10-Q/A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

_________________

FORM 10-Q/A

(Amendment No. 1)

_________________

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

For the quarterly period ended: March 31, 2013

or

o     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from: ______ to ______

_________________

Organic Alliance, INC.

(Exact name of registrant as specified in its charter) 

_________________

Nevada	000-29711	20-0853334
(State or Other Jurisdiction	(Commission	(I.R.S. Employer
of Incorporation or Organization)	File Number)	Identification No.)

401, Monterey Street, Suite 202, Salinas, CA 93901
(Address of Principal Executive Offices) (Zip Code)

(831) 240-0295
(Registrant’s telephone number, including area code)

N/A
(Former name or former address and former fiscal year, if changed since last report)

_________________

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

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  þ

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

APPLICABLE ONLY TO CORPORATE ISSUERS

Class	Outstanding at June 28, 2013
Common stock, $0.0001 par value	18,473,554

EXPLANATORY NOTE

The purpose of this Amendment No. 1 to the Organic Alliance Inc. Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2013, filed with the Securities and Exchange Commission on June 25, 2013 (the “Form 10-Q”), is to furnish Exhibit 101 to the Form 10-Q in accordance with Rule 405 of Regulation S-T. Exhibit 101 to this report provides the financial statements and related notes from the Form 10-Q formatted in XBRL (eXtensible Business Reporting Language).

Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

In addition, the Company corrected the check mark to “yes” whether the registrant 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.

This Amendment No. 1 to the Form 10-Q speaks as of the original filing date of the Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the Form 10-Q.

ITEM 6. EXHIBITS

31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
101*	The following financial information from the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2013, formatted in Extensible Business Reporting Language: (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Operations; (iii) the Condensed Consolidated Statements of Cash Flows; and (iv) the Notes to the Condensed Consolidated Financial Statements.

*furnished herewith

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this Amendment No. 1 to its Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

ORGANIC ALLIANCE, INC.

By: /s/ Parker Booth

Parker Booth

Chief Executive Officer, and Director

Date: June 28, 2013

By: /s/ Barry Brookstein

Barry Brookstein

Chief Financial Officer

Date: June 28, 2013

EXHIBIT INDEX

EXHIBIT NO.	DESCRIPTION
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
101*	The following financial information from the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2013, formatted in Extensible Business Reporting Language: (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Operations; (iii) the Condensed Consolidated Statements of Cash Flows; and (iv) the Notes to the Condensed Consolidated Financial Statements.

* Furnished, not filed, herewith

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Accrued Expenses and other Liabilities

3 Months Ended

Mar. 31, 2013

Payables and Accruals [Abstract]

Accrued Expenses and other Liabilities

12. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following:

	March 31, 2013		December 31, 2012
Due to consultant (Note 10)	$	100,000	$	100,000
Payroll and payroll taxes payable (A)		1,511,923		1,399,049
Other accrued liabilities		58,103		235,814
	$	1,670,026	$	1,734,863

  (A)   As of March 31, 2013 and December 31, 2012, the Company has unpaid payroll taxes including penalties and interest of $297,512 and $286,027, respectively, which have yet to be remitted to the taxing authorities and returns have yet to be filed.

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Condensed Consolidated Statements of Operations (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Income Statement [Abstract]
Revenue	$ 690,802	$ 336,007
Cost of sales	613,895	302,863
Gross margin	76,907	33,144
General and administrative expenses	890,111	456,842
Operating loss	(813,204)	(423,698)
Other expense (income) :
Interest expense	513,177	228,870
Change in fair value of derivative liability	(212,700)	278,265
Total other expense (income)	300,477	507,135
Net loss	$ (1,113,681)	$ (930,833)
Basic and diluted loss per share	$ (0.06)	$ (0.05)
Weighted average number of common shares outstanding - basic and diluted	19,296,410	17,358,027

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Preferred Stock

3 Months Ended

Mar. 31, 2013

Equity [Abstract]

Preferred Stock

5 . PREFERRED STOCK

The Company’s articles of incorporation authorize its Board of Directors to issue up to 10,000,000 shares of preferred stock in one or more series without stockholder approval. Each such series of preferred stock may have such number of shares, designations, preferences, voting powers, qualifications, and special or relative rights or privileges as are determined by The Company’s Board of Directors. At March 31, 2013 and December 31 2012, no shares of preferred stock were issued or outstanding.

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Summary of Significant Accounting Policies (Details Narrative) (USD $) (USD $)	Mar. 31, 2013	Dec. 31, 2012	Mar. 30, 2013 Minimum	Mar. 30, 2013 Maximum
Days of payment			10	30
Allowance for Doubtful Accounts	$ 5,000	$ 5,000
Factoring Accounts Receivable, fees			3.00%	5.00%
Inventory from growers	(1,092)	(34,547)
Packing materials	(75,229)	(105,341)
Inventory	$ 76,321	$ 139,888

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Subsequent Events

3 Months Ended

Mar. 31, 2013

Subsequent Events [Abstract]

Subsequent Events

13. SUBSEQUENT EVENTS

During May 2013, the Company issued a $30,000 promissory note with an original issue discount of 20%.  The promissory note is due on the earlier of (i) the closing by the Company of a financing or series of financings for aggregate cash proceeds of at least $1,850,000, or, (ii) July 5, 2013. As a financing incentive, the lender received a three-year warrant, vesting immediately, to purchase 25,000 shares of common stock at an exercise price of $0.10 per share. 

During May 2013, the Company issued a $500,000 convertible promissory note with an original issue discount of $50,000. The convertible promissory note is due on August 13, 2013 and may be converted at any time into fully paid and non-assessable shares of the Company’s common stock. The conversion price shall be 60% of the average closing price of the stock for the twenty-five (25) business days preceding the conversion notice. The conversion price of the note was not fixed and determinable on the date of issuance and as such in accordance with ASC Topic 815 “Derivatives and Hedging” (“ASC 815”), the embedded conversion options of the note on the date of issuance was valued using the binomial lattice options pricing model and recorded as a derivative liability.  As of June 28, 2013, the Company has been advanced $25,000 on this note.

During June 2013, a consultant was granted a three-year warrant to purchase 250,000 shares of our Company’s common stock at $0.15 per share for accounting services to our Company. The warrant vests immediately.

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Accrued Expenses and other Liabilities - Accrued Liabilities (Details) (USD $)	Mar. 31, 2013	Dec. 31, 2012
Accrued expenses and other current liabilities	$ 1,670,026	$ 1,734,863
Payroll tax liabilities	297,512	286,027
Consultants
Accrued expenses and other current liabilities	100,000	100,000
Payroll and payroll taxes payable
Accrued expenses and other current liabilities	1,511,923	1,399,049
Other Accrued Liabilites
Accrued expenses and other current liabilities	$ 58,103	$ 235,814

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FAIR VALUE MEASUREMENTS - Liability measured at fair value on a recurring basis (Details) (USD $)	Mar. 31, 2013	Dec. 31, 2012
Warrant derivative liability	$ 219,330	$ 432,030
Level 1
Warrant derivative liability
Level 2
Warrant derivative liability
Level 3
Warrant derivative liability	$ 219,330	$ 432,030

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Summary of Significant Accounting Policies Concentration (Details Narrative)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Customers
Number of Customers	1	2
Major Customers	13.00%	65.00%
Customers | Customer A
Major Customers	13.00%
Customers | Customer F
Major Customers		42.00%
Customers | Customer H
Major Customers		23.00%
Accounts Receivable
Number of Customers	3
Accounts Receivable | Customer B
Major Customers	19.00%
Accounts Receivable | Customer C
Major Customers	12.00%
Accounts Receivable | Customer D
Major Customers	11.00%
Accounts Receivable | Customer F
Major Customers		17.00%
Accounts Receivable | Customer H
Major Customers		14.00%
Accounts Receivable | Customer G
Major Customers		17.00%
Accounts Receivable | Customer E
Major Customers		27.00%
Accounts Receivable | Customer I
Major Customers		11.00%
Suppliers
Number of Customers	5	4
Major Customers	86.00%	63.00%

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Summary of Significant Accounting Policies Share Based Compensation (Details Narrative)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Minimum
Risk -free interest rates	0.34%	0.43%
Dividend yield
Expected Volatility	36.40%	44.70%
Expected life in years	2 years 5 months 0 days	3 years 0 months 0 days
Maximum
Risk -free interest rates	2.54%	0.86%
Dividend yield
Expected Volatility	50.20%	55.20%
Expected life in years	7 years 0 months 0 days	5 years 0 months 0 days

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Commitments - Lease payments (Details) (USD $)	Dec. 31, 2012
Commitments - Lease Payments Details
2013	$ 39,147
2014	53,371
2015	13,441
Future minimum lease payments	$ 105,959

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Notes payable, Loans and Derivative Liabilities - Notes payable (Details) (Parenthetical) (USD $)	Mar. 31, 2013	Dec. 31, 2012
Notes Payable
Debt Discount	$ 66,913	$ 133,827
Notes Payable Related Party
Debt Discount	23,836	47,673
Convertible Notes Payable
Debt Discount		$ 217,535

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Stock options and Warrants (Details Narrative) (USD $)	3 Months Ended	12 Months Ended	0 Months Ended
	Mar. 31, 2013	Dec. 31, 2012	Oct. 05, 2012 Vice President	Jul. 03, 2011 Vice President	Jan. 06, 2012 Director of Sales	Apr. 24, 2012 Director	May 18, 2012 Director of National Sales	Aug. 31, 2012 Manager, National Retail Sales
Options			3,837,719	2,950,000	1,500,000	325,000	500,000	396,427
Per Share			$ 0.62	$ 0.20	$ 0.20	$ 0.25	$ 0.25	$ 0.35
Life			7 years	7 years	5 years	3 years	3 years	3 years
Options Vested			2,250,000	1,180,000	250,000	100,000	100,000	135,714
Options vest each three months			198,250
Options vest each six months				295,000
Options vest each year					416,667	75,000	134,000	86,904
Fair Value options			$ 1,221,493	$ 317,400	$ 44,000	$ 18,400	$ 33,900	$ 102,524
Stock Based Compensation Expense	$ 191,430	$ 30,134

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Subsequent Events (Details Narrative) (USD $)	0 Months Ended
	May 31, 2013 Promissory Note	May 31, 2013 Convertible Promissory Note	Jun. 15, 2013 Consultant
Warrants Issued			250,000
Exercise Price	0.10		0.15
Maturity date		Aug. 13, 2013
Note Payable	$ 30,000	$ 500,000
Original issue discount	20%	50,000
Debt Discount		50,000
Aggregate cash proceeds	1,850,000
Cash Advanced		$ 25,000

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Preferred Stock (Details Narrative) (USD $)	Mar. 31, 2013	Dec. 31, 2012
Notes to Financial Statements
Preferred stock, par value
Preferred stock, shares authorized	10,000,000	10,000,000

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Stock options and Warrants - Warrants (Details)	3 Months Ended
	Mar. 31, 2013
Total Warrants
Number of Warrants Outstanding and Exercisable	14,494,341
Weighted Average Remaining Life in years	2 years 7 months 5 days
452,354
Exercise Price	0.01
Number of Warrants Outstanding and Exercisable	452,354
Weighted Average Remaining Life in years	3 years 0 months 8 days
692,802
Exercise Price	0.10
Number of Warrants Outstanding and Exercisable	692,802
Weighted Average Remaining Life in years	3 years 1 month 3 days
705,882
Exercise Price	0.25
Number of Warrants Outstanding and Exercisable	705,882
Weighted Average Remaining Life in years	3 years 3 months 3 days
575,000
Exercise Price	0.25
Number of Warrants Outstanding and Exercisable	575,000
Weighted Average Remaining Life in years	3 years 4 months 6 days
452,355
Exercise Price	0.01
Number of Warrants Outstanding and Exercisable	452,355
Weighted Average Remaining Life in years	3 years 5 months 0 days
1.098,220
Exercise Price	0.25
Number of Warrants Outstanding and Exercisable	1,098,220
Weighted Average Remaining Life in years	3 years 5 months 4 days
195,291
Exercise Price	0.001
Number of Warrants Outstanding and Exercisable	195,291
Weighted Average Remaining Life in years	1 year 7 months 5 days
1,000,000
Exercise Price	0.10
Number of Warrants Outstanding and Exercisable	1,000,000
Weighted Average Remaining Life in years	1 year 8 months 8 days
125,000
Exercise Price	0.10
Number of Warrants Outstanding and Exercisable	125,000
Weighted Average Remaining Life in years	2 years 1 month 7 days
300,000
Exercise Price	0.25
Number of Warrants Outstanding and Exercisable	300,000
Weighted Average Remaining Life in years	2 years 1 month 7 days
1,197,437
Exercise Price	0.10
Number of Warrants Outstanding and Exercisable	1,197,437
Weighted Average Remaining Life in years	2 years 2 months 1 day
50,000
Exercise Price	0.50
Number of Warrants Outstanding and Exercisable	50,000
Weighted Average Remaining Life in years	2 years 5 months 8 days
25,000
Exercise Price	0.50
Number of Warrants Outstanding and Exercisable	25,000
Weighted Average Remaining Life in years	2 years 5 months 8 days
50,000
Exercise Price	0.50
Number of Warrants Outstanding and Exercisable	50,000
Weighted Average Remaining Life in years	2 years 6 months 7 days
25,000 (2)
Exercise Price	0.50
Number of Warrants Outstanding and Exercisable	25,000
Weighted Average Remaining Life in years	2 years 6 months 7 days
250,000
Exercise Price	0.25
Number of Warrants Outstanding and Exercisable	250,000
Weighted Average Remaining Life in years	2 years 5 months 0 days
1,870,000
Exercise Price	0.50
Number of Warrants Outstanding and Exercisable	1,870,000
Weighted Average Remaining Life in years	2 years 6 months 7 days
55,000
Exercise Price	0.50
Number of Warrants Outstanding and Exercisable	55,000
Weighted Average Remaining Life in years	2 years 7 months 5 days
1,550,000
Exercise Price	0.50
Number of Warrants Outstanding and Exercisable	1.550000
Weighted Average Remaining Life in years	2 years 8 months 3 days
1,125,000
Exercise Price	0.50
Number of Warrants Outstanding and Exercisable	1,125,000
Weighted Average Remaining Life in years	2 years 9 months 2 days
1,000,000
Exercise Price	0.50
Number of Warrants Outstanding and Exercisable	1,000,000
Weighted Average Remaining Life in years	2 years 9 months 2 days
1,200,000
Exercise Price	0.25
Number of Warrants Outstanding and Exercisable	1,200,000
Weighted Average Remaining Life in years	3 years
500,000
Exercise Price	0.50
Number of Warrants Outstanding and Exercisable	500,000
Weighted Average Remaining Life in years	3 years

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Summary of Significant Accounting Policies Fair Value Assumptions (Details Narrative)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Black-Scholes pricing model | Minimum
Risk-free rate interest rate	0.17%	0.31%
Dividend yield
Expected volatility	37.10%	46.50%
Expected life in months and years	0 years 3 months 0 days	0 years 20 months 0 days
Black-Scholes pricing model | Maximum
Risk-free rate interest rate	0.71%	0.38%
Dividend yield
Expected volatility	54.70%	46.80%
Expected life in months and years	0 years 48 months 0 days	0 years 20 months 0 days
Binomial lattice | Minimum
Risk-free rate interest rate	0.14%	0.15%
Dividend yield
Expected volatility	31.60%	43.40%
Expected life in months and years	0 years 3 months 0 days	0 years 6 months 0 days
Binomial lattice | Maximum
Risk-free rate interest rate	0.34%	0.62%
Dividend yield
Expected volatility	56.00%	46.10%
Expected life in months and years	4 years 3 months 0 days	3 years 0 months 0 days

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Nature of Business

3 Months Ended

Mar. 31, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Business

1.  NATURE OF BUSINESS

Organic Alliance, Inc. is a global grower and marketer of organic, Fair Trade and conventional fresh fruits and vegetables. By establishing collaborative relationships with key growers, the Company has built a vertically integrated supply chain that enables it to support its customers with an increasing variety of certified sustainable products, sensible pricing, steady supply and inspiring multi-media stories from our many producing communities.

History - NB Design & Licensing, Inc. (“NB Design”), a Nevada corporation, was organized in September 2001. Its former parent, New Bridge Products, Inc., incorporated in August 1995 as a manufacturer of minivans, filed a petition in bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. Its Plan of Reorganization was approved by the U.S. Bankruptcy Court for the District of Arizona in September 2002, and NB Design was discharged from bankruptcy in October 2002. NB Design was inactive from October 2002 to April 29, 2008.

Organic Alliance, Inc., a Texas corporation (“Organic Texas”) was organized on February 19, 2008 to sell organically grown fruits and vegetables. During the second quarter of 2009, it ceased being a development stage company when it commenced its operations.

On April 29, 2008, NB Design acquired all 10,916,917 issued and outstanding shares of common stock of Organic Texas for 464,999 shares of the NB Design’s common stock. Organic Texas thereupon became a wholly-owned subsidiary of NB Design. The business of Organic Texas is the only business of NB Design. The Company operates in California.

The acquisition of Organic Texas, a private operating company, by NB Design, a non-operating public shell corporation with nominal net assets, was accounted for as a reverse capitalization in accordance with the Securities and Exchange Commission’s (“SEC”) Division of Corporate Financial Reporting manual Topic 12 “Reverse Acquisition and Reverse Capitalization”. As such, the acquisition was treated as a capital transaction rather than a business combination, and no goodwill was recorded. NB Design was the legal acquirer because it issued its equity interests, and Organic Texas was the legal acquiree because its equity interests were acquired. However, NB Design was the acquiree and Organic Texas was the acquirer for accounting purposes. Organic Texas is treated as the continuing reporting entity that acquired the registrant, NB Design. The pre-acquisition financial statements of Organic Texas are treated as the historical financial statements of the consolidated companies.

On June 2, 2008, NB Design changed its name to Organic Alliance, Inc. On August 29, 2008, Organic Texas changed its name to Organic Texas, Inc. All references throughout this report to “Organic Alliance, Inc.” or the “Company” refers to Organic Alliance, Inc. and its wholly-owned subsidiary, Organic Texas, except where the context makes clear that the reference is only to Organic Alliance, Inc.

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Going Concern

3 Months Ended

Mar. 31, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Going Concern

3 . GOING CONCERN

The condensed consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America applicable for a going concern, which assume that the Company will realize its assets and discharge its liabilities in the ordinary course of business. As of March 31, 2013, the Company had limited cash, a working capital deficit of approximately $7,536,000, accumulated losses of approximately $21,690,000 since its inception, and has $297,512 of payroll tax liabilities inclusive of penalties and interest, from wages paid which have yet to be remitted to the taxing authorities and are delinquent. The Company currently is delinquent with its payroll tax filings since December 31, 2008; however, since April 1, 2012 the Company has been remitting payroll tax on a current basis. The Company’s accounts receivable are pledged per a factoring agreement. At March 31, 2013, the Company was not compliant with the repayments terms of various notes payable for an aggregate of approximately $1,335,000 including accrued interest. Its ability to continue as a going concern is dependent upon the ability of the Company to obtain the necessary financing to meet its obligations and pay its liabilities arising from normal business operations when they come due, and increasing its revenue in order to achieve profitable operations. The outcome of these matters cannot be predicted with any certainty at this time and raise substantial doubt that the Company will be able to continue as a going concern. These consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern.

The Company intends to overcome the circumstances that impact its ability to remain a going concern through a combination of growing high margin revenues, with interim cash flow deficiencies being addressed through additional equity and debt financing. The Company anticipates raising additional funds through public or private financing, strategic relationships or other arrangements in the near future to support its business operations; however the Company does not have commitments from third parties for a sufficient amount of additional capital, the Company cannot be certain that any such financing will be available on acceptable terms, or at all, and its failure to raise capital when needed could limit its ability to continue its operations. The Company’s ability to obtain additional funding will determine its ability to continue as a going concern. Furthermore, additional equity financing may be dilutive to the holders of the Company’s common stock, and debt financing, if available, may involve restrictive covenants or may require that the Company relinquish valuable rights.

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Equity Transactions

3 Months Ended

Mar. 31, 2013

Equity [Abstract]

Equity Transactions

6. EQUITY TRANSACTIONS

During March 2013, the Company issued 500,000 shares of the Company’s common stock to a consultant for investor and public relations services. The fair value of the award was fully vested on the date of issuance and accordingly the Company recorded a charge for stock based compensation of $55,000 or $0.11 per share in the accompanying condensed consolidated statements of operations.

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Due to Factor

3 Months Ended

Mar. 31, 2013

Receivables [Abstract]

Due to Factor

4 . DUE TO FACTOR

On November 1, 2010, the Company signed a one year agreement with a financial services company for the purchase and sale of accounts receivables which expired on October 31, 2011. The agreement is continuing on a month to month basis. The financial services company commenced funding during February 2011. The financial services company advances up to 80% of qualified customer invoices, less applicable discount fees, and holds the remaining 20% as a reserve until the customer pays the financial services company. The released reserves are used to fund other vendor purchases or returned to the Company. The Company is charged 3% for the first 30 days outstanding plus 1/10 of 1% daily for funds outstanding over 30 days. Uncollectable customer invoices are charged back to us. At March 31, 2013 the advances from the factor, inclusive of fees, amounted to $300,065 which was offset against due from factor of $45,671. Advances from the factor are collateralized by substantially all assets of the Company.

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Stock options and Warrants - Options Summary (Details) (Options, USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2013	Dec. 31, 2012
Options
Stock Options
Beginning Balance	8,042,896	2,983,750
Granted		6,559,146
Exercised
Forfeited/cancelled	(325,000)	(1,500,000)
Common Stock Options, Outstanding	7,717,896	8,042,896
Ending Balance	4,782,714
Weighted Average Exercise Price
Beginning Balance	$ 0.45	$ 0.31
Granted		$ 0.46
Exercised
Forfeited/cancelled	$ 0.25	$ 0.20
Ending Balance	$ 0.46	$ 0.45
Exercisable at March 31, 2013	$ 0.49
Weighted Remaining Contractual Life (Years)
Beginning Balance	3 years 4 months 7 days	4 years
Granted		3 years 5 months 5 days
Ending Balance	3 years 5 months 0 days	3 years 4 months 7 days
Exercisable at March 31, 2013	3 years 5 months 0 days
Intrinsic Value
Outstanding	$ 88,500
Balance		88,500
Stock Based Compensation Balance	$ 1,145,000

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Summary of Significant Accounting Policies Net Loss Per Share (Details Narrative) (Earnings Per Share, USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Earnings Per Share
Options	7,717,896	4,483,750
Warrants	13,394,341	4,710,350
Convertible notes	3,793,160	5,304,352
Common Stock Equivalents	24,905,397	14,498,452
Warrants Issued	1,100,000	2,795,538
Exercise Price	$ 0.01	$ 0.01
Shares earned, not issued	56,189	3,529,897

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Equity Transactions (Details Narrative) (USD $)	3 Months Ended
	Mar. 31, 2013
Common stock issued for services (in shares)	500,000
Common stock issued for services	$ 55,000
Share price	$ 0.11

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Notes payable, Loans and Derivative Liabilities:Notes Payable-Convertible Notes Payable (Details Narrative) (USD $) (Convertible Notes Payable, USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2013	Dec. 31, 2012
Note 1
Date Issued	Jul. 30, 2010
Convertible Promissory Note	$ 8,000
Interest rate	6.00%
Debt Discount	8,000
Conversion price	$ 0.05
Note Payable	9,282	9,164
Note 2
Date Issued	Apr. 28, 2011
Convertible Promissory Note	70,588
Discount rate	15.00%
Equity financing to be raised	600,000
Debt Discount	60,000
Conversion price	$ 0.05
Vesting Terms	5 years
Warrant Issue Date	Apr. 28, 2011
Warrant to purchase common stock	705,882
Exercise price	0.25
Note Payable	70,588	70,588
Note 2 Amended Note
Debt Discount Interest Expense		4,923
Vesting Terms		3 years
Warrant Issue Date		Jun. 30, 2012
Warrant to purchase common stock		61,856
Note 3
Date Issued	Jul. 15, 2011
Convertible Promissory Note	109,822
Discount rate	15.00%
Equity financing to be raised	600,000
Debt Discount	95,497
Payment on note payable	1,783
Conversion price	$ 0.05
Vesting Terms	5 years
Warrant to purchase common stock	1,098,220
Exercise price	0.25
Note Payable	109,789	109,789
Note 4
Date Issued	Mar. 31, 2012
Convertible Promissory Note	1,000,000
Interest rate	18.00%
Maturity date beginning	Sep. 02, 2012
Debt Discount	789,073
Debt Discount Interest Expense	28,459
Past due payment on note	78,329
Vesting Terms	5 years
Warrant to purchase common stock	2,500,000
Exercise price	0.10
Note Payable	887,726	850,000
Note 4 Sold in Offering
Convertible Promissory Note	850,000
Vesting Terms	3 years
Warrant to purchase common stock	2,337,500
Exercise price	0.10
Note 4 Modifed Note
Convertible Promissory Note	775,000
Expiration Date	Jun. 30, 2013
Debt Discount	140,759
Debt Discount Interest Expense	52,785
Warrant to purchase common stock	1,550,000
Exercise price	0.50
Note 5
Date Issued	Aug. 31, 2012
Convertible Promissory Note	3,000,000
Interest rate	18.00%
Debt Discount	499,186
Debt Discount Interest Expense	217,535
Warrant Issue Date	May 13, 2013
Warrant to purchase common stock	6,000,000
Exercise price	0.50
Note Payable	913,836	875,000
Note 5 Sold in Offering
Convertible Promissory Note	$ 875,000
Vesting Terms	3 years
Warrant to purchase common stock	1,925,000
Exercise price	0.50

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Commitments - Leases (Details) (USD $)	1 Months Ended
	Apr. 30, 2014	Apr. 30, 2013	Mar. 31, 2013
Commitments - Leases Details
Monthly rent	$ 4,500	$ 4,350	$ 4,200

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Condensed Consolidated Balance Sheet (Parenthetical) (USD $)	Mar. 31, 2013	Dec. 31, 2012
Statement of Financial Position [Abstract]
Preferred stock, par value
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	18,473,554	17,795,376
Common stock, shares outstanding	18,473,554	17,795,376

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Stock options and Warrants

3 Months Ended

Mar. 31, 2013

Temporary Equity Disclosure [Abstract]

Stock options and Warrants

9. STOCK OPTIONS AND WARRANTS

Stock Options – Employment Letter Agreement:

On July 3, 2011, in conjunction with Chris White’s employment as the Company’s Vice President of Global Supply Chain, the Company granted Mr. White a seven-year option to purchase 2,950,000 shares of the Company’s common stock at $0.20 per share. The option vested as to 1,180,000 shares on the date of grant, and vests as to 295,000 on each of the first six semi-annual anniversaries of the grant date. The fair value of the option was approximately $317,400.

On January 6, 2012, in conjunction with Mark Zeller’s employment as the Company’s North American Director of Sales, the Company granted Mr. Zeller a five-year option to purchase 1,500,000 shares of the Company’s common stock at $0.20 per share. The option vested as to 250,000 on the date of grant, and vests as to 416,667 on each of the first three anniversaries of the grant date. The fair value of the option was approximately $44,000. On May 1, 2012, Mr. Zeller resigned from the Company and the option terminated in accordance with its terms.

On April 24, 2012, in conjunction with Roger Zardo’s employment as the Company’s Director of National Procurement, the Company granted Mr. Zardo a three-year option to purchase 325,000 shares of the Company’s common stock at $0.25 per share. The option vested as to 100,000 on the date of grant, vests as to 75,000 shares on each of the first two anniversaries of the grant date, and vests as to 75,000 shares on November 28, 2014. The fair value of the option was approximately $18,400. During March 2013, Mr. Zardo resigned from the Company and the option terminated in accordance with its terms. .

On May 18, 2012, in conjunction with Jack Connelly’s employment as the Company’s Director of National Sales, the Company granted Mr. Connelly a three-year option to purchase 500,000 shares of the Company’s common stock at $0.25 per share. The option vested as to 100,000 on the date of grant, vests as to 134,000 shares on each of the first two anniversaries of the grant date, and vests as to the final 132,000 shares on November 29, 2014. The fair value of the option was approximately $33,900.

On August 31, 2012, in conjunction with George Borzilleri’s employment as the Company’s Manager, National Retail Sales, the Company granted Mr. Borzilleri a three-year option to purchase 396,427 shares of the Company’s common stock at $0.35 per share. The option vested as to 135,714 shares on the date of grant, vests as to 86,904 shares on each of the first two anniversaries of the grant date, and vests as to the final 86,905 shares on March 6, 2015. The fair value of the option was approximately $102,524.

On October 5, 2012, Chris White, the Company’s Vice President of Global Supply was granted a seven year non-qualified stock option to purchase 3,837,719 shares of the Company’s common stock at $0.62 per share. The fair value of the option was $1,221,493. The option vests as follows:

· 750,000 shares vest immediately.

· 750,000 shares vest upon receipt of certificates issued by IMO Control (Institute for Marker Ecology) certifying compliance with IMO Controls ‘For Life’ Fair Trade standards for three key Company suppliers.

· 750,000 shares vest upon the launch by Mr. White of an internal “alpha” demonstration website that contains certain functionality.

· 198,250 shares vest on each of the next 8 quarter dates starting January 6, 2013 through October 6^, 2014. The final quarterly vesting will be 199,969 shares.

The Company recognized stock based compensation expense included in general and administrative expenses on the condensed consolidated statement of operations of $191,430 and $30,134 for the three months ended March 31, 2013 and 2012, respectively for these awards.

Options Summary:

A summary of option activity during the three months ended March 31, 2013 and the year ended December 31, 2012 is presented below:

						Weighted
				Weighted		Average
				Average		Remaining
				Exercise		Contractual		Intrinsic
	Shares			Price		Term		Value
Balance at December 31, 2011		2,983,750		$	0.31		4.00	$	—
Granted		6,559,146			0.46		3.55		—
Exercised		—			—		—		—
Forfeited		(1,500,000	)		0.20		—		—
Balance at December 31, 2012		8,042,896			0.45		3.47		88,500
Granted		—			—		—		—
Exercised		—			—		—		—
Forfeited		(325,000	)		0.25		—		—
Balance at March 31, 2013		7,717,896		$	0.46		3.50	$	—
Exercisable at March 31, 2013		4,782,714		$	0.49		3.50	$	—

The Company expects to amortize the remaining stock based compensation expense of approximately $1,145,000 over the vesting term of the options.

 Common Stock Warrants Summary:

Warrant transactions during the three months ended March 31, 2013 and the year ended December 31, 2012 were as follows:

				Weighted		Average
				Average		Remaining
	Number of			Exercise		Life		Intrinsic
	Warrants			Price		In Years		Value
Balance, December 31, 2011		5,862,140		$	0.12
Granted		10,775,000			0.34
Exercised		(2,039,735	)		0.10
Forfeited		(103,064	)		0.10
Balance, December 31, 2012		14,494,341		$	0.28
Granted		—			—
Exercised		—			—
Forfeited		—			—
Balance, March 31, 2013		14,494,341		$	0.28		2.50	$	231,481
Exercisable, March 31, 2013		14,494,341		$	0.28		2.50	$	231,481

The intrinsic value is calculated on the difference between the fair market value of the Company’s restricted stock, which was $0.12 per share as of March 31, 2013, and the exercise price of the warrants.

The following table presents information related to warrants at March 31, 2013:

Warrants Outstanding				Warrants Exercisable
				Weighted
				Average		Exercisable
Exercise		Number of		Remaining Life		Number of
Price		Warrants		In Years		Warrants
$	0.01		452,354		3.08		452,354
	0.10		692,802		3.13		692,802
	0.25		705,882		3.33		705,882
	0.25		575,000		3.46		575,000
	0.01		452,355		3.50		452,355
	0.25		1,098,220		3.54		1,098,220
	0.001		195,291		1.75		195,291
	0.10		1,000,000		1.88		1,000,000
	0.10		125,000		2.17		125,000
	0.25		300,000		2.17		300,000
	0.10		1,197,437		2.21		1,197,437
	0.50		50,000		2.58		50,000
	0.50		25,000		2.58		25,000
	0.50		50,000		2.67		50,000
	0.50		25,000		2.67		25,000
	0.25		250,000		2.50		250,000
	0.50		1,870,000		2.67		1,870,000
	0.50		55,000		2.75		55,000
	0.50		1,550,000		2.83		1,550,000
	0.50		1,125,000		2.92		1,125,000
	0.50		1,000,000		2.92		1,000,000
	0.25		1,200,000		3.00		1,200,000
	0.50		500,000		3.00		500,000
			14,494,341		2.75		14,494,341

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Consolidated Statements of Cash Flows (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Cash flows from operating activities:
Net loss	$ (1,113,681)	$ (930,833)
Adjustments to reconcile net loss to net cash used in operating activities:
Common stock issued for services	55,000
Share-based compensation	191,430	89,587
Non-cash interest	179,333	22,892
Change in fair value of derivative liability	(212,700)	278,265
Amortization on discount of note payable	308,286	110,012
Changes in operating assets and liabilities:
Accounts receivable	22,265	(66,436)
Inventory	63,567	(19,073)
Prepaid expenses and other current assets	(30,292)	(8,967)
Accounts payable	368,096	16,393
Accrued expenses and other current liabilities	(52,624)	135,285
Net cash used in operating activities	(221,320)	(372,875)
Cash flows from financing activities
Proceeds from notes and loans payable		500,000
Cash Overdraft	21,358
Due to factor - net of repayment	40,616	(31,158)
Net cash provided by financing activities	61,974	468,842
Net (decrease) increase in cash	(159,346)	95,967
Cash - beginning of the period	159,346	5,852
Cash - end of the period		101,819
Supplemental disclosures:
Interest paid	25,556	95,967
Supplemental disclosure for non-cash financing activities:
Discount on notes payable		362,977
Issuance of common stock to settle liability	$ 33,572

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Condensed Consolidated Balance Sheet (USD $)	Mar. 31, 2013	Dec. 31, 2012
Assets
Cash		$ 159,346
Accounts receivable, net	189,023	211,288
Inventory	76,321	139,888
Prepaid expenses and other current assets	128,366	98,074
Total current assets	393,710	608,596
Total Assets	393,710	608,596
Current liabilities:
Accounts payable	1,361,336	993,240
Due to factor	254,394	213,778
Accrued expenses and other current liabilities	1,670,026	1,734,863
Derivative liabilities	219,330	432,030
Notes payable to related parties and others, net of discounts	4,424,573	3,936,955
Total current liabilities	7,929,659	7,310,866
Stockholders' Deficiency:
Preferred stock, no stated value; 10,000,000 shares authorized; -0- shares issued and outstanding as of December 31, 2012 and December 31, 2011
Common stock, $.0001 par value, 100,000,000 shares authorized, 18,473,554 and 17,795,376 shares issued and outstanding as of December 31, 2012 and December 31, 2011, respectively	1,848	1,780
Additional paid-in capital	14,152,531	13,872,597
Accumulated deficit	(21,690,328)	(20,576,647)
Total stockholders' deficiency	(7,535,949)	(6,702,270)
Total Liabilities and Stockholders' Deficiency	$ 393,710	$ 608,596

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Going Concern (Details Narrative) (USD $) (USD $)	Mar. 31, 2013	Dec. 31, 2012
Going Concern Details Narrative Usd
Working Capital Deficit	$ 7,536,000
Accumulated Losses	21,690,000
Payroll tax liability	297,512	286,027
Aggregate notes payable	$ 1,335,000

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Nature of Business (Details Narrative)	0 Months Ended
	Apr. 29, 2008
Notes to Financial Statements
Common Stock, Shares for Mergers	10,916,917
Common Stock, shares acquired	464,999

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Related Party Transactions (Details Narrative) (USD $)	0 Months Ended			1 Months Ended	3 Months Ended
	Jul. 01, 2008	Mar. 31, 2013	Dec. 31, 2012	Feb. 29, 2012 Employee	Mar. 31, 2013 Employee
Monthly Consulting Fees	$ 6,250
Consulting Fees		100,000	100,000
Warrants Issued				300,000
Per Share				$ 0.25
Life				3 years
Stock Based Compensation Expense					$ 6,149

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FAIR VALUE MEASUREMENTS - Liability measured at fair value on a recurring basis Additional (Details) (USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2013	Dec. 31, 2012
Fair Value Measurements - Liability Measured At Fair Value On Recurring Basis Additional Details
Fair value, beginning of period	$ 432,030
Derivative liabilities recorded during the period		1,323,548
Reclassification to equity upon conversion of note		(1,787,542)
Reclassification to equity upon amendment of notes and warrants		(1,152,144)
Net unrealized (gain) loss on derivative financial instruments	(212,700)	1,892,355
Fair value, end of period	$ 219,330	$ 432,030

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Notes payable, Loans and Derivative Liabilities:Notes Payable(Details Narrative) (Notes Payable, USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2013	Dec. 31, 2012
Note 1
Date Issued	2010-05
Note Payable Issued	$ 20,000
Interest Rate	6.00%
Warrants Issued	20,000
Conversion Price	$ 1.00
Expiration date	2011-11
Debt Discount	9,200
Note Payable	23,342	23,046
Note 2
Date Issued	Feb. 03, 2011
Note Payable Issued	500,000
Interest Rate	15.00%
Warrants Issued	452,354	438,144
Conversion Price	$ 0.01	$ 0.18
Expiration date		2013-06
Debt Discount	137,703
Debt Discount Interest Expense		63,114
Fair value warrants		39,798
Vesting Terms	3 years and 5 years
Note Payable	724,425	698,534
Default	21% interest rate
Note 3
Date Issued	Aug. 01, 2012
Note Payable Issued	60,000
Discount rate	20.00%
Warrants Issued	50,000
Conversion Price	$ 0.50
Debt Discount	11,088
Debt Discount Interest Expense	11,088
Vesting Terms	3 years
Aggregate cash proceeds	1,850,000
Note Payable	60,000
Note 4
Date Issued	Aug. 07, 2012
Note Payable Issued	30,000
Discount rate	20.00%
Warrants Issued	25,000
Conversion Price	$ 0.50
Debt Discount	3,406
Debt Discount Interest Expense	3,406
Vesting Terms	3 years
Aggregate cash proceeds	1,850,000
Note Payable	30,000	30,000
Note 5
Date Issued	Aug. 22, 2012
Note Payable Issued	60,000
Discount rate	20.00%
Warrants Issued	50,000
Conversion Price	$ 0.50
Debt Discount	9,495
Debt Discount Interest Expense	9,495
Vesting Terms	3 years
Aggregate cash proceeds	1,850,000
Note Payable	60,000	60,000
Note 6
Date Issued	Dec. 31, 2012
Note Payable Issued	2,500,000
Interest Rate	18.00%
Warrants Issued	5,000,000
Conversion Price	$ 0.50
Expiration date	2013-06
Debt Discount		32,202
Debt Discount Interest Expense	14,126
Aggregate cash proceeds		1,000,000
Warrants sold		2,000,000
Additional warrants issued		200,000
Note Payable	$ 1,044,384	$ 1,000,000

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Notes payable, Loans and Derivative Liabilities:Notes Payable-Related Party(Details Narrative) (USD $) (Notes Payable Related Party, USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2013	Dec. 31, 2012
Note 1
Date	2008-09
Note Payable Issued	$ 15,000
Interest Rate	10.00%
Expiration date	Sep. 13, 2009
Note Payable	21,816	21,446
Note 2
Date	2009-11
Note Payable Issued	10,000
Date	2010-02
Additional Note payable issued	15,000
Interest Rate	5.00%
Warrants Authorized	2,770
Expiration date	Jun. 30, 2010
Expiration date	Sep. 30, 2010
Debt Discount	2,935
Note Payable	29,034	28,726
Note 3
Date	2010-03
Note Payable Issued	16,000
Date	2011-10
Additional Note payable issued	49,958
Interest Rate	5.00%
Warrants Authorized		47,690
Payments on notes payable	9,000
Additional payments on notes payable	8,000
Note Payable	55,154	54,551
Note 4
Date	Oct. 17, 2011
Note Payable Issued	400,000
Interest Rate	21.00%
Shares to purchase	2.5
Per loan amount	1
Warrants Authorized	1,000,000
Gross proceeds	125,000
Additional gross proceeds	275,000
Warrants Issued	312,500
Additonal Warrants Issued	687,500
Warrant Issued - on Modified Note	1,000,000
Conversion Price	$ 0.10
Conversion price on modified note	$ 0.20
Expiration date	Apr. 17, 2012
Expiration Date - on Modified Note	Jun. 30, 2013
Debt Discount	105,363
Debt Discount on modified note	49,439
Vesting Terms	3 years
Note Payable	420,712	400,000
Debt Discount Interest Expense	40,062
Debt Discount Interest Expense - on Modified Note	21,188
Note 5
Date	Feb. 28, 2012
Note Payable Issued	50,000
Interest Rate	21.00%
Warrants Issued	125,000
Warrant Issued - on Modified Note	125,000
Conversion Price	$ 0.10
Conversion price on modified note	$ 0.20
Expiration date	Aug. 28, 2012
Expiration Date - on Modified Note	Jun. 30, 2013
Debt Discount	7,997
Debt Discount on modified note	6,180
Vesting Terms	3 years
Note Payable	55,236	52,647
Debt Discount Interest Expense	7,997
Debt Discount Interest Expense - on Modified Note	$ 2,649

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Fair Value Measures

3 Months Ended

Mar. 31, 2013

Fair Value Disclosures [Abstract]

Fair Value Measures

8. FAIR VALUE MEASURES 

ASC 820 “Fair Value Measurements and Disclosures” defines fair value, establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements. As defined in ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Standard clarifies that the exchange price is the price in an orderly transaction between market participants to sell an asset or transfer a liability at the measurement date, and emphasizes that fair value is a market-based measurement and not an entity-specific measurement.

ASC 820 establishes the following hierarchy used in fair value measurements and expands the required disclosures of assets and liabilities measured at fair value:

· Level 1 – Inputs use quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

· Level 2 – Inputs use other inputs that are observable, either directly or indirectly. These inputs include quoted prices for similar assets and liabilities in active markets as well as other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.

· Level 3 – Inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset or liability.

In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Company’s assessment.

The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of March 31, 2013 and December 31, 2012, respectively:

	Fair Value Measurements
		Level 1		Level 2		Level 3		Total
Derivative liabilities:
March 31, 2013	$	—	$	—	$	219,330	$	219,330
December 31, 2012	$	—	$	—	$	432,030	$	432,030

The 2013 and 2012 derivative liabilities are measured at fair value using the binomial lattice options pricing model, and are classified within Level 3 of the valuation hierarchy. The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring basis:

		Three Months Ended March 31, 2013		Year Ended December 31, 2012
Fair value, beginning of period	$	432,030	$	155,813
Derivative liabilities recorded during the period		-		1,323,548
Reclassification to equity upon conversion of note		-		(1,787,542)
Reclassification to equity upon amendment of notes and warrants		-		(1,152,144)
Net unrealized (gain) loss on derivative financial instruments		(212,700)		1,892,355
Fair value, end of period	$	219,330	$	432,030

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Due to Factor (Details Narrative) (USD $)	3 Months Ended
	Mar. 31, 2013
Notes to Financial Statements
Factor, Accounts Receivable percentage	80.00%
Collateral, Accounts Receivable percentage	20.00%
Advances from Accounts Receivable	$ 300,065
Due from Factor	$ 45,671

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Stock options and Warrants - Common Stock Warrant Summary (Details) (Common Stock Warrants, USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2013	Dec. 31, 2012
Common Stock Warrants
Warrant Activity
Beginning Balance	14,494,341	5,862,140
Granted		10,775,000
Exercised		(2,039,735)
Forfeited/cancelled		(103,064)
Balance outstanding and exercisable, Number of Warrants	14,494,341	14,494,341
Weighted Average Exericse Price
Beginning Balance	$ 0.28	$ 0.12
Granted		$ 0.34
Exercised		$ 0.10
Forfeited/cancelled		$ 0.10
Ending Balance	$ 0.28	$ 0.28
Weighted Remaining Contractual Life (Years)
Exercisable at March 31, 2013	2 years 5 months 0 days
Intrinsic Value
Balance	$ 231,481
Exercisable at March 31, 2013	$ 231,481
Intinsic value per share	$ 0.12

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

11 . COMMITMENTS AND CONTINGENCIES

Agreements

During October 2012 we leased approximately 1,641 square feet of office space located at 2030 Addison Street, Berkeley, CA for approximately $4,200 per month under a 29 month agreement with rental payments commencing on January 1, 2013. The rental fee escalates to approximately $4,350 on April 1, 2013 and approximately $4,500 on April 1, 2014.

Future minimum lease payments under all operating leases as of March 31, 2013, are approximately as follows:

Year Ending December 31,	Amount
2013	$  39,147
2014	53,371
2015	13,441
Total	$105,959

Legal matters

In the normal course of business, the Company is, and in the future may be, subject to various disputes, claims, lawsuits, and administrative proceedings arising in the ordinary course of business with respect to commercial, product liability, employment, and other matters, which could involve substantial amounts of damages. In the opinion of management, any liability related to any such known proceedings would not have a material adverse effect on the business or financial condition of the Company. Additionally, from time to time, the Company may pursue litigation against third parties to enforce or protect the Company’s rights under the Company’s trademarks, trade secrets and intellectual property rights generally.

During 2010, the Company was served with a lawsuit for the Company’s past due liabilities. The lawsuit was Peri & Sons, plaintiff, vs. Organic Alliance, Inc. and Parker Booth, defendants, for past due produce liabilities. An agreement was reached and the Company has been making payments to the plaintiff. The Company was dismissed from the action and signed a confession of judgment. Over half of the past due amount has been paid with a balance of approximately $21,000 remaining. The Company has accrued for this balance.

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Notes payable, Loans and Derivative Liabilities

3 Months Ended

Mar. 31, 2013

Debt Disclosure [Abstract]

Notes payable, Loans and Derivative Liabilities

7.  NOTES PAYABLE, LOANS AND DERIVATIVE LIABILITES

Notes payable to related parties and others, net of discounts consists of the following:

	March 31		December 31,
	2013		2012
	(unaudited)
Notes Payable (net of debt discount of $66,913 at March 31, 2013 and $133,827 at December 31, 2012) (A)	$	2,687,963	$	2,512,753
Notes Payable – Related Parties (net of debt discount of $23,836 at March 31, 2013 and net of debt discount of $47,673 at December 31, 2012) (B)		558,115		509,696
Convertible Notes Payable (net of debt discount of  $217,535 at December 31, 2012) (C)		1,178,495		914,506
Total	$	4,424,573	$	3,936,955

(A) Notes Payable

i. In May 2010, an individual advanced to the Company $20,000 bearing interest at 6% per annum. As a financing incentive, the individual received a warrant to purchase 20,000 shares of the Company’s common stock at $1.00 per share. The warrants expired in November 2011. The gross proceeds of the note were recorded net of a debt discount of $9,200. The debt discount consisted of the relative fair value of the warrant of $9,200 and is accreted to interest expense ratably over the term of the note. The promissory note matured on November 17, 2011. The unpaid balance, including accrued interest, was $23,342 and $23,046 at March 31 2013 and December 31, 2012, respectively. The Company is not compliant with the repayment terms of the note.

ii. On February 3, 2011, the Company signed a $500,000 promissory note with a maturity date of August 2, 2012, and has a stated interest rate of 15% per annum. As a financing incentive, the lender received a three-year warrant vesting on January 31, 2011, to purchase 452,354 shares of common stock at an exercise price of $0.01 per share, and also received a five-year warrant, vesting on June 30, 2011, to purchase 452,354 shares at an exercise price of $0.01 per share. The gross proceeds from the sale of the note of $500,000 were recorded net of a discount of $137,703. The debt discount consisted of $137,703 related to the fair value of the warrants and is accreted to interest expense ratably over the term of the note which amounted to $63,114 for the year ended December 31, 2012. The Company has not made any note payments and received a waiver from the lender on September 1, 2011 that deferred payment until September 1, 2012 and increased the interest rate to 21% beginning April 4, 2011, the date of the first event of default. The unpaid balance, including accrued interest, was $724,425 and $698,534 at March 31 2013 and December 31, 2012, respectively.

During December 2012 the Company amended the note to extend the due date to June 30, 2013. For executing the agreement, the holder was granted a three-year warrant to purchase 438,144 shares of the Company’s common stock, at an exercise price of $0.18 per share. In addition, the amendment set the warrant expiration date at April 28^th 2016 for both the three-year and the five-year warrants issued with the original note. The Company evaluated the change in cash flows in connection with the December amendment and determined that there was a less than 10% change between the present value of the existing debt and the amended debt. As a result, the fair value of the new three-year warrants of $39,798 was expensed on the date of the amendment.

iii. On August 1, 2012, the Company issued a $60,000 promissory note with an original issue discount of 20%. The promissory note is due on the earlier of (i) the closing by the Company of a financing or series of financings for aggregate cash proceeds of at least $1,850,000, or, (ii) July 31, 2013. As a financing incentive, the lender received a three-year warrant, vesting immediately, to purchase 50,000 shares of common stock at an exercise price of $0.50 per share. The gross proceeds from the sale of the note of $60,000 were recorded net of a discount of $11,088. The debt discount consisted of $11,088 related to the fair value of the warrant and is accreted to interest expense ratably over the term of the note which amounted to $11,088 for the year ended December 31, 2012. Since the Company satisfied the requirement of item (i) and raised $1,875,000 after August 1, 2012, the discount was recognized over the shorter maturity term. The carrying value of the unpaid balance was $60,000 at March 31 2013 and December 31, 2012, respectively. The Company is not compliant with the repayment terms of the note.

iv. On August 7, 2012, the Company issued a $30,000 promissory note with an original issue discount of 20%. The promissory note is due on the earlier of (i) the closing by the Company of a financing or series of financings for aggregate cash proceeds of at least $1,850,000, or, (ii) August 6, 2013. As a financing incentive, the lender received a three-year warrant, vesting immediately, to purchase 25,000 shares of common stock at an exercise price of $0.50 per share. The gross proceeds from the sale of the note of $30,000 were recorded net of a discount of $3,406. The debt discount consisted of $3,406 related to the fair value of the warrant and is accreted to interest expense ratably over the term of the note which amounted to $3,406 for the year ended December 31, 2012. Since the Company satisfied the requirement of item (i) and raised $1,875,000 after August 7, 2012, the discount was recognized over the shorter maturity term. The carrying value of the unpaid balance was $30,000 at March 31 2013 and December 31, 2012, respectively. The Company is not compliant with the repayment terms of the note.

v. On August 22, 2012, the Company issued a $60,000 promissory note with an original issue discount of 20%. The promissory note is due on the earlier of (i) the closing by the Company of a financing or series of financings for aggregate cash proceeds of at least $1,850,000, or, (ii) August 21, 2013. As a financing incentive, the lender received a three-year warrant, vesting immediately, to purchase 50,000 shares of common stock at an exercise price of $0.50 per share. The gross proceeds from the sale of the note of $60,000 were recorded net of a discount of $9,495. The debt discount consisted of $9,495 related to the fair value of the warrant and is accreted to interest expense ratably over the term of the note which amounted to $9,495 for the year ended December 31, 2012. Since the Company satisfied the requirement of item (i) and raised $1,875,000 after August 22, 2012, the discount was recognized over the shorter maturity term. The carrying value of the unpaid balance was $60,000 March 31 2013 and December 31, 2012, respectively. The Company is not compliant with the repayment terms of the note.

vi. In December 2012, the Company commenced an offering of secured promissory notes for an aggregate principal amount of $2,500,000 with three-year warrants to purchase an aggregate of 5,000,000 shares our common stock (two shares for each $1 of the principal amount of the notes purchased) exercisable at $0.50 per share. The notes bear interest at 18% and have a maturity date of June 30, 2013. Notes in the aggregate principal amount of $1,000,000 and warrants to purchase an aggregate of 2,000,000 common shares were sold in the offering. In addition, the investment banker who facilitated the sale of the notes and warrants received a three-year warrant to purchase 200,000 shares of our common stock (10% of the number of shares of common stock issuable upon exercise of the warrants sold in the offering) exercisable at $0.50 per share. The fair value of the three-year warrants issued in connection with the notes on the date of issuance aggregated $32,202, and was recorded as debt discount. The debt discount was amortized through the term of the notes and amounted to $14,126 for the three months ended March 31 2013. The unpaid balance, including accrued interest, was $1,044,384 and $1,000,000 at March 31 2013 and December 31, 2012, respectively.

(B)   Notes Payable – Related Parties

i. In September 2008, Earnest Mathis, a former shareholder, advanced to the Company $15,000. The advance is evidenced by a promissory note bearing interest at 10% per annum. The promissory note matured on September 13, 2009. The unpaid balance, including accrued interest, was $21,816 and $21,446 at March 31 2013 and December 31, 2012, respectively. The Company is not compliant with the repayment terms of the note.

ii. In November 2009 and February 2010, Morrison Partners, LLC (an affiliate of Thomas Morrison, former CEO and Chairman of the Board of Directors of the Company), advanced to the Company $10,000 and $15,000, respectively. The advances are evidenced by promissory notes bearing interest at 5% per annum. The November advance provides for the issuance of 2,770 shares of the Company’s common stock as a financing incentive. The Company recorded a debt discount of $2,935 for the relative fair value of the common stock. The discount was accreted over the life of the note.

The November 2009 and February 2010 notes were due on June 30, 2010 and September 30, 2010, respectively. The unpaid balance, including accrued interest, was $29,034 and $28,726 at March 31 2013 and December 31, 2012, respectively. The shares have not been issued to Morrison Partners, LLC, and the Company is not in compliance with the repayment terms of the notes.

iii. During March, 2010 through October 2011, an employee of the Company loaned to the Company $65,958, of which $16,000 and $49,958 was advanced during 2011 and 2010, respectively. The loans are evidenced by promissory notes payable with interest at 5% and are due on demand. The Company repaid $9,000 during 2010 and $8,000 during April 2012. In addition, the employee will be issued 47,690 shares of the Company’s common stock upon repayment of the promissory notes as additional consideration. The Company will record a fair value for these shares on the measurement date as a charge to interest expense. The unpaid balance, including accrued interest, was $55,154 and $54,551 at March 31 2013 and December 31, 2012, respectively.

iv. On October 17, 2011, the Company entered into a $400,000 convertible multi-draw term loan facility with an entity owned by a related party. The loan bears interest at 21% and has a maturity date of the earlier of an event of default or April 17, 2012. The Company has not made a note payment and is currently negotiating an extension of such loan. At the time of any new debt or equity financing of the Company, the loan balance, including principal and interest, may be converted into the number of fully paid and non-assessable debt instruments, shares/or units to be issued in the financing. In addition, with each drawdown the related party received a three-year warrant to purchase 2.5 shares of the Company’s common stock for each $1.00 of principal loaned at such time, up to 1,000,000 shares in the aggregate for all drawdowns. Each warrant has an exercise price of $0.10 per share, is vested upon issuance, and expires on October 17, 2014. The Company received $125,000 and $275,000 in gross proceeds during the years ended December 31, 2012 and December 31, 2011, respectively. The Company issued warrants to purchase an aggregate of 312,500 and 687,500 shares of the Company’s common stock during the years ended December 31, 2012 and December 31, 2011, respectively. The unpaid balance of the loan, including accrued interest, was $420,712 and $400,000 at March 31 2013 and December 31, 2012, respectively.

The conversion price of the outstanding loan amounts was not fixed and determinable on the date of issuance and, as such in accordance with ASC Topic 815 “Derivatives and Hedging” (“ASC 815”), the embedded conversion option on the date of issuance was valued using the binomial lattice options pricing model and recorded as derivative liabilities. The fair value of the three-year warrants on the date of issuance aggregated $105,363, and was recorded as debt discount. The debt discount was fully amortized through the term of the loan and amounted to $40,062 for the three months ended March 31 2012.

During December 2012 the Company amended the notes to remove the conversion right and extend the due date to June 30, 2013, and to amend the warrants to remove certain anti-dilution provisions. For executing the agreement, the holder was granted a three-year warrant to purchase 1,000,000 shares of the Company’s common stock, equal to two and one-half times the principal amount of the note amended, exercisable at $0.20 per share. The Company evaluated the change in cash flows in connection with the December amendment and determined that there was a greater than 10% change between the present value of the existing debt and the amended debt. As a result, the fair value of the three-year warrants aggregated $49,439 and were recorded as a discount to the modified debt and will be accreted over the remaining term of the modified debt and recognized as interest expense. The debt discount on the modified debt amounted to $21,188 for the three months ended March 31, 2013.

v. On February 28, 2012, Michael Rosenthal, Chairman of the Company’s Board of Directors, advanced the Company $50,000. The advance is evidenced by a promissory note bearing interest at 21% and has a maturity date of the earlier of an event of default or August 28, 2012. In addition, Mr. Rosenthal received a three-year warrant to purchase 125,000 shares of the Company’s common stock at an exercise price of $0.10 per share. The Company recorded a debt discount of $7,997 to the face value of the note based upon the fair values of the warrants. The discount was being accreted over the life of the note which amounted to $7,997 for the year ended December 31, 2012. The unpaid balance, including accrued interest, was $55,236 and $52,647 at March 31, 2013 and December 31, 2012, respectively.

During December 2012 the Company amended the note to extend the due date to June 30, 2013. For executing the agreement, the holder was granted a three-year warrant to purchase 125,000 shares of the Company’s common stock, equal to two and one-half times the principal amount of the note amended, exercisable at $0.20 per share. The Company evaluated the change in cash flows in connection with the December amendment and determined that there was a greater than 10% change between the present value of the existing debt and the amended debt. As a result, the fair value of the three-year warrants aggregated $6,180 and were recorded as a discount to the modified debt and will be accreted over the remaining term of the modified debt and recognized as interest expense. The debt discount on the modified debt amounted to $2,649 for the three months ended March 31, 2013.

(C)   Convertible Notes Payable

i. On July 30, 2010, an individual advanced the Company $8,000. The advance is evidenced by a promissory note bearing interest at 6% per annum and maturing on March 2, 2011. The holder, at any time, may convert the promissory note into shares of the Company’s common stock at $0.05 per share. The Company calculated the fair value of the beneficial conversion feature using the Black-Scholes pricing model on the date of issuance. The fair value of the conversion option in connection with the note on the date of issuance aggregated $8,000, and was recorded as debt discount. The debt discount was amortized through the term of the note. The unpaid balance, including accrued interest, was $9,282 and $9,164 at March 31 2013 and December 31, 2012, respectively. The Company is not compliant with the repayment terms of the note.

ii. On April 28, 2011, the Company issued a $70,588 convertible promissory note with an original issue discount of 15%. The convertible promissory note has a maturity date of the earlier of (i) the Company raising debt or equity financing of $600,000 or more, or (ii) May 31, 2011. The note may be converted into the Company’s common stock by the holder at $0.05 per share. As a financing incentive, the lender received a five-year warrant, vesting April 28, 2011, to purchase 705,882 shares of the Company’s common stock at an exercise price of $0.25 per share. The Company has not made a note payment, and the Company received a waiver from the lender on September 1, 2011 that defers payment until May 31, 2012 and waives the provision for payment upon the Company’s closing a debt or equity financing of $600,000 or more. The unpaid balance on the note was $70,588 at March 31, 2013 and December 31, 2012.

The conversion price of the note and five-year warrants was not fixed and determinable on the date of issuance and as such in accordance with ASC Topic 815 “Derivatives and Hedging” (“ASC 815”), the embedded conversion options of the note and warrants on the date of issuance were valued using the binomial lattice options pricing model and recorded as derivative liabilities. The fair value of the conversion option and five-year warrants issued in connection with the note on the date of issuance aggregated $60,000, and were recorded as debt discount. The debt discount was amortized through the term of the note.

During December 2012 the Company amended the note to remove the conversion right and extend the due date to June 30, 2013, and to amend the warrants to remove certain anti-dilution provisions. For executing the agreement, the holder was granted a three-year warrant to purchase 61,856 shares of the Company’s common stock, exercisable at $0.18 per share. The Company evaluated the change in cash flows in connection with the December amendment and determined that there was a less than 10% change between the present value of the existing debt and the amended debt. As a result, the fair value of the new three-year warrants of $4,923 was expensed on the date of the amendment.

iii. On July 15, 2011, the Company issued a $109,822 convertible promissory note with an original issue discount of 15% that consolidated various demand notes from September 2010 through July 2011. The convertible promissory note has a maturity date of the earlier of (i) the Company raising debt or equity financing of $600,000 or more, or (ii) August 31, 2011. The note may be converted into the Company’s common stock by the holder at $0.05 per share. As a financing incentive, the lender received a five-year warrant, vesting July 15, 2011, to purchase 1,098,220 shares of the Company’s common stock at an exercise price of $0.25 per share. The Company repaid $1,783 during 2012. The unpaid balance was $109,789 at March 31 2013 and December 31, 2012. The Company is not compliant with the repayment terms of the note.

The conversion price of the note and five-year warrants were not fixed and determinable on the date of issuance and as such in accordance with ASC Topic 815 “Derivatives and Hedging” (“ASC 815”), the embedded conversion options of the note and warrants on the date of issuance were valued using the binomial lattice options pricing model and recorded as derivative liabilities. The fair value of the conversion option and five-year warrants issued in connection with the note on the date of issuance aggregated $95,497, and were recorded as debt discount. The debt discount was amortized through the term of the note.

iv. In March 2012, the Company commenced an offering of secured promissory notes for an aggregate principal amount of $1,000,000 with three-year warrants to purchase an aggregate of 2,500,000 shares the Company’s common stock (2.5 shares for each $1 of the principal amount of the notes purchased) exercisable at $0.10 per share. The notes bear interest at 18% and have various maturity dates beginning September 2, 2012. At the time of any new debt or equity financing by the Company, the principal and interest then due under the notes may be converted into the number of fully paid and non-assessable debt instruments, shares/or units issued in the financing. Notes in the aggregate principal amount of $850,000 and warrants to purchase an aggregate of 2,125,000 common shares were sold in the offering. In addition, the investment banker who facilitated the sale of the notes and warrants received a three-year warrant to purchase 212,500 shares of the Company’s common stock (10% of the number of shares of common stock issuable upon exercise of the warrants sold in the offering) exercisable at $0.10 per share. The unpaid balance on the notes was $887,726 and $850,000 at March 31, 2013 and December 31, 2012, respectively. The Company is not compliant with of the repayment terms of the note for an aggregate of $78,329, including accrued interest.

The conversion price of the note and three-year warrants were not fixed and determinable on the date of issuance and as such in accordance with ASC Topic 815 “Derivatives and Hedging” (“ASC 815”), the embedded conversion options of the note and warrants on the date of issuance were valued using the binomial lattice options pricing model and recorded as derivative liabilities. The fair value of the conversion option and three-year warrants issued in connection with the note on the date of issuance aggregated $789,073, and was recorded as debt discount. The debt discount was fully amortized through the term of the notes and amounted to $28,459 for the three months ended March 31, 2012.

During October 2012 the Company amended the notes to remove the conversion right and extend the due date to June 30, 2013, and to amend the warrants to remove certain anti-dilution provisions. Holders of an aggregate of $775,000 of principal agreed to such amendments and were granted a warrant to purchase 1,550,000 shares of our common stock equal to two times the principal amount of the note amended, exercisable at $0.50 per share.

The Company evaluated the change in cash flows in connection with the October amendment and determined that there was a greater than 10% change between the present value of the existing debt and the amended debt. As a result, the fair value of the three-year warrants aggregated $140,759 and were recorded as a discount to the modified debt and will be accreted over the remaining term of the modified debt and recognized as interest expense. The accretion of the debt discount on the modified debt amounted to $52,785 for the three months ended March 31, 2013.

v. In August 2012, the Company commenced an offering of secured promissory notes for an aggregate principal amount of $3,000,000 with three-year warrants to purchase an aggregate of 6,000,000 shares of the Company’s common stock (two shares for each $1 of the principal amount of the notes purchased) exercisable at $0.50 per share. The notes bear interest at 18% and have various maturity dates beginning March 13, 2013. At the time of any new debt or equity financing by the Company, the principal and interest then due under the notes may be converted into the number of fully paid and non-assessable debt instruments, shares/or units issued in the financing. During year ended December 31, 2012, notes in the aggregate principal amount of $875,000 and warrants to purchase an aggregate of 1,750,000 shares of the Company’s common stock were sold in the offering. In addition, the investment banker who facilitated the sale of the notes and warrants received a three-year warrant to purchase 175,000 shares of the Company’s common stock (10% of the number of shares of common stock issuable upon exercise of the warrants sold in the offering) exercisable at $0.50 per share. The unpaid balance on the notes was $913,836 and $875,000 at March 31, 2013 and December 31, 2012, respectively. The Company is not compliant with the repayment terms of the note.   The conversion price of the note and three-year warrants were not fixed and determinable on the date of issuance and as such in accordance with ASC Topic 815 “Derivatives and Hedging” (“ASC 815”), the embedded conversion options of the note and warrants on the date of issuance were valued using the binomial lattice options pricing model and recorded as derivative liabilities. The fair value of the conversion option and three-year warrants issued in connection with the note on the date of issuance aggregated $499,186, and were recorded as debt discount. The debt discount was amortized through the term of the notes and amounted to $217,535 for the three months ended March 31, 2013.

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2013

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation - The Company's unaudited condensed consolidated financial statements have been prepared on an accrual basis of accounting, in conformity with accounting principles generally accepted in the United States of America (US GAAP) for interim financial information applicable for a going concern, which assumes that the Company will realize its assets and discharge its liabilities in the ordinary course of the business, and in accordance with the instructions for Form 10-Q and Article 10 of Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended. Certain information and disclosures included in the financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such rules and regulations.

In the opinion of management, the condensed consolidated financial statements contain all material adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial condition, results of operations, and cash flows of the Company for the interim periods presented.

The results for the three months ended March 31, 2013 are not necessarily indicative of the results of operations for the full year. These financial statements and related footnotes should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission on June 13, 2013.

Use of Estimates - The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, 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. Significant estimates that are particularly sensitive to change in the near term include, but are not limited to, realization of deferred tax assets, allowance for doubtful accounts, and assumptions used in derivative valuations and share based payment transactions. Actual results could differ from those estimates.

Principles of Consolidation - The consolidated financial statements include the accounts of Organic Alliance, Inc. and its wholly-owned subsidiary, Organic Texas, Inc. (collectively, the “Company”). All significant inter-company transactions and balances have been eliminated in consolidation.

Allowance for Doubtful Accounts - An allowance for uncollectible accounts receivable is recorded based on a combination of aging analysis, past practices and any specific troubled accounts. The Company’s produce is sold to the Company’s customers for cash or on credit terms which are established in accordance with local and industry practices and typically require payment within 10 to 30 days of delivery. Accounts are written off when uncollectibility is confirmed. Subsequent recoveries, if any, are credited to the allowance account. The allowance for doubtful accounts amounted to $5,000 at March 31, 2013 and December 31, 2012.

In addition, the Company factors its receivables with full recourse and, as a result, accounts for the factoring akin to a secured borrowing, maintaining the gross receivable asset and due to factor liability on its books and records. In connection with the factoring of its receivables, the Company estimates an allowance for factoring fees associated with the collections. These fees range from 3% to 5% depending on the actual timing of the collection. The actual recognition and amount of such fees may differ from the estimates depending upon the timing of collections.

Inventory - Inventory is stated at the lower of cost (first-in, first-out) or market, and includes principally produce the Company purchases from growers ($1,092) and ($34,547) and packaging materials ($75,229) and ($105,341) as of March 31, 2013 and December 31, 2012, respectively. The Company held $76,321 and $139,888 of inventory as of March 31, 2013 and December 31, 2012, respectively.

Income Taxes - The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes”. Under this method, income tax expense is recognized for the amount of (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

Fair Value of Financial Instruments - The carrying amounts of financial instruments, including cash, receivables, accounts payable and accrued expenses approximated fair value as of the balance sheet dates presented, because of the relatively short maturity dates on these instruments. The carrying amounts of the notes payable issued approximate fair value as of the balance sheet dates presented, because interest rates and other terms on these instruments approximate terms currently available on similar instruments.

Derivative Financial Instruments - The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the instrument could be required within 12 months of the balance sheet date.

The accounting treatment of derivative financial instruments requires that the Company record the conversion option and related warrants at their fair values as of the inception date of the agreements, and at fair value as of each subsequent balance sheet date. As a result of entering into the convertible notes, the Company is required to classify all other non-employee warrants as derivative liabilities and record them at their fair values at each balance sheet date. Any change in fair value was recorded as a change in the fair value of derivative liabilities for each reporting period at each balance sheet date. The Company reassesses the classification at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.

The fair value of conversion options at a fixed number of shares are recorded using the intrinsic value method. Conversion options at variable rates and any options and warrants with ratchet provisions are deemed to contain a “down-round protection”. Accordingly, they do not meet the scope exception for treatment as a derivative under ASC 815 since “down-round protection” is not an input into the calculation of the fair value of the equity instruments and cannot be considered “indexed to the Company’s own stock”, which is a requirement for the scope exception as outlined under ASC 815. The Company determined the fair value of the Binomial Lattice Model and the Black-Scholes Method to be materially the same. Warrants that had been reclassified to derivative liability that did not contain “down-round protection” were valued using the black-scholes model.

For the Black-Scholes pricing model, which approximates the binomial lattice model, the Company used the following assumptions and weighted average fair value ranges for the three months ended March 31:

	2013	2012
Risk-free interest rate	0.17% - 0.71%	0.31%-0.38%
Dividend yield	N/A	N/A
Expected volatility	37.1%-54.7%	46.5%-46.8%
Expected life in months and years	3 months - 48 months	20 months

For the binomial lattice options pricing model, the Company used the following assumptions and weighted average fair value ranges for the three months ended March 31:

	2013	2012
Risk-free interest rate	0.14% - 0.34%	0.15%-0.62%
Dividend yield	N/A	N/A
Expected volatility	31.6%-56.0%	43.4%-46.1%
Expected life in months and years	3 months – 4.3 years	6 months – 3 years

Revenue Recognition - Revenue is recorded when (1) the customer accepts delivery of the product, title has been transferred, and the Company has no significant obligations remaining to be performed; (2) a final understanding as to specific nature and terms of the agreed upon transaction has occurred; (3) price is fixed and (4) collection is reasonably assured.

Share Based Compensation – The Company accounts for share-based compensation in accordance with the fair value recognition provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) No. 718. For employees and directors, the fair value of the award is measured on the grant date, and for non-employees the fair value of the award is generally re-measured on interim financial reporting dates until the service period is complete.

Option valuation models require the input of highly subjective assumptions, including the expected life of the option, and such assumptions can materially affect the fair value estimate. The fair value of share-based payment awards was estimated using the Black-Scholes option pricing model. The Company uses historical data to estimate option exercise and employee termination within the valuation model; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

For the Black-Scholes pricing model, the Company used the following assumptions and weighted average fair value ranges for the three months ended March 31:

		2013	2012
Risk-free interest rate	0.34%-2.54%		0.43%-0.86%
Dividend yield	N/A		N/A
Expected volatility	36.4%-50.2%		44.7%-55.2%
Expected life in years	2.5-7		3-5

Concentrations

· Credit Risk – The Company maintains cash balances at various high quality federally insured financial institutions, with balances at times in excess of federally insured limits. Management believes that the financial institutions that hold the Company’s deposits are financially sound and therefore pose a minimum credit risk. The Company has not experienced any losses in such accounts.

· Major customers – The Company has one and two major customers, which accounted for approximately 13% and 65% of the sales during the three months ended March 31, 2013 and 2012, respectively. For the three months ended March 31, 2013, the total sales comprised of customer A 13% compared to the three months ended March 31, 2012, comprised of customer F 42% and customer H 23%. The loss of any of these customers could adversely affect the Company's operations.

· Major receivables – The Company has three major receivables at March 31, 2013 comprised of customer B 19%, customer C 12% and customer D 11%, compared to five major receivables at March 31, 2012 comprised of customer E 27%, customer F 17%, customer G 17%, customer H 14%, and customer I 11%.

· Major suppliers – The Company has five and four major suppliers, which accounted for approximately 86% and 63% of purchases during three months ended March 31, 2013 and 2012, respectively. The loss of any of these suppliers could adversely affect the Company's operations.

Net Loss Per Share - Basic loss per share was computed using the weighted average number of outstanding common shares. Diluted loss per share includes the effect of dilutive common stock equivalents from the assumed exercise of options, warrants and convertible notes. Common stock equivalents were excluded in the computation of diluted loss per share since their inclusion would be anti-dilutive.

In accordance with ASC 260 “Earnings per Share”, the Company has given effect to the issuance of warrants to purchase 1,100,000 and 2,795,538 shares of the Company’s common stock as of March 31, 2013 and 2012, respectively, exercisable at $0.01. These warrants have been included in computing the basic net loss per share for the three months ended March 31, 2013 and 2012. Additionally, included in the Company’s weighted average shares outstanding are 56,189 and 3,529,897 shares earned, but not issued, as at March 31, 2013 and 2012, respectively.

Total common stock equivalents which were excluded (since their inclusion would be anti-dilutive) are those shares issuable upon the exercise of warrants, options and the conversion of convertible notes, as of March 31, 2013 and 2012 were as follows:

	March 31,
	2013		2012
Options		7,717,896		4,483,750
Warrants		13,394,341		4,710,350
Convertible notes		3,793,160		5,304,352
Total Common stock equivalents		24,905,397		14,498,452

Recently Issued Accounting Standards

Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.

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Commitments and Contingencies Litigation (Details Narrative) (USD $) (Lawsuit 1, USD $)	Dec. 31, 2012
Lawsuit 1
Litigation
Balance Due on Litigation	$ 21,000

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Notes payable, Loans and Derivative Liabilities - Notes payable (Details) (USD $)	Mar. 31, 2013	Dec. 31, 2012
Notes to Financial Statements
Notes Payable (net of debt discount of $66,913 at March 31, 2013 and $133,827 at December 31, 2012) (A)	$ 2,687,963	$ 2,512,753
Notes Payable – Related Parties (net of debt discount of $23,836 at March 31, 2013 and net of debt discount of $47,673 at December 31, 2012) (B)	558,115	509,696
Convertible Notes Payable (net of debt discount of $217,535 at December 31, 2012) (C)	1,178,495	914,506
Total	$ 4,424,573	$ 3,936,955

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2013

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation - The Company's unaudited condensed consolidated financial statements have been prepared on an accrual basis of accounting, in conformity with accounting principles generally accepted in the United States of America (US GAAP) for interim financial information applicable for a going concern, which assumes that the Company will realize its assets and discharge its liabilities in the ordinary course of the business, and in accordance with the instructions for Form 10-Q and Article 10 of Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended. Certain information and disclosures included in the financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such rules and regulations.

In the opinion of management, the condensed consolidated financial statements contain all material adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial condition, results of operations, and cash flows of the Company for the interim periods presented.

The results for the three months ended March 31, 2013 are not necessarily indicative of the results of operations for the full year. These financial statements and related footnotes should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission on June 13, 2013.

Use of estimates

Use of Estimates - The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, 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. Significant estimates that are particularly sensitive to change in the near term include, but are not limited to, realization of deferred tax assets, allowance for doubtful accounts, and assumptions used in derivative valuations and share based payment transactions. Actual results could differ from those estimates.

Principles of Consolidation

Principles of Consolidation - The consolidated financial statements include the accounts of Organic Alliance, Inc. and its wholly-owned subsidiary, Organic Texas, Inc. (collectively, the “Company”). All significant inter-company transactions and balances have been eliminated in consolidation.

Allowance for Doubtful Accounts

Allowance for Doubtful Accounts - An allowance for uncollectible accounts receivable is recorded based on a combination of aging analysis, past practices and any specific troubled accounts. The Company’s produce is sold to the Company’s customers for cash or on credit terms which are established in accordance with local and industry practices and typically require payment within 10 to 30 days of delivery. Accounts are written off when uncollectibility is confirmed. Subsequent recoveries, if any, are credited to the allowance account. The allowance for doubtful accounts amounted to $5,000 at March 31, 2013 and December 31, 2012.

In addition, the Company factors its receivables with full recourse and, as a result, accounts for the factoring akin to a secured borrowing, maintaining the gross receivable asset and due to factor liability on its books and records. In connection with the factoring of its receivables, the Company estimates an allowance for factoring fees associated with the collections. These fees range from 3% to 5% depending on the actual timing of the collection. The actual recognition and amount of such fees may differ from the estimates depending upon the timing of collections.

Inventory

Inventory - Inventory is stated at the lower of cost (first-in, first-out) or market, and includes principally produce the Company purchases from growers ($1,092) and ($34,547) and packaging materials ($75,229) and ($105,341) as of March 31, 2013 and December 31, 2012, respectively. The Company held $76,321 and $139,888 of inventory as of March 31, 2013 and December 31, 2012, respectively.

Income Tax

Income Taxes - The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes”. Under this method, income tax expense is recognized for the amount of (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

Fair Value of Financial Instruments

Fair Value of Financial Instruments - The carrying amounts of financial instruments, including cash, receivables, accounts payable and accrued expenses approximated fair value as of the balance sheet dates presented, because of the relatively short maturity dates on these instruments. The carrying amounts of the notes payable issued approximate fair value as of the balance sheet dates presented, because interest rates and other terms on these instruments approximate terms currently available on similar instruments.

Derivative Financial Instruments

Derivative Financial Instruments - The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the instrument could be required within 12 months of the balance sheet date.

The accounting treatment of derivative financial instruments requires that the Company record the conversion option and related warrants at their fair values as of the inception date of the agreements, and at fair value as of each subsequent balance sheet date. As a result of entering into the convertible notes, the Company is required to classify all other non-employee warrants as derivative liabilities and record them at their fair values at each balance sheet date. Any change in fair value was recorded as a change in the fair value of derivative liabilities for each reporting period at each balance sheet date. The Company reassesses the classification at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.

The fair value of conversion options at a fixed number of shares are recorded using the intrinsic value method. Conversion options at variable rates and any options and warrants with ratchet provisions are deemed to contain a “down-round protection”. Accordingly, they do not meet the scope exception for treatment as a derivative under ASC 815 since “down-round protection” is not an input into the calculation of the fair value of the equity instruments and cannot be considered “indexed to the Company’s own stock”, which is a requirement for the scope exception as outlined under ASC 815. The Company determined the fair value of the Binomial Lattice Model and the Black-Scholes Method to be materially the same. Warrants that had been reclassified to derivative liability that did not contain “down-round protection” were valued using the black-scholes model.

For the Black-Scholes pricing model, which approximates the binomial lattice model, the Company used the following assumptions and weighted average fair value ranges for the three months ended March 31:

	2013	2012
Risk-free interest rate	0.17% - 0.71%	0.31%-0.38%
Dividend yield	N/A	N/A
Expected volatility	37.1%-54.7%	46.5%-46.8%
Expected life in months and years	3 months - 48 months	20 months

For the binomial lattice options pricing model, the Company used the following assumptions and weighted average fair value ranges for the three months ended March 31:

	2013	2012
Risk-free interest rate	0.14% - 0.34%	0.15%-0.62%
Dividend yield	N/A	N/A
Expected volatility	31.6%-56.0%	43.4%-46.1%
Expected life in months and years	3 months – 4.3 years	6 months – 3 years

Revenue Recognition

Revenue Recognition - Revenue is recorded when (1) the customer accepts delivery of the product, title has been transferred, and the Company has no significant obligations remaining to be performed; (2) a final understanding as to specific nature and terms of the agreed upon transaction has occurred; (3) price is fixed and (4) collection is reasonably assured.

Share Based Compensation

Share Based Compensation – The Company accounts for share-based compensation in accordance with the fair value recognition provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) No. 718. For employees and directors, the fair value of the award is measured on the grant date, and for non-employees the fair value of the award is generally re-measured on interim financial reporting dates until the service period is complete.

Option valuation models require the input of highly subjective assumptions, including the expected life of the option, and such assumptions can materially affect the fair value estimate. The fair value of share-based payment awards was estimated using the Black-Scholes option pricing model. The Company uses historical data to estimate option exercise and employee termination within the valuation model; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

For the Black-Scholes pricing model, the Company used the following assumptions and weighted average fair value ranges for the three months ended March 31:

		2013	2012
Risk-free interest rate	0.34%-2.54%		0.43%-0.86%
Dividend yield	N/A		N/A
Expected volatility	36.4%-50.2%		44.7%-55.2%
Expected life in years	2.5-7		3-5

Concentration

Concentrations

· Credit Risk – The Company maintains cash balances at various high quality federally insured financial institutions, with balances at times in excess of federally insured limits. Management believes that the financial institutions that hold the Company’s deposits are financially sound and therefore pose a minimum credit risk. The Company has not experienced any losses in such accounts.

· Major customers – The Company has one and two major customers, which accounted for approximately 13% and 65% of the sales during the three months ended March 31, 2013 and 2012, respectively. For the three months ended March 31, 2013, the total sales comprised of customer A 13% compared to the three months ended March 31, 2012, comprised of customer F 42% and customer H 23%. The loss of any of these customers could adversely affect the Company's operations.

· Major receivables – The Company has three major receivables at March 31, 2013 comprised of customer B 19%, customer C 12% and customer D 11%, compared to five major receivables at March 31, 2012 comprised of customer E 27%, customer F 17%, customer G 17%, customer H 14%, and customer I 11%.

· Major suppliers – The Company has five and four major suppliers, which accounted for approximately 86% and 63% of purchases during three months ended March 31, 2013 and 2012, respectively. The loss of any of these suppliers could adversely affect the Company's operations.

Net Loss Per Share

Net Loss Per Share - Basic loss per share was computed using the weighted average number of outstanding common shares. Diluted loss per share includes the effect of dilutive common stock equivalents from the assumed exercise of options, warrants and convertible notes. Common stock equivalents were excluded in the computation of diluted loss per share since their inclusion would be anti-dilutive.

In accordance with ASC 260 “Earnings per Share”, the Company has given effect to the issuance of warrants to purchase 1,100,000 and 2,795,538 shares of the Company’s common stock as of March 31, 2013 and 2012, respectively, exercisable at $0.01. These warrants have been included in computing the basic net loss per share for the three months ended March 31, 2013 and 2012. Additionally, included in the Company’s weighted average shares outstanding are 56,189 and 3,529,897 shares earned, but not issued, as at March 31, 2013 and 2012, respectively.

Total common stock equivalents which were excluded (since their inclusion would be anti-dilutive) are those shares issuable upon the exercise of warrants, options and the conversion of convertible notes, as of March 31, 2013 and 2012 were as follows:

	March 31,
	2013		2012
Options		7,717,896		4,483,750
Warrants		13,394,341		4,710,350
Convertible notes		3,793,160		5,304,352
Total Common stock equivalents		24,905,397		14,498,452

Recently Issued Accounting Standards

Recently Issued Accounting Standards

Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.

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Related Party Transactions

3 Months Ended

Mar. 31, 2013

Related Party Transactions [Abstract]

Related Party Transactions

10. RELATED PARTY TRANSACTIONS

Consulting Agreement

On July 1, 2008, the Company signed a 16-month consulting agreement with a related party. The consulting services include financial advisory, investment relations and certain administrative and other services for $6,250 monthly fees. At March 31, 2013 and December 31, 2012, the Company owed $100,000 related to above consulting services, which is included in accrued expenses and other current liabilities in the condensed consolidated balance sheets.

Employee Warrants

On February 29, 2012, an employee was granted a three year warrant to purchase 300,000 shares of the Company’s common stock for services rendered. The warrant vested upon grant, and was exercisable at $0.25 per share. The Company recorded a charge for $6,149 to stock based compensation for the three months ended March 31, 2012.

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Fair Value Measures (Tables)

3 Months Ended

Mar. 31, 2013

Fair Value Disclosures [Abstract]

Fair Value Measures on a recurring basis

	Fair Value Measurements
		Level 1		Level 2		Level 3		Total
Derivative liabilities:
March 31, 2013	$	—	$	—	$	219,330	$	219,330
December 31, 2012	$	—	$	—	$	432,030	$	432,030

Fair value liability on recurring basis

		Three Months Ended March 31, 2013		Year Ended December 31, 2012
Fair value, beginning of period	$	432,030	$	155,813
Derivative liabilities recorded during the period		-		1,323,548
Reclassification to equity upon conversion of note		-		(1,787,542)
Reclassification to equity upon amendment of notes and warrants		-		(1,152,144)
Net unrealized (gain) loss on derivative financial instruments		(212,700)		1,892,355
Fair value, end of period	$	219,330	$	432,030

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2013

Accounting Policies [Abstract]

Black-Scholes pricing model

	2013	2012
Risk-free interest rate	0.17% - 0.71%	0.31%-0.38%
Dividend yield	N/A	N/A
Expected volatility	37.1%-54.7%	46.5%-46.8%
Expected life in months and years	3 months - 48 months	20 months

Binomial lattice options pricing model

	2013	2012
Risk-free interest rate	0.14% - 0.34%	0.15%-0.62%
Dividend yield	N/A	N/A
Expected volatility	31.6%-56.0%	43.4%-46.1%
Expected life in months and years	3 months – 4.3 years	6 months – 3 years

Share Based Compensation Assumptions

		2013	2012
Risk-free interest rate	0.34%-2.54%		0.43%-0.86%
Dividend yield	N/A		N/A
Expected volatility	36.4%-50.2%		44.7%-55.2%
Expected life in years	2.5-7		3-5

Common Stock Equivalents

	March 31,
	2013		2012
Options		7,717,896		4,483,750
Warrants		13,394,341		4,710,350
Convertible notes		3,793,160		5,304,352
Total Common stock equivalents		24.905,397		14,498,452

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Document and Entity Information	3 Months Ended
	Mar. 31, 2013	Jun. 28, 2013
Document And Entity Information
Entity Registrant Name	Organic Alliance, Inc.
Entity Central Index Key	0001442634
Document Type	10-Q
Document Period End Date	Mar. 31, 2013
Amendment Flag	true
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		18,473,554
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2013
Amendment Description	The purpose of this Amendment No. 1 to the Organic Alliance Inc. Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2013, filed with the Securities and Exchange Commission on June 25, 2013 (the “Form 10-Q”), is to furnish Exhibit 101 to the Form 10-Q in accordance with Rule 405 of Regulation S-T. Exhibit 101 to this report provides the financial statements and related notes from the Form 10-Q formatted in XBRL (eXtensible Business Reporting Language).

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Notes payable, Loans and Derivative Liabilities (Tables)

3 Months Ended

Mar. 31, 2013

Debt Disclosure [Abstract]

Notes payable

	March 31		December 31,
	2013		2012
	(unaudited)
Notes Payable (net of debt discount of $66,913 at March 31, 2013 and $133,827 at December 31, 2012) (A)	$	2,687,963	$	2,512,753
Notes Payable – Related Parties (net of debt discount of $23,836 at March 31, 2013 and net of debt discount of $47,673 at December 31, 2012) (B)		558,115		509,696
Convertible Notes Payable (net of debt discount of  $217,535 at December 31, 2012) (C)		1,178,495		914,506
Total	$	4,424,573	$	3,936,955
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