes, artwork, logos and other elements depicted in the 2009 movie, The Hangover. This license had an initial term through January 31, 2013 and provides for certain royalties based on a percentage of products sold subject to certain agreed-upon guaranteed minimum royalty payments over the term of the license.

In January 2013, the Company entered into an extension of its product license agreement with WBCP extending the term of the agreement to January 31, 2016. Further, the extension added certain channels of distribution and required certain agreed-upon minimum royalty payments over the next three years, the first of which was paid from the proceeds from the TCA revolving credit facility discussed in Note 11.

Royalty and Commission Agreements

The Company has a representative agreement with an individual who became a member of the Company's board of directors in March 2012. Under this agreement, as amended, this individual is entitled to a commission of between 4% and 6% of sales made by this individual, based on the nature of the sales, and a royalty of 3% of all sales made by the Company, as defined. Commissions and royalty expense to this individual for the years ended December 31, 2012 and 2011 totaled approximately $49,500 and $12,500, respectively. Effective April 1, 2012, the Company agreed to pay this individual a $6,000 draw per month against commissions. As of December 31, 2012, net prepaid expenses related to draws in excess of commissions were approximately $28,000.

The Company has an agreement with a second individual for design services. Under this agreement, as amended, this individual is entitled to receive a royalty of 2% of net sales, as defined. Royalty expense to this individual was $18,400 and $4,500 for the years ended December 31, 2012 and 2011, respectively. Effective April 1, 2012, the Company agreed to pay this individual a $3,000 draw per month against royalties. As of December 31, 2012, net prepaid expenses related to draws in excess of royalties were approximately $17,000.

Management Agreement with AMHC Managed Services

Effective March 1, 2012, HOJ entered into a management agreement (the "Management Agreement") with AMHC Managed Services, Inc. ("AMHC Services"), a subsidiary of AMHC. The significant terms of the Management Agreement provided for monthly payments to AMHC Services in exchange for financial management and accounting services, corporate office and administrative services, and expertise regarding compliance with securities regulations. The Management Agreement term was 24 months, and required the Company to pay AMHC Services a monthly fee equal to $27,500 per month ($192,500 expensed during the year ended December 31, 2012).

On October 1, 2012, AMHC Services suspended the accounting and financial management services provided under the Management Agreement due to a dispute under the contract. In January 2013, the Company settled the dispute and terminated the Management Agreement in exchange for 3,000,000 shares of common stock (See below).

Settlement Agreement with AMHC Services and Other Claims

On January 14, 2013, the Company entered into a settlement agreement with AMHC Services, the principal owners of AMHC Services, and an independent third party pursuant to which the respective parties released each other from certain claims. Under the terms of the settlement, the Company issued AMHC Services 3,000,000 shares of its common stock, and issued the independent third party 1,500,000 shares of its common stock. The fair value of the shares issued under this settlement was $652,500 based upon the closing price of the stock on the date of the signed settlement agreement.

As a result of this settlement, the Company recorded an accrued settlement liability of $652,500 on its consolidated balance sheet as of December 31, 2012 and has recorded a corresponding settlement expense on its consolidated statement of operations for the year ended December 31, 2012. Legal costs are expensed as incurred.

Strategic Consulting Agreement

In November 2012, the Company entered into a consulting agreement with The Bricktown Group ("Bricktown") to provide beverage management and strategic advisory consulting services to the Company. The consulting agreement has an initial term of six months with an automatic extension of 180 days provided neither party has provided a written notice to not extend the agreement. The contract can be terminated upon written notice at any time, but the Company is obligated to pay any fees accrued under the agreement. The agreement requires the Company to pay an upfront retainer of $10,000 and monthly consulting fees of $10,000 per month, which was to be deferred until the Company raised at least $300,000 in debt or equity. The Company is to issue 3,000,000 shares of the Company's common stock in two tranches, of which 1,500,000 shares are issuable upon request after January 4th, 2013 and 1,500,000 shares are issuable on March l, 2013. The first 1,500,000 shares are non-forfeitable and fully vested on the date of the agreement.

Based upon the terms of the agreement, the Company determined that the measurement date for the initial 1,500,000 shares to be issued under the agreement is the contract date and calculated a fair value of $225,000 based upon the closing market price on this date. Accordingly, the Company recorded an accrued consulting cost liability of $225,000 on the consolidated balance sheet as of December 31, 2012 until such shares are issued. The stock-based compensation associated with the initial shares of $225,000 was recorded as prepaid consulting costs and is being amortized over the three-month term of this agreement. For the year ended December 31, 2012, the Company recognized consulting expense of $81,383 related to this agreement. The measurement date for the second tranche of 1,500,000 shares was March 1, 2013. The fair value of these shares was determined based upon the closing market price of the Company's common stock on this date and will be amortized over the remaining 3 months of the contract. On January 10, 2013, the Company issued the initial 1,500,000 shares of its common stock to Bricktown. In March 2013, the Company hired one of the principal owners of Bricktown to become the interim COO of the Company.

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INCOME TAXES

12 Months Ended

Dec. 31, 2012

INCOME TAXES [Abstract]

INCOME TAXES

NOTE 10 - INCOME TAXES

Provision for Income Taxes

Through March 5, 2012 (the date of incorporation of HOJ), no provision for income taxes has been provided in the accompanying combined financial statements because HOJ LLC and HOJ JV elected to file as partnerships, and therefore HOJ was not subject to income taxes, and, that such taxes are the responsibility of the individual member/partners.

Beginning March 5, 2012, HOJ began recording a provision for deferred income tax assets and liabilities in order to reflect the net tax effects of temporary differences between (i) the tax basis of assets and liabilities and (ii) their reported amounts in the financial statements. The provision is based upon enacted tax laws and rates in effect for the years in which the differences are expected to affect taxable income. The Company establishes a valuation allowance when necessary to reduce deferred income tax assets to the amounts expected to be realized.

On July 25, 2012, the Company acquired HOJ and began recording a provision for deferred income tax assets and liabilities. As of December 31, 2012, the Company's net deferred tax assets have been fully reserved, effectively by a valuation allowance, because management does not believe realization of the deferred tax assets is sufficiently assured at the balance sheet date.

No income tax benefit was recognized for the year ended December 31, 2012 as indicated below:

Deferred tax benefit:
Federal	$	686,000
State		59,000
		745,000
Increase in valuation allowance		(745,000	)
Net income tax benefit	$	-

The differences in the total income tax benefit that would result from applying the 35% federal statutory rate to loss before income taxes and the reported income tax for 2012 are as follows:

U.S. Federal tax benefit at statutory rate	$	(751,000	)
State income taxes, net of federal tax benefit		(65,000	)
Permanent differences		3,000
Income tax losses allocated to partners		68,000
Increase in valuation allowance		745,000
Net income tax benefit	$	-

The components of the deferred tax assets at December 31, 2012 are as follows:

Deferred tax assets:
Allowance for doubtful accounts	$	8,000
Accrued settlement costs		248,000
Accrued compensation		48,000
Stock-based compensation		44,000
Net operating loss carryforwards		397,000
Total net deferred tax assets		745,000
Less: valuation allowance		(745,000	)
Net deferred tax asset	$	-

At December 31, 2012 the Company has U.S. net operating loss carry-forwards of approximately $1.0 million which expire in the years 2029 through 2032.

The valuation allowance for deferred tax assets of $745,000 at December 31, 2012 relates principally to the uncertainty of the utilization of certain deferred tax assets, primarily net operating loss carry forwards in various tax jurisdictions. The Company continually assesses both positive and negative evidence to determine whether it is more likely than not that the deferred tax assets can be realized prior to their expiration. Based on the Company's assessment, it has determined the deferred tax assets are not currently realizable.

Net Operating Loss Carry Forward Limitation

The Tax Reform Act of 1986 contains provisions that limit the utilization of net operating loss and tax credit carry forwards if there has been a change in ownership as described in Section 382 of the Internal Revenue Code. As a result of the Acquisition in July 2012, substantial changes in the Company's ownership have occurred that may limit or reduce the amount of net operating loss carry-forward that the Company could utilize in the future to offset taxable income. The Company has not completed a detailed Section 382 study to determine what impact, if any, that ownership changes may have had on the Company's net operating loss carry-forwards.

Accounting for Uncertainty in Income Taxes

During the years ended December 31, 2012 and 2011, the Company has not identified any unrecognized tax benefits or had any additions or reductions in tax positions and therefore a reconciliation of the beginning and ending amount of unrecognized tax benefits is not presented. The Company does not have any unrecognized tax benefits as of December 31, 2012 and accordingly the Company's effective tax rate will not be materially affected by unrecognized tax benefits.

The Company's federal and state income tax returns remain open for examination for 2009 through 2011 tax years.

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STOCKHOLDERS EQUITY (Schedule of Fair Value Assumptions) (Details)	12 Months Ended
	Dec. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility	186.00%
Expected dividend yield
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk free interest rate	0.25%
Expected term	2 years
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk free interest rate	0.33%
Expected term	3 years

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ACCRUED EXPENSES (Tables)

12 Months Ended

Dec. 31, 2012

ACCRUED EXPENSES [Abstract]

Schedule of Accrued Expenses

	December 31,		December 31,
	2012		2011
Accrued expenses	$	37,005	$	46,842
Deferred salaries		45,960		-
Accrued settlement costs - paid for in common stock		652,500		-
Accrued consulting costs - paid for in common stock		225,000		-
	$	960,465	$	46,842

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INVENTORY (Details) (USD $)	3 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
INVENTORY [Abstract]
Raw materials (packing supplies)	$ 26,634	$ 27,515
Finished goods (bottled products)		19,230
Inventory	26,634	46,745
Inventory write-down	$ 75,376

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CONSOLIDATED STATEMENT OF CHANGES IN DEFICIT (USD $)	Total	Common stock [Member]	Preferred stock [Member]	Additional paid-in capital [Member]	Accumulated deficit [Member]
Balance at Dec. 31, 2010	$ (30,820)			$ 31,000	$ (61,820)
Balance, shares at Dec. 31, 2010
Withdrawals	(11,069)			(11,069)
Contributed services	150,000			150,000
Net loss	(256,673)				(256,673)
Balance at Dec. 31, 2011	(148,562)			169,931	(318,493)
Balance, shares at Dec. 31, 2011
Withdrawals	(10,579)			(10,579)
Contributed services	50,000			50,000
Issuance of common shares upon incorporation and legal reorganization of entities under common control	200	61,295		(61,095)
Issuance of common shares upon incorporation and legal reorganization of entities under common control, shares	61,295,271	61,295,271
Shares issued to founders	14	4,291		(4,277)
Shares issued to founders, shares	4,290,669	4,290,669
Proceeds from issuance of common stock	710,000	18,542		691,458
Proceeds from issuance of common stock, shares	18,541,840	18,541,840
Common shares cancelled due to dissenters right	(20,000)	(613)		(19,387)
Common shares cancelled due to dissenters right, shares	(612,953)	(612,953)
Acquisition of AMHC and sale of subsidiary interests	10,044	36,808	321,081	(347,845)
Acquisition of AMHC and sale of subsidiary interests, shares	36,807,801	36,807,801	89,168
Proceeds from issuance of common stock post-merger	17,000	243		16,757
Proceeds from issuance of common stock post-merger, shares	242,858	242,858
Common shares issued to reduce payables	18,727	268		18,459
Common shares issued to reduce payables, shares	267,526	267,526
Conversion of preferred to common stock		13	(6,003)	5,990
Conversion of preferred to common stock, shares	13,336	13,336	(1,667)
Stock-based compensation	114,378			114,378
Net loss	(2,145,115)				(2,145,115)
Balance at Dec. 31, 2012	$ (1,403,893)	$ 120,847	$ 315,078	$ 623,790	$ (2,463,608)
Balance, shares at Dec. 31, 2012		120,846,348	87,501

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PROPERTY AND EQUIPMENT

12 Months Ended

Dec. 31, 2012

PROPERTY AND EQUIPMENT [Abstract]

PROPERTY AND EQUIPMENT

NOTE 4 - PROPERTY AND EQUIPMENT

As of December 31, 2012 and 2011, property and equipment consists of the following:

	December 31, 2012			December 31, 2011
Website development	$	3,500		$	3,500
Furniture and equipment		2,562			-
		6,062			3,500
Less accumulated depreciation		(2,847	)		(1,750	)
	$	3,215		$	1,750

Depreciation and amortization expense on property and equipment for the years ended December 31, 2012 and 2011 was $1,097 and $700, respectively.

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PROPERTY AND EQUIPMENT (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
PROPERTY AND EQUIPMENT [Abstract]
Website development	$ 3,500	$ 3,500
Furniture and fixtures	2,562
Property and equipment, gross	6,062	3,500
Less accumulated depreciation and amortization	(2,847)	(1,750)
Property and equipment, net	3,215	1,750
Depreciation expense	$ 1,097	$ 700

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INCOME TAXES (Schedule of Income Tax Reconciliation) (Details) (USD $)	12 Months Ended
	Dec. 31, 2012
INCOME TAXES [Abstract]
Federal statutory rate	35.00%
U.S. Federal tax benefit at statutory rate	$ (751,000)
State income taxes, net of federal tax benefit	(65,000)
Permanent differences	3,000
Income tax losses allocated to partners	68,000
Increase in valuation allowance	(745,000)
Net income tax benefit

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PROPERTY AND EQUIPMENT (Tables)

12 Months Ended

Dec. 31, 2012

PROPERTY AND EQUIPMENT [Abstract]

Schedule of Property and Equipment

	December 31, 2012			December 31, 2011
Website development	$	3,500		$	3,500
Furniture and equipment		2,562			-
		6,062			3,500
Less accumulated depreciation		(2,847	)		(1,750	)
	$	3,215		$	1,750