|UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM 10-KSB/A                                                                                                                                                                                                                                                                
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|(Mark One)                                                                                                                                                                                                                                                                                                                                            
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|[X]                                                                                                                                                                                                                                                                                                                                                   
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|Commission file number 0-26108                                                                                                                                                                                                                                                                                                                        
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|NATUREWELL, INCORPORATED[Name of small business issuer in its charter]                                                                                                                                                                                                                                                                                
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|Delaware(State or other jurisdiction
of incorporation or organization)                                                                                                                                                                                                                                                                                
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|110 West C St., Suite 1300, San Diego, California 92101
(Address of principal executive office)      (Zip Code)                                                                                                                                                                                                                                       
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|Registrant's telephone number including area code:  (619) 234-0222                                                                                                                                                                                                                                                                                    
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|Securities registered pursuant to Section 12(b) of the Act:None(Title of Class)                                                                                                                                                                                                                                                                       
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|Securities registered pursuant to Section 12(g) of the Act:Common Stock, $0.01 Par Value(Title of Class)                                                                                                                                                                                                                                              
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|Check whether this issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes   [X]     No   [ ]
|                                                                                                                                                                                                                                                                                                                                                      
|Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation SB contained herein, and no disclosure will be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.  [X]    
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|State the issuer's revenues for its most recent fiscal year:  $71,355.                                                                                                                                                                                                                                                                                
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|State the aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within the past 60 days. As of October 12, 2005 the aggregate market value was $591,106.                                        
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|State the number of shares outstanding of each of the issuer's classes of common equity, as of the last practicable date. As of October 12, 2005 the Company had issued and outstanding 118,221,228 shares of $0.01 par value common stock.                                                                                                           
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|Documents incorporated by reference and parts of Form 10-KSB into which incorporated:  None.                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                      
|Transitional Small Business Disclosure Format (check one):  Yes   [ ]     No   [X]                                                                                                                                                                                                                                                                    





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ITEM 1.   BUSINESS

THIS REPORT ON FORM 10-KSB CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES.  THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN SUCH FORWARD-LOOKING STATEMENTS.

This report contains a number of forward-looking statements, which reflect the Company's current views with respect to future events and financial performance.  Such forward-looking statements are based on management's beliefs and assumptions regarding information that is currently available, and are made pursuant to the "safe harbor" provisions of the federal securities laws.  These forward-looking statements are subject to certain risks and uncertainties.  The Company's actual performance and results could differ materially from those expressed in the forward-looking statements due to risks and uncertainties that could materially impact the Company in an adverse fashion and are only predictions of future results, and there can be no assurance that the Company's actual results will not materially differ from those anticipated in these forward-looking statements. In this report, the words "anticipates", "believes", "expects", "intends", "plans", "may", "future", and similar expressions identify forward-looking statements. Readers are cautioned to consider the risk factors described below and not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date hereof. The Company has no obligation to publicly update or revise any of the forward-looking statements to reflect events or circumstances that may arise after the date hereof.

Background of Company

NatureWell, Incorporated (the "Company") is a public company traded on the Over-the-Counter Bulletin Board ("OTC-BB") under the symbol "NAWL."  The Company is engaged in the research and development of unique proprietary healthcare products intended for a variety of conditions. Currently the Company's primary focus is on the distribution and sale of its migraine medication, MIGRASPRAY(R), a homeopathic over-the-counter drug used for the treatment and prevention of migraine headaches. The Company intends to exclusively market MIGRASPRAY to healthcare professionals and directly to consumers. The Company has been testing its marketing strategy while it engages in restructuring/capital raising efforts. The completion of such efforts is necessary in order for the Company to fully implement its business plan. (see Note Q "Restructuring" in Notes to Financial Statements).

The Company outsources its manufacturing, warehousing and major distribution activities to third party vendors. Customer service, sales and administration are handled at the Company's headquarters in San Diego, California. The Company currently has four employees.

Business Strategy

The Company believes that a strong need exists for a safe and effective over-the-counter drug for the treatment of migraine headaches and its strategy is to position MIGRASPRAY as a comprehensive first-line of defense for treating migraine headaches and for the distribution of MIGRASPRAY to lead the development of a distribution platform that can be used in the future to launch the Company's other products. The medication, a sublingual spray (sprayed under the tongue), can be used for prevention of migraines, as well as for the treatment of migraine headache attacks. If a migraine attack still occurs while MIGRASPRAY is being used preventatively, the medication may also be used to treat the acute attack. This comprehensive approach can be highly effective in dramatically reducing or eliminating migraines and represents a safe alternative to expensive prescription medications. In addition to its use as a migraine reliever or preventative, MIGRASPRAY may also be used for other types of headaches and pain, particularly headache pain and cramping associated with menstrual cycles.

The Company plans to market MIGRASPRAY to healthcare providers using in-house and outside sales representatives and distributors and plans to also continue selling MIGRASPRAY via the Internet and other direct-to-consumer sales.



It is anticipated that a completion of the Company's restructuring/capital raising efforts will be needed before the Company can launch a full-scale effort of its marketing strategy.

Order Fulfillment

Currently the Company's order fulfillment process is performed in-house while maintaining the majority of its inventory at a third party warehouse. Order fulfillment activities include receiving merchandise from the warehouse, inspecting merchandise for damages or defects, packaging and processing customer orders and shipping the product. Each customer is generally charged a shipping and handling fee in addition to the cost of the product unless such fees have been waived as part of a sales promotion.





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Product Development

The Company's Senior Vice President of Research and Development researches new product concepts and ideas from a variety of sources.

During the evaluation phase of product development, the Company analyzes the suitability of a product for mass distribution, as well as the anticipated perceived value of the product to consumers; determines whether an adequate and timely supply of the product can be obtained; and further analyzes whether the estimated profitability of the product satisfies the Company's needs.  The Company will continue to review products and product concepts on an ongoing basis to select those that it believes will be successful in one or more markets.

Product Overview

MIGRASPRAY

MIGRASPRAY is a patented, clinically tested, over-the-counter homeopathic drug for the fast relief and prevention of the symptoms of migraine headaches and is currently sold through a limited number of healthcare practitioners throughout the United States, as well as directly to consumers over the Internet and through telephone orders.

MIGRASPRAY is sprayed under the tongue (sublingual administration), which promotes enhanced bioavailability and rapid metabolization by directly entering the bloodstream through the mucous membrane, avoiding degradation from exposure to the gastrointestinal tract and liver.  This fast acting delivery system allows MIGRASPRAY to provide rapid relief from migraine pain and other associated symptoms. It contains the active ingredients feverfew (its primary ingredient), polyporus, goldenseal and dandelion. Feverfew has been used for centuries for the treatment of a variety of ailments including headaches, rheumatic aches, abdominal pain and menstrual cramps. Studies have shown that feverfew acts as a natural anti-inflammatory controlling the inflammation that results in cerebral blood vessel dilation, believed to cause or contribute to the symptoms of migraine headaches. The active ingredients in feverfew are sesquiterpene lactones, the primary component being Parthenolide, a phyto-chemical. In limited doctor tests conducted on behalf of the Company, and consistent with large clinical studies indicating the effectiveness of feverfew for preventing migraines, MIGRASPRAY has been shown to be effective in dramatically reducing the frequency or eliminating migraine headaches entirely, when taken daily.





|* | Contains:             | 10 ml or 30 ml.                                                                                                                                                                                                                     
|- | --------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Indication:           | For relief of headaches.                                                                                                                                                                                                            
|* | Directions:           | Administer 10 full sprays under the tongue and hold for at least thirty seconds before swallowing. Dose can be repeated every 10 minutes if required, up to 6 doses.  Use as needed or directed by physician.                       
|* | Active
Ingredients:   | A proprietary homeopathic blend: feverfew (Tanacetum Parthenium, leaves and flowers), Goldenseal (Hydrastis rhizoma, root, Dandelion (Taraxicum denleonis, root), Polyporus Officinalis (Polyporus umbelleatus, Sclerotium)(all 3x).
|* | Inactive
Ingredients: | Distilled water, glycerin, ascorbic acid, potassium Sorbate (as preservative), disodium EDTA.                                                                                                                                       

Migraine Market

Estimates indicate that as many as 32 million Americans suffer from migraine headaches and that approximately three quarters of those sufferers are women. More than half of all sufferers rely totally on non-prescription remedies, the same as nearly 10 years ago.



An estimated 150 million workdays or an equivalent of 1,200 million work hours are lost each year to head pain.  Such lost productivity and employee absenteeism results in an estimated $13 billion in losses to employers each year.



A family of drugs known as "triptans," which constrict the cerebral blood vessels, dominate the prescription market for migraine remedies at costs reaching as high as $60 per dose. Triptans are sometimes contraindicated for patients with poor cardiac health and/or high blood pressure and patients are generally restricted in the amount of these drugs that may be used within a 30-day period due to potentially serious side effects.





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The Company's Other Products

The Company has developed, or has under development, other products using its sublingual delivery system.  All of these products are natural, fall within the category of either homeopathic drugs or dietary supplements and, thus, avoid the lengthy and expensive FDA approval processes.  Sublingual (under the tongue) administration, is a method of delivering substances into the body in a manner that promotes direct absorption through the highly vascularized mucous membrane under the tongue, rather than through the digestive tract, thereby bypassing exposure to the liver and gastric system.  Sublingual administration of the Company's specially prepared sprays is a fast acting and efficacious delivery method, promoting enhanced bioavailability and rapid metabolization.  Many of the spray formulations are intended to be symptomatically efficacious in a manner of minutes.

Though many sublingual substances are absorbed by diffusion (the sublingual area soaking up the substance), not all substances are permeable and accessible to the mucous membrane, which often functions as a barrier.  However using the Company's MICROMIST technology, the sublingual mucous membrane can become an ideal site for rapid absorption.

The Company has developed the following products for future marketing and distribution:

ALLERSPRAY II (TM) - designed for the fast relief of allergy symptoms, without drowsiness, dry-mouth or other side effects. An estimated 58 million people suffer from allergies in the United States.

PMS SPRAY (TM) - intended to prevent and relieve the pain and symptoms of pre-menstrual syndrome. An estimated 40 million women suffer from PMS in the United States.

ARTHRISPRAY (TM) - intended to prevent and relieve the pain and symptoms of arthritis. An estimated 70 million people suffer from arthritis in the United States.

ANTI-OXY SPRAY (TM) - intended to reduce and prevent cerebral oxidative damage, which may be associated with Parkinson's disease. An estimated 1.5 million people suffer from Parkinson's disease in the United States.

Additionally, the Company has in various stages of development other products including, but not limited to, a natural sedative, a treatment for general aches and pains and other treatments for a variety of conditions.

Competition

The Company competes directly with many other companies, which generate revenue from direct marketing, wholesale/retail distribution, and electronic commerce activities. The Company also competes with a large number of consumer health product companies and retailers, which have substantially greater financial, marketing and other resources than the Company. Additionally, companies may attempt to imitate or "knockoff" the Company's products and may be able to take advantage of the product category awareness and product development, which the Company has created. The Company will seek to protect itself from "knockoffs" through the establishment and enforcement of its intellectual property and patent rights.

Regulatory Compliance

Various aspects of the Company's business are subject to regulation and ongoing review by a variety of federal, state, local and foreign government agencies, including, but not limited to the Federal Trade Commission ("FTC"), the United States Post Office, the Consumer Product Safety Commission ("CPSC"), the Federal Communications Commission, ("FCC"), the Food and Drug Administration ("FDA"), various States' Attorneys General and other state, local consumer protection and health agencies. The statutes, rules and regulations applicable to the Company's operations, marketing and distribution are numerous, complex and subject to change.





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If any significant actions were brought against the Company or any of its subsidiaries in connection with a breach of such laws or regulations, including, but not limited to the imposition of fines or other penalties, the Company could be materially and adversely affected. There can be no assurance that changes in the laws and regulations of any territory which forms a significant portion of the Company's market will not adversely affect the Company's business or results of operations.

The Company will collect and remit sales tax in states where it has a physical presence. Certain states in which the Company's only activity is direct marketing may attempt to require direct marketers, such as the Company, to collect and remit sales tax on sales to customers residing in such states. A 1995 United States Supreme Court decision held that Congress could legislate such a change. Thus far, Congress has taken no action to that effect. The Company will be prepared to collect sales taxes for other states if laws are passed requiring such collection. The Company does not believe that a change in the laws requiring the collecting of sales taxes will have a material adverse effect on the Company's financial condition or results of operations.

Trademarks and Patents

Proprietary protection for the Company's products, processes, and know-how is important to the Company's business.  Thus, the Company plans to aggressively prosecute and defend its proprietary technology.  The Company holds two patents and has one patent pending before the United States Patent and Trademark Office and intends to file additional patent applications, where appropriate, to protect technology, inventions and improvements that are considered important to the development of its business. The Company also relies upon trade secrets, know-how, continuing technological innovation, and licensing opportunities to develop and maintain its competitive position.

Patent positions of healthcare product firms, including the Company's, are generally uncertain and involve complex legal and factual questions.  Consequently, even though the Company may prosecute its patent applications with the United States and foreign patent offices, the Company does not know whether any applications will result in the issuance of patents or whether any issued patents will provide significant proprietary protection or will be circumvented or invalidated.  Since patent applications in the United States are maintained in secrecy until patents are issued, and publication of discoveries in the scientific or patent literature tend to lag behind actual discoveries, the Company cannot be certain that it was the original creator of inventions which may be covered by patent applications or that it was the first to file patent applications for such inventions.

There can be no assurance that a court of competent jurisdiction, if issued, would hold patents, valid.  Moreover, to determine priority of invention, the Company may have to participate in interference proceedings declared by the United States Patent and Trademark Office or opposition proceedings before an equivalent foreign agency, which could result in substantial cost to the Company.

There can be no assurance that the patent applications, if any, will result in patents being issued or that if issued, the patents will afford protection against competitors with similar technology; nor can there be any assurance that others will not obtain patents that the Company would need to license or circumvent.

The Company will also rely upon unpatented trade secrets, and there can be no assurance that others will not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to the Company's trade secrets or disclose such technology, or that the Company can meaningfully protect its right to unpatented trade secrets.

Human Resources

The Company has three employees and utilizes the services of consultants, or independent contractors, engaged in research and development, customer service and general administration when needed.  None of the Company's employees are covered by a collective bargaining agreement and the Company has experienced no work stoppages.  The Company believes that it maintains positive relations with its personnel.





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ITEM 2.   PROPERTY

The Company's corporate offices are located at 110 West "C" St, Suite 1300, San Diego, California 92101.  The offices are approximately 350 square feet and are currently leased on a month to month basis at $1,400 per month.

ITEM 3.   LEGAL PROCEEDINGS

At June 30, 2005 the Company has a litigation reserve totaling $130,170 which it maintains for legal and settlement costs associated with its restructuring efforts and for litigation arising in the ordinary course of business. Notwithstanding the reserve established, in the light of the Company's current financial condition, the Company's cash liability, if any, arising from legal proceedings related to these matters, and others in which it is involved, could have a material adverse effect on the Company's financial position, results of operations or cash flows.



As discussed elsewhere in this Form 10-KSB, the Company is subject to regulation by a number of federal, state, and foreign agencies and is involved in various legal matters arising in the normal course of its business.



Currently the Company does not carry product liability insurance. Pending the outcome of the Company's restructuring efforts, and tests of its marketing strategy, insurance coverage will be evaluated in amounts that management believes is adequate to cover the risks it faces in the industry in which it competes. There can be no assurance, however, that the Company can afford such insurance coverage or that such insurance coverage will be adequate to cover all losses, which the Company may incur in future periods or that coverage will be available for all of the types of claims the Company faces or may face.



In the opinion of management, the Company's liability, if any, arising from regulatory and legal proceedings related to these matters, and others in which it is involved, could have a material adverse effect on the Company's financial position, results of operations or cash flows.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

As of June 30, 2005, there were over 600 holders of record of the Common Stock. The Company has not paid cash dividends on its capital stock since inception and does not have any plans to do so in the future. The Company currently intends to retain earnings, if any, for use in its business.

Market Information

The Company's Common Stock is traded on the Over-the-Counter Bulletin Board ("OTC-BB") under the symbol "NAWL."  The following table sets forth the high and low closing prices per share for the Company's Common Stock for the prior three years:



|                  | HIGH  | LOW  
|----------------- | ----- | -----
|                  |       |      
|Fiscal Year 2002: |       |      
|First Quarter     | 0.03  | 0.02 
|Second Quarter    | 0.06  | 0.01 
|Third Quarter     | 0.04  | 0.02 
|Fourth Quarter    | 0.03  | 0.01 
|                  |       |      
|Fiscal Year 2003: |       |      
|First Quarter     | 0.21  | 0.075
|Second Quarter    | 0.15  | 0.055
|Third Quarter     | 0.087 | 0.045
|Fourth Quarter    | 0.30  | 0.085
|                  |       |      
|Fiscal Year 2004: |       |      
|First Quarter     | 0.015 | 0.007
|Second Quarter    | 0.014 | 0.005
|Third Quarter     | 0.01  | 0.005
|Fourth Quarter    | 0.01  | 0.005





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Recent Sales of Securities

During the year ending June 30, 2005 the Company made the following issuances and sales of securities in reliance upon the exemption provided by Section 4(2) of the Securities Act of 1933, as amended, Rule 506 of Regulation D hereunder.

During the Month of July 2004, the Company issued 658,100 shares of common stock registered under its S-8 plan for services in the amount of $6,581.

During the Month of October 2004, the Company issued 533,333 shares of common stock registered under its S-8 plan as payment for $5,333 of services rendered.



During the month of December 2004 the Company sold a Senior Convertible Note, face value $50,000, to an individual investor in return for $50,000 in cash. Such Senior Convertible Note pays interest quarterly beginning on April 1, 2005 at the rate of 8% per annum and is convertible into 2,000,000 shares of Common Stock.



In January 2005 the Company issued $10,875 face value of unsecured convertible notes to two former officers and one former director, which convert into 4,350,000 shares of Common Stock (subject to restrictions) in exchange for $10,875 of services rendered. The forfeiture by the officers and director of 3,500,000 shares of stock and a $6,000 convertible note that converts into 600,000 shares were part of the transaction.



In January 2005 the Company sold a Senior Convertible Note, face value $100,000, to an individual investor in return for $100,000 in cash. Such Senior Convertible Note pays interest quarterly beginning on April 1, 2005 at the rate of 8% per annum and is convertible into 4,000,000 shares of Common Stock.



In February 2005 the Company sold a Senior Convertible Note, face value $15,000, to an individual investor in return for $15,000 in cash. Such Senior Convertible Note pays interest quarterly beginning on April 1, 2005 at the rate of 8% per annum and is convertible into 600,000 shares of Common Stock.



In February 2005 the Company sold a Senior Convertible Note, face value $15,000, to an individual investor in return for $15,000 in cash. Such Senior Convertible Note accrues interest at the annual rate of 6% and is convertible into 600,000 shares of Common Stock (the holder has the right to convert the interest which has accrued on the note as of the time of conversion into Common Stock at $.025 per share).

In February 2005, the Company issued $57,400 face value of Convertible Notes to the Guarantor (see Note N) that are convertible into 11,480,000 shares of Common Stock (subject to conversion restrictions) in return for guaranteeing $180,000 of Senior Convertible Notes.



In February 2005 the Company issued a $6,000 unsecured convertible note to its Chief Financial Officer, in exchange for services rendered, that is convertible (subject to restrictions) at $.0075 declining to $.0025 at February 22, 2007. The forfeiture by the Chief Financial Officer of a $7,000 senior secured convertible note that was convertible into 700,000 shares was part of the transaction.



In February 2005 the Company issued $17,500 of unsecured convertible notes that are convertible into 7,000,000 shares of common stock, subject to restrictions, in exchange for $17,500 of board fees owed to two directors. The forfeiture by the directors of $17,500 of senior secured convertible notes that were convertible into 1,750,000 shares of stock and 750,000 shares of stock were part of the transaction.



In February 2005 the Company issued a $7,000 unsecured convertible note to an employee, in exchange for services rendered, which is convertible into common stock at $.0075 declining to $.0025 at February 22, 2007. The forfeiture by the employee of a $9,000 senior secured convertible note that was convertible into 900,000 shares was part of the transaction.



In February 2005 the Company issued to its Chief Executive Officer: (1)(i) 25 shares of Series B Preferred stock (which are convertible into 625,000 shares of common, (ii) a senior secured convertible note, face value $190,000, which is convertible into 19,000,000 shares of common, and (iii) a $100,000 senior secured note due March 30, 2006, in exchange for a senior secured note for $484,698 owned by the Executive that had been in payment default since October 5, 2003, (2) 3,000,000 shares of S-8 stock in exchange for $30,000 past due to the Executive for services rendered, (3) a $110,000 senior secured convertible note that is convertible into 11,000,000 shares of common until May 15, 2006 at which time it becomes convertible into 22,000,000 shares of common if Executive has remained in the continuous employ of the Company throughout the entire period, in exchange for the settlement of amounts past due to the Executive for services rendered, and (4) a $150,000 senior secured note maturing on March 30, 2006 in exchange for the settlement of amounts past due to the Executive for services rendered.





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In February 2005 the Company issued to its Senior Vice President of Research and Development: (1) a $12,500 unsecured convertible note that is convertible into 5,000,000 shares of common in exchange for the settlement of amounts past due to the Executive for services rendered, and (2) a $25,000 senior secured convertible note that is convertible into 10,000,000 shares of common in exchange for $5,290 of services rendered and the purchase of a senior note for $18,250 owned by the Executive



During the Month of March 2005, the Company issued 300,000 shares of common stock registered under its S-8 plan as payment for $3,000 of services rendered.



In April 2005 the Company sold a Senior Convertible Note, face value $120,000, and an unsecured convertible note, face value $5,000, to an individual investor in return for $125,000 in cash. The Senior Convertible Note pays interest monthly at the annual rate of 10%, is convertible into 4,800,000 shares of Common Stock and matures in May of 2006.The unsecured convertible note accrues interest at the annual rate of 4% and is convertible into 2,000,000 shares of Common Stock.



In April 2005 the Company issued $21,600 face value of Convertible Notes to the Guarantor (see Note N) that are convertible into 4,320,000 shares of Common Stock (subject to conversion restrictions) in return for guaranteeing $120,000 of Senior Convertible Notes.

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS

The Company intends to exclusively market its MIGRASPRAY product to healthcare providers and directly to consumers, and has conducted limited test marketing for this marketing strategy. The Company manages all phases of direct and other marketing for its MIGRASPRAY product in the United States, which includes product selection and development, manufacturing by third parties, acquisition of media and advertising, design and production of marketing materials and creative, order processing and fulfillment, and customer service. The Company's ability to execute a business and marketing plan are dependent upon a successful completion of its restructuring effort/capital raising efforts (see Note Q to Financial Statements).

RISK FACTORS

Certain statements under the headings "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business," and elsewhere in this Report constitute "forward-looking statements" within the meaning of the rules and regulations promulgated by the Securities and Exchange Commission.

THIS REPORT ON FORM 10-KSB CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES.  THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN SUCH FORWARD-LOOKING STATEMENTS.

This report contains a number of forward-looking statements, which reflect the Company's current views with respect to future events and financial performance.  Such forward-looking statements are based on management's beliefs and assumptions regarding information that is currently available, and are made pursuant to the "safe harbor" provisions of the federal securities laws.  These forward-looking statements are subject to certain risks and uncertainties.  The Company's actual performance and results could differ materially from those expressed in the forward-looking statements due to risks and uncertainties that could materially impact the Company in an adverse fashion and are only predictions of future results, and there can be no assurance that the Company's actual results will not materially differ from those anticipated in these forward-looking statements. In this report, the words "anticipates", "believes", "expects", "intends", "plans", "may", "future", and similar expressions identify forward-looking statements. Readers are cautioned to consider the risk factors described below and not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date hereof. The Company has no obligation to publicly update or revise any of the forward-looking statements to reflect events or circumstances that may arise after the date hereof.



As described above, the forward-looking statements contained in this report involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks, uncertainties and other factors include, but are not limited to the following: the Company's lack of operating history and the uncertainty of profitability; the Company's ability to obtain capital, which is critical to its future existence, and if able to obtain capital it can do so on terms that are advantageous or desirable to current shareholders and/or stakeholders of the Company, the Company's ability to successfully advertise or market its products to a degree necessary for it to drive product sales to a level necessary to reach profitability, the Company's ability to develop and introduce new products; the uncertainty of market acceptance of the Company's products and their market penetration; the uncertainties related to the Company's product development programs; the Company's future reliance on collaborative partners and licenses; the Company's future sales, marketing and distribution experience and dependence on distributors; the risks associated with obtaining governmental approval of the Company's products; the highly competitive industry in which the Company operates and the rapid pace of technological change within that industry; the uncertainty of patented and proprietary information protection and the Company's reliance on such patented and proprietary information; changes in or failure to comply with governmental regulation; the Company's dependence on key employees; and general economic and business conditions and other factors referenced in this report. Accordingly, any investment in the Company's common stock hereby involves a high degree of risk. In addition to the other information contained in this Form 10-KSB, the Company's business should be considered carefully before purchasing any of the securities of the Company. In addition to other information contained in this report, prospective investors should carefully consider the following factors before purchasing securities of the Company. Prospective investors are cautioned that the statements in this Section that are not descriptions of historical facts may be forward-looking statements that are subject to risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors, including those identified in "Risk Factors," "Business," and elsewhere in this report.

We Have a Limited Operating History and Have Incurred Operating Losses Since Inception. As a Result, We May Never Become Profitable.



We have a limited operating history upon which an investor can evaluate our potential for future success.  We have generated an accumulated deficit of approximately $23.5 million through June 30, 2005. Although we commenced sales of our migraine product on a national level during the month of September 2001, sales have been limited to date. As a result, there is limited historical financial data upon which an investor can make an evaluation of our performance or make a decision regarding an investment in shares of its common stock.

Our business is subject to all the problems, expenses, delays, and risks inherent in the establishment of a new business enterprise, including but not limited to the following:

- limited capital;
- delays in product development;
- possible cost overruns due to price increases in raw product;
- unforeseen difficulties in the Company's manufacturing processes;
- risks associated with obtaining governmental approval or failing to comply with governmental regulation with respect to the Company's business;
- uncertain market acceptance; and
- the absence of an operating history.



Therefore, the Company may never achieve or maintain profitable operations and the Company may encounter unforeseen difficulties that may deplete its capital resources more rapidly than anticipated.

We May Be Unable To Manage Our Growth.



We plan to experience growth from the sale of our products. Such growth, if realized, could place a significant strain on the Company's management, financial, operating and technical resources. Failure to manage growth effectively could have a material adverse effect on the Company's financial condition or results of operations. Additionally, although the Company presently has no plans to acquire any "companies or assets of a material amount," should the Company decide to adopt acquisition plans as part of a future growth strategy, no assurance can be given that the Company can effectively integrate such acquired operations or assets with its own operations. The Company may also seek to finance any such future acquisition by debt financing or issuance of equity securities and there can be no assurance that any such financing will be available at acceptable terms or at all.





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We Face Extensive Government Regulation.



The manufacturing, processing, formulating, packaging, labeling and advertising of the Company's products are subject to regulation by one or more federal agencies, including the United States Food and Drug Administration, the Federal Trade Commission and the Consumer Product Safety Commission. The Company's activities are also regulated by various state and local governmental agencies in the states where the Company distributes its products and in which the Company's products are sold. Although the Company believes that it is in compliance with all existing regulations, the Company remains subject to the risk that, in one or more of its present or future markets, its products or marketing systems could be found not to be in compliance with applicable laws or regulations.



In addition, the Company is unable to predict whether it will be able to comply with any new legislation or regulations or amendments to legislation and regulations that may be enacted in the future. New laws or regulations could require the reformulation of certain products to meet new standards, the recall or discontinuance of certain products not capable of reformulation, additional record keeping, expanded documentation of the properties of certain products, expanded or different labeling, and/or scientific substantiation. Failure by the Company to comply timely with all laws and regulations applicable to its products could have a material adverse effect on its business, operations, and financial condition.



We Do Not Carry Product Liability Insurance Even Though We Are Subject to Product Liability Claims.



The Company, like other retailers, distributors and manufacturers of products that are ingested, faces the inherent risk of exposure to product liability claims in the event that the use of its products results or is believed to result in injury. However, we currently do not carry product liability insurance. Pending the outcome of the Company's capital raising efforts, and testing of its new marketing strategy, insurance coverage will be evaluated in amounts that management believes is adequate to cover the risks it faces in the industry in which it competes. There can be no assurance, however, that the Company can afford such insurance coverage or that such insurance coverage will be adequate to cover all losses, which the Company may incur in future periods or that coverage will be available for all of the types of claims the Company faces or may face. We cannot assure the safety or effectiveness of our products.

We Face Intense Competition From Competitors With Far Greater Market Share, Market Recognition, and Financial Resources.



The business of designing, marketing, and selling products for the treatment and/or prevention of migraine is highly competitive. Numerous manufacturers, distributors, and retailers compete actively for customers, including a number of international pharmaceutical companies with vast financial resources. Many of the Company's competitors are substantially larger than the Company and have greater market share, market recognition, and financial resources.



The prescription drug market for migraines is led by GlaxoSmithKline with Imitrex®, a Triptan drug indicated for the acute treatment of migraine. Excedrin Migraine®, manufactured by Novartis, dominates the over-the-counter market. Virtually all prescription and over-the-counter allopathic drugs are manufactured, marketed and distributed by large international pharmaceutical companies with substantial resources and thus command a majority of market share and acceptance. Competing brands and their manufacturers include the following:



A. PRESCRIPTION DRUGS



I. Triptans:

- Imitrex®[A] - GlaxoSmithKline
Zomig®[A] - AstraZeneca
Relpax®[A] - Pfizer
Axert®[A] - Ortho-McNeil
- Amerge®[A] - GlaxoSmithKine
- Maxalt®[A] - Merck
- Migranal®[A] - Valeant Pharmaceuticals



II. Anticonvulsants:

- Topamax®[P] - OrthoMcNeil Neurologics, Inc.



B. OVER-THE-COUNTER DRUGS

I. Analgesics:

- Excedrin Migraine®[A] - Novartis
- Midrin®[A] - Women First HealthCare, Inc.

II. NSAID's:

- Advil Migraine®[A] - Wyeth Consumer Healthcare
- Motrin Migraine®[A] - McNeil Consumer and Specialty Pharmaceuticals

[A] - Abortive treatment of migraine.
[P] - Prophylactic treatment of migraine (prevention).





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The products listed above have resources placed behind marketing and product awareness campaigns that are far greater than the amount of resources available to the Company to support similar efforts for its migraine product. Additionally, such products are generally supported by substantial testing and scientific validation of their efficacy which may be viewed by consumers as superior to the limited data accumulated by the Company to support the efficacy of its migraine product.



The Company also competes with other manufacturers that market natural over-the-counter products for migraines. Typically these competitors are small private companies for which the Company has little data or information. The limited amount of data about such competitors and the market share that they control makes it very difficult to analyze which types of marketing efforts and initiatives have proven successful for these competitors. As such, the Company will have to engage in marketing efforts that are largely untested and speculative as to their effectiveness.



The market for other products that the Company would like to introduce in the future will also be very highly competitive and dominated by many of the same competitors and challenges that the Company faces for its migraine product. Because the Company's ability to reach profitability and remain competitive depends in part upon the successful introduction of new products, the challenges of competitors having vastly greater resources, market share, proven marketing techniques and products with demonstrated efficacy make the future success of the Company a difficult task, which there can be no assurance is achievable.

We Depend Upon A Single Product and a Limited Customer Base.



The Company has only one product that it is currently attempting to distribute nationally, a homeopathic drug called MIGRASPRAY which is used for the treatment and prevention of migraine headaches. The Company's sales depend exclusively on the MIGRASPRAY product, creating a risk of concentration associated with the sale of a single product and limited customer base. The loss of this single product market could cause severe damage to the Company's financial future. The Company has no customers that represent greater than 5% of gross revenues. As a result, the Company has no large customers upon which it can rely for sales of its product.

Sales of Our Migraine Relief Product, MIGRASPRAY, Have Been Limited Due To Our Limited Marketing Budget. As a Result, MIGRASPRAY May Never Gain Market Acceptance.



We are attempting to market our migraine relief product nationally. However, as a result of capital constraints, the national marketing of MIGRASPRAY has been very limited, and the Company has experienced minimal sales to date.



There can be no assurance that we will obtain the funds necessary to successfully market MIGRASPRAY. Even if we were to obtain the funds necessary to successfully market MIGRASPRAY, there is no assurance that sales of MIGRASPRAY would increase.

Our Success Depends In Part Upon the Development Of New Products, Which May Never Materialize.



The Company is in various stages of development on a number of products. A substantial part of the Company's future growth strategy depends upon the development of new products. However, there can be no assurance that such new products will be developed timely and within budget or if developed will meet with market acceptance. Any new products developed by the Company likely will face competition from numerous larger manufacturers whose resources are substantially greater than those of the Company and whose market presence may make it difficult or uneconomic for the Company to introduce new products against such competition. The market for natural remedies, treatments and dietary supplements is highly sensitive to the introduction of new products that may rapidly capture a significant share of the market. As a result, the Company's ability to remain competitive depends in part upon the successful introduction of new products.

Inflation May Harm Our Financial Results.



Inflation affects the cost of raw materials, goods, and services we use.. In recent years, inflation has been modest. If inflation were to increase, the competitive environment in the over the counter drug market limits our ability of the Company to recover higher costs resulting from inflation by raising prices of our products.

We Depend Upon Our Key Personnel.



The Company is dependent on the efforts and abilities of certain of its senior management, particularly James Arabia, its Chief Executive Officer and Chief Financial Officer. As an accommodation to the Company, much of key management (as well as the outside directors on the board of directors) have accepted securities issued by the Company in lieu of cash compensation for their services, including Mr. Arabia. The interruption of the services of such key management (or outside directors), especially in light of their willingness to accept forms of compensation other than cash, could have a material adverse effect on the Company's operations, profits and future development, if suitable replacements are not promptly obtained. In addition, the Company's success depends, in part, upon its ability to attract and retain other talented personnel. There can be no assurance that the Company will be able to attract and retain such personnel necessary for the development of the business of the Company.

We Have Limited Intellectual Property Rights. We May Not Be Able to Commercialize our Products Under Development If They Infringe Existing Patents or Patents That Have Not Yet Issued.



The Company's patents and trademarks are valuable assets, which are very important to the marketing and national distribution of its products. The Company holds trademarks for NatureWell, MigraSpray, Allerspray and MigraDaily and also holds two patents with the United States Patent and Trademark Office;  "Therapeutic Nasal Spray Administered Composition Containing Feverfew" (patent # 6103218) and "Compositions and Methods for the Treatment of Aches and Pains" (patent # 6770263 B1). The Company intends to file additional patent applications, where appropriate, to protect technology, inventions and improvements that are considered important to the development of its business. The Company also relies upon trade secrets, know-how, continuing technological innovation, and licensing opportunities to develop and maintain its competitive position.



Consequently, even though the Company may pursue patent applications with the United States and foreign patent offices, the Company does not know whether any applications will result in the issuance of patents or whether any issued patents will provide significant proprietary protection or will be circumvented or invalidated. Since patent applications in the United States are maintained in secrecy until patents are issued, and publication of discoveries in the scientific or patent literature tend to lag behind actual discoveries, the Company cannot be certain that it was the original creator of inventions which may be covered by patent application or that it was the first to file patent applications for such inventions.



There can be no assurance that a court of competent jurisdiction would hold the Company's patents valid. Moreover, to determine priority of invention, the Company may have to participate in interference proceedings declared by the United States Patent and Trademark Office ("PTO") or opposition proceedings before an equivalent foreign agency, which could result in substantial cost to the Company. There can be no assurance that the patent applications will result in patents being used or issued, nor that if issued, the patents will afford protection against competitors with similar technologies; nor can there be any assurance that others will not obtain patents that the Company would need to license or circumvent. The Company will also rely up on unpatented trade secrets, and there can be no assurance that others will not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to the Company's rights in the unpatented trade secrets.

We May Not Be Able To Continue As a Going Concern.



In their report accompanying the audit of our June 30, 2005 financial statements, our auditors expressed doubt as our ability to continue as a going concern. To date, the Company has had limited sales due to the early stage of its efforts to transition into the marketing and distribution of products. Prior to the first quarter of fiscal year ending June 30, 2002, the Company was primarily engaged in research and development activities. Consequently, the Company has incurred recurring losses from operations. These factors, as well as the risks associated with raising capital through the issuance of equity and/or debt securities creates uncertainty as to the Company's ability to continue as a going concern.





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Assuming the completion of sufficient capital raising efforts, the Company believes that capital raised, together with cash generated from operations, will be sufficient to fund the operations of the Company for at least the next year. However, there can be no assurance that the Company will be able to complete these efforts or produce future revenues. To the extent that the proceeds from the capital raising efforts and cash flow from operations fall short or are insufficient to fund the Company's activities, we may not be able to continue as a going concern.

The Company's plans to address its going concern issues include:



|* | Increasing sales of its products through national distribution channels and through direct marketing to consumers;     
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|* | Raising capital through the sale of debt and/or equity securities; and,                                                
|* | Settling outstanding debts and accounts payable, when available, through the issuance of debt and/or equity securities.



We Require Significant Amounts of Additional Financing Which Could Result in Dilution to Investors; Additional Financing Could be Unavailable or Have Unfavorable Terms



The development and national distribution of the Company's products will require a substantial commitment of funds. Thus far the Company's restructuring efforts have primarily consisted of preparing and positioning the Company to be able to attract new capital by entering into structured agreements with past due creditors (which includes the agreement by such creditors to subordinate their claims to any lien against the Company's assets that may be granted to parties investing new capital) and defending and/or settling outstanding litigation.



We will be required to raise additional capital through equity and/or debt financing (including convertible debt). Any equity financings could result in dilution to our then-existing stockholders. Sources of debt financing may result in higher interest expense.  Any financing, if available, may be on terms unfavorable to us. If such capital raising efforts are unsuccessful, we may be required to reduce or curtail operations and would unlikely to be able to continue as a going concern. The Company's actual capital requirements will depend on many factors, including, but not limited to, the cost and timing of product development and launch activities, the success of research and development efforts, the cost and timing of expansion of its sales and marketing activities, the progress of the Company's national distribution efforts and the commercialization efforts of the Company's competitors, the costs involved in acquiring, prosecuting, maintaining, enforcing and defending intellectual property rights, developments related to regulatory issues, and other factors.

Risk Factors Relation To Our Current Financing Arrangements:

We Are Delinquent In Payments To Our Unsecured Creditors And May Face Collection Actions As a Result.



The Company is delinquent with a number of unsecured creditors for which no payment arrangements exist or for which no agreement to forestall collection action has been agreed upon. At June 30, 2005 the Company has a litigation reserve totaling $130,170 which it maintains for legal and settlement costs associated with its restructuring efforts and for current litigation arising in the ordinary course of business. Notwithstanding the litigation reserve established, in the light of the Company's current financial condition, the Company's cash liability, if any, arising from legal proceedings, could have a material adverse effect on the Company's financial position, results of operations or cash flows. Unsecured creditors amount to approximately $196,000, excluding officers and directors, including those accounted for in the Company's litigation reserve of $130,170, and are comprised of a number of creditors owed amounts of less than $5,000. Whenever feasible the Company negotiates with these creditors to reach settlement agreements that are acceptable to the Company, however, if the Company is unable to reach acceptable settlement arrangements it may be subject to various collection actions.

We Have Secured Debt Obligations That We are Unlikely to Service in a Timely Manner and Which are Likely to Go Into Default



As of June 30, 2005 the Company had the following secured debt obligations that it believes it will be unable to pay in a timely manner: (i) four senior secured notes totaling $302,802 (including interest accrued thereon of $2,802) that accumulate interest at the rate of 4% per annum and are due and payable on March 30, 2006, (ii) subordinated secured notes totaling $1,414,941 (including interest accrued thereon of $356,013) that accumulate interest at the rate of either 8% or 10% per annum and  are scheduled to have principal and interest amortized over 24 equal installments beginning April 1, 2006, and (iii) senior secured notes totaling $155,356 (including interest accrued thereon of $14,872) that accumulate interest at the rate of 8% per annum and are scheduled to have principal and interest amortized over 24 equal installments beginning April 1, 2006.



The Company believes it is unlikely that it will be able to pay these obligations at their scheduled time or in the scheduled amount. As a result it is likely that the Company will default on its payment obligations for this debt. Because these creditors are secured by virtually all of the Company's assets, the Company could face action to have its assets foreclosed upon. Collection action by any secured creditor is governed by an Intercreditor Agreement between such creditors, which requires a majority of senior creditors to approve of any collection action by any secured creditor(s) before such action is commenced (including an action to foreclose on the Company's assets). Although the Company believes that the majority of senior creditors will not agree to authorize collection action at this time (Mr. Arabia controls approximately 45% of the senior debt), there can be no assurance that the senior creditors will not authorize certain collection actions. If collection actions are authorized and do commence, the assets of the Company could be foreclosed upon and the Company's ability to continue as a going concern would be severely limited.



It is likely that the Company will need to negotiate debt for equity swaps with defaulted creditors, which could lead to the issuance of substantial amounts of common stock and substantial dilution of then-existing shareholders. There can be no assurance that any of our secured creditors will accept equity in exchange for their debt. If the Company is unable to issue equity to retire much of its secured debt obligations, it may be very difficult to raise capital through the sale of debt or equity.





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Risk Factors Relating to Our Common Stock:



We Do Not Expect to Pay Dividends for Some Time, if At All.



No cash dividends have been paid on our common stock. We expect that any income received from operations will be devoted to our future operations. We do not expect to pay cash dividends in the foreseeable future.  Payment of dividends would depend upon our profitability at the time, cash available for those dividends, and other factors.

The Public Market for Our Common Stock is Volatile and Limited.



Our common stock is currently quoted on the Over the Counter Bulletin Board under the ticker symbol NAWL. The market price of the Company's common stock has been, and is likely to continue to be, volatile. Factors such as announcements of new products by the Company or its competitors, changes in pricing policies by the Company or its competitors, quarterly fluctuations in the Company's operating results, announcements relating to strategic relationships, government regulatory actions, general conditions in the market for healthcare products, overall market conditions and other factors may have a significant impact on the market price of the common stock. In addition, in recent years the stock market in general, and the shares of healthcare product companies have experienced extreme price fluctuations. This volatility has had a substantial effect on the market prices of securities issued by many companies for reasons unrelated to the operating performance of the specific companies. These broad market fluctuations may adversely affect the market price of the Company's common stock.



In addition, the public float of the Company's common stock is small in comparison to total shares outstanding on a fully diluted basis, resulting in a very thin public market for the trading of the Company's shares. Trading volume on any single day seldom exceeds one hundred thousand shares, while some days have a volume of only a few thousand shares. Limited trading volume entails a high degree of volatility in the stock price. In the 52-week period from June 30, 2004 to June 30, 2005, the closing price for the shares of the Company's stock on the OTC Bulletin Board ranged from $0.005 to $0.015. This situation of limited liquidity and volatile stock price will most likely continue for the near future.

Our Common Stock is Subject to the "Penny Stock" Rules of the SEC and the Trading Market in Our Securities is Limited, Which Makes Transactions In Our Stock Cumbersome and May Reduce the Value of an Investment in Our Stock.



The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:



*     that a broker or dealer approve a person's account for transactions in penny stocks; and

*     the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity  and quantity of the penny stock to be purchased.



In order to approve a person's account for transactions in penny stocks, the broker or dealer must:



*     obtain financial information and investment experience objectives of the person; and

*     make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions  in penny stocks.



The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:



*     sets forth the basis on which the broker or dealer made the suitability determination; and

*     that the broker or dealer received a signed, written agreement from the investor prior to the transaction.



Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.



Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

Rule 144 Stock Sales

As of June 30, 2005, the Company had approximately 59,701,535 shares of the Company's outstanding common stock as "restricted securities" which may be sold only in compliance with Rule 144 adopted under the Securities Act of 1933, as amended or other applicable exemptions from registration.  Rule 144 provides that a person holding restricted securities for a period of one year may thereafter sell in brokerage transactions, an amount not exceeding in any three month period the greater of either (i) 1% of the Company's outstanding common stock, or (ii) the average weekly trading volume during a period of four calendar weeks immediately preceding any sale.  Persons who are not affiliated with the Company and who have held their restricted securities for at least two years are not subject to the volume limitation.  Potential or actual sales of the Company's common stock by present shareholders under Rule 144 may have a depressive effect on the price of the Company's stock.





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PLAN OF OPERATIONS

EXPECTED CAPITAL REQUIREMENTS

Over the next twelve months the Company will need to raise additional capital for its business operations.

In December of 2004 the Company began conducting a private placement offering of $1,250,000 (the "Maximum Offering Amount") of senior secured convertible notes (the "Senior Convertible Notes"), which offer a third-party guaranty as to the timely payment of principal and interest (the "Private Placement"). As of June 30, 2005 the Company had sold $300,000 face value of Senior Convertible Notes. The Senior Convertible Notes; (i) are secured by a first priority lien on all of the Company's assets and are equal in priority with all of the Company's other senior debt, (ii) either pay 8% annual interest on a quarterly basis beginning on April 1, 2005 or accrue interest at the rate of 6% (the investor chooses the interest payment option), (iii) mature on October 1, 2008, (iv) are convertible at any time at the holder's option, in whole or in part in minimum increments of $5,000, into the Company's common stock at a conversion price of $.025 per share (if covered by the third party guaranty), and (v) may be covered by a third party guaranty agreement at the option of the purchaser of the note (the "Guaranty" or "Guaranty Agreement").  Of the $300,000 sold, all are covered by the Guaranty Agreement. The Senior Convertible Notes are being offered without registration under the Securities Act of 1933 (the "Securities Act") in reliance upon exemption from registration afforded by Section 4(2) of the Securities Act and Rule 506 of Regulation D thereunder. The Offering is being made without any form of general solicitation or general advertising and each purchaser must represent to the Company that they are purchasing the securities for their own account, for investment purposes only and not with a view towards distribution or resale to others.

The Guaranty Agreement is entered into by the Company and Milan Mandaric (the "Guarantor") for the express benefit of any investor that purchases a Senior Convertible Note. It requires that the Guarantor unconditionally and irrevocably and without limitation or exception (other than conditions, limitations or exceptions specifically described in the Guaranty Agreement) guaranty the faithful and complete payment of any sums, including principal and interest, contemplated by any Senior Convertible Note as required by the Guaranty Agreement. The Company is permitted to enforce the Guaranty on behalf of purchasers of the Senior Convertible Notes.

Pursuant to the terms of the Private Placement, the Company has wide latitude, in its sole and absolute discretion, to increase or decrease the size of the offering (although the Guaranty is only available for up to $1.25 million of Senior Convertible Notes) and/or modify any terms of the offering.

In addition to the Private Placement, the Company is evaluating raising capital from institutional sources in amounts greater than the Maximum Offering Amount. The Company believes that it is likely that it will need capital in an amount greater than the amount of funding contemplated by the Private Placement to fully implement its business strategy. There can be no assurance that the Company will timely complete either its financing efforts or other aspects of its restructuring, or that if both goals are reached cash flows will be sufficient to fund the Company's ongoing capital and operating needs. If the Company is unable to complete a successful restructuring, including its financing efforts, the Company will be severely limited in its ability to execute its contemplated business plan and continue as a going concern.

EXPECTED RESEARCH AND DEVELOPMENT ACTIVITIES

The Company plans to continue its ongoing research and development activities.  The Company has completed its research and development activities with respect to MIGRASPRAY, to the extent that such product is being marketed currently, and its initial research and development activities with respect to ALLERSPRAY II, PMS SPRAY, ARTHRISPRAY and ANTI-OXY SPRAY to the extent that such products can be produced and distributed in the future. The Company through the efforts of Dr. Brucker, Senior Vice President, Research and Development, is involved in research for the development of novel products, including, but not limited to, a natural sedative, a treatment for general aches and pains and other treatments for a variety of conditions. The Company plans to conduct clinical trials, doctor and laboratory tests and market analyses for such new products when appropriate and to continue clinical testing and analyzing certain existing products. The Company holds two patents and has one patent pending.





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FINANCIAL RESOURCES

At June 30, 2005 and 2004, the Company had current assets of $80,138 and $ 28,393 including cash of $59,682 and $1,687, respectively. At June 30, 2005, current assets included inventory valued at $18,861 and prepaid expenses of $1,009. At June 30, 2005 and 2004 the Company had total assets of $427,717 and $377,309, respectively including inventory valued at $331,123.



Gross sales for the years ended June 30, 2005 and 2004 were $71,355 and $97,110, respectively.  Costs and expenses for the years ended June 30, 2005 and 2004 were $761,899 and $1,088,121 resulting in a loss from operations of $690,544 and $996,229, respectively.

EXPECTED PURCHASES OR SALES OF PLANT AND SIGNIFICANT EQUIPMENT

The Company does not expect to purchase and/or sell any significant equipment during the next twelve months. However this does not preclude the Company from doing so if it is deemed necessary for the growth and success of the Company.

EXPECTED CHANGES IN NUMBER OF EMPLOYEES

The Company may add employees over the next twelve months if it is successful in its restructuring/capital raising efforts. If any anticipated employee positions are to be filled they will likely be at the sales and marketing staff level.  The Company operates with three employees.

RESULTS OF OPERATIONS

As discussed above, the Company did not engage in any significant business prior to April 17, 1995.  During April 1995, the Company acquired Unified Technologies, Inc., a development stage business.  Since that time, the Company has been developing various healthcare products and now intends to exclusively distribute its products to healthcare providers and directly to consumers.

FISCAL YEARS ENDED JUNE 30, 2005 AND 2004

On a consolidated basis, the Company had gross sales totaling $71,355 for the year ended June 30, 2005, compared with $97,110 in gross sales for the same period ending June 30, 2004. This represented a decrease of $25,755 or 26.5% in gross sales from the year before.  The sales decrease is primarily attributable to slow product movement due to lack of financing necessary to provide marketing support for the Company's product. The Company also had product returns of $0 for the year ending June 30, 2005.



The Company experienced a net loss of $363,972 for the twelve-month period ended June 30, 2005, compared with a net loss of $313,421 for the same period ended June 30, 2004. This represents an increase of $50,551 or 16.1% from the prior year.  A substantial portion of the decrease in net loss is attributable to income derived from the forgiveness of debt and accrued expenses and liabilities as well as decreased selling, general and administrative, marketing, and advertising costs.

The Company had a gross profit margin for the year ended June 30, 2005 of 81.6% or $58,231.  The Company's cost of products sold for the years ended June 30, 2005 and 2004 was $13,124 and $195,559, respectively. The Company expects product cost as a percentage of gross sales to decrease as the Company increases its sales through the use of direct and other marketing.



Consulting fees totaled $98,900 for the year ended June 30, 2005, compared with $71,756 for the same period ending June 30, 2004. This represented an increase of $27,144 or 37.8% from the prior year. Marketing and advertising cost totaled $8,698 for the year ended June 30, 2005, compared to $31,683 for the same period ending June 30, 2004.  Selling, general and administrative expenses incurred by the Company were $634,360 for the year ended June 30, 2005, compared with $779,553 for the same period ended June 30, 2004.  This represented a decrease of $145,193 or 18.6% from the prior year. The decrease is due primarily to reduced salaries, workforce, legal fees and the waiver by officers of salaries and benefits due to such officers.





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LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its operations primarily through the sale of convertible notes, revenue from sales and cash advances from its Chief Executive Officer, James R. Arabia.  Assuming a successful completion of an acceptable restructuring/capital raising effort the Company anticipates that the proceeds from future sale of equity and/or debt securities (including convertible debt) together with revenues from product sales should be sufficient to finance its operations for the next twelve months. However, there can be no assurance that the Company will successfully complete a satisfactory restructuring plan and financing effort, or that their will be sufficient sales or that any combination thereof will be sufficient to meet its capital needs, which, if not met, could result in the Company being unable to continue as a going concern. (See also "PLAN OF OPERATIONS")

Financial Resources

The Company had as of June 30, 2005 $59,682 in cash. The report of the Company's independent auditors on the financial statements for the year ended June 30, 2005, includes an explanatory paragraph relating to the uncertainty of the Company's ability to continue as a going concern due to recurring losses and the risks associated with raising capital through issuance of equity and/or debt securities.

NEW ACCOUNTING STANDARDS

In May 2003, the Financial Accounting Standards Board issued SFAS No. 150. The Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity.  The Company does not expect the adoption of this standard to have a significant impact on its financial statements.



In April 2003, the Financial Accounting Standards Board issued SFAS No. 149. The Statement amends Statement 133 for decisions made i. as part of the Derivatives Implementation Group process that effectively required amendments to Statement 133, ii in connection with other Board projects dealing with financial instruments, and iii in connection with implementation issues raised in relation to the application of the definition of a derivative.  The Company does not expect the adoption of this standard to have a significant impact on its financial statements.



In December 2002, the Financial Accounting Standards Board issued SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure" (SFAS 148).  SFAS 148 amends SFAS No. 123 "Accounting for Stock-Based compensation" (SFAS 123), to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation.  In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results.  SFAS 148 is effective for fiscal years beginning after December 15, 2002.  The interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 15, 2002.  The adoption of SFAS 147 did not have a material effect on the Companies consolidated financial statements.



In October 2002, the Financial Accounting Standards Board issued SFAS No. 147, "Acquisitions of Certain Financial Institutions - an amendment of FASB Statements No. 72 and 144 and FASB interpretation No. 9".  SFAS 147 removes acquisitions of financial institutions from the scope of both Statement 72 and interpretation 9 and requires that those transactions be accounted for in accordance with FASB Statements No. 141, Business Combinations, and No. 142 Goodwill and Other Intangible Assets.  Thus, the requirement in paragraph 5 of Statement 72 to recognize (and subsequently amortize) any excess of the fair value of liabilities assumed over the fair value of tangible and identifiable intangible assets acquired as an unidentifiable intangible asset no longer applies to acquisitions within the scope of this Statement.  In addition, this Statement amends FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, to include in its scope long-term customer-relationship intangible assets of financial institutions such as depositor and borrower relationship intangible assets and credit cardholder intangible assets.  Consequently, those intangible assets are subject to the same undiscounted cash flow recoverability test and impairment loss recognition and measurement provisions that Statement 144 requires for other long-lived assets that are held and used.  SFAS 147 is effective October 1, 2002.  The adoption of SFAS 147 did not have a material effect on the Companies consolidated financial statements.





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In June 2002, the Financial Accounting Standards Board issued SFAS No. 146. The standard requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan.  The Company does not expect the adoption of this standard to have a significant impact on its financial statements.



In April 2002, the Financial Accounting Standards Board issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections ("SFAS 145"). Among other things, SFAS 145 eliminates the requirement that gains and losses from the extinguishments of debt be classified as extraordinary items. SFAS 145 is effective for fiscal years beginning after May 15, 2002, with early adoption permitted. The Company does not expect the adoption of this standard to have a significant impact on its financial statements.

INFLATION

Inflation may affect the cost of raw materials, goods, and services used by the Company. In recent years, inflation has been modest. The competitive environment in the over the counter drug market somewhat limits the ability of the Company to recover higher costs resulting from inflation by raising prices to its customers. Overall, product prices have generally been stable, and the Company seeks to mitigate the adverse effects of inflation primarily through improved productivity and cost containment programs. The Company does not believe that inflation has had a material impact on its results of operations for the periods presented.

ITEM 7.   FINANCIAL STATEMENTS



|INDEX TO FINANCIAL STATEMENTS   
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|REPORT OF INDEPENDENT ACCOUNTANT
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|FINANCIAL STATEMENTS:           
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|A | C | I | ARMANDO C. IBARRACertified Public Accountants
A Professional Corporation
|- | - | - | ------------------------------------------------------------------------



|Armando C. Ibarra, C.P.A.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Members of the California Society of Certified Public Accountants
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------
|Armando Ibarra, Jr., C.P.A., JD                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | Members of the American Institute of Certified Public Accountants
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Registered with the Public Company Accounting Oversight Board    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                  
|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|To the Board of Directors of
NatureWell, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                  
|We have audited the accompanying consolidated balance sheets of NatureWell, Inc. as of June 30, 2005 and 2004 and the related consolidated statements of operations, changes in shareholders' equity and cash flow for the years then ended. These consolidated financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                  
|We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                  
|In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of NatureWell, Inc. as of June 30, 2005 and 2004, and the results of their operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                  
|The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note R to the consolidated financial statements, the Company's losses from operations raise doubt about its ability to continue as a going concern.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                  
|/s/ Armando C. Ibarra 
ARMANDO C. IBARRA, CPA                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                  
|October 10, 2005                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                  
|Chula Vista, Ca. 91910                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                  
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|371 "E" Street, Chula Vista, CA 91910                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Tel:(619)422-1348                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | Fax: (619)422-1465                                               





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|NATUREWELL, INCORPORATED AND SUBSIDIARIES
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See Notes to Consolidated Financial Statements



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|NATUREWELL, INCORPORATED AND SUBSIDIARIES
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|Consolidated Statements of Operations    
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See Notes to Consolidated Financial Statements



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|NATUREWELL, INCORPORATED AND SUBSIDIARIES                
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|Consolidated Statement of Changes in Stockholders' Equity
|For the Years Ended June  30, 2005 and 2004              
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See Notes to Consolidated Financial Statements



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|NATUREWELL, INCORPORATED AND SUBSIDIARIES
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|Consolidated Statements of Cash Flows    
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NATUREWELL, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





A.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:



ORGANIZATION AND BASIS OF CONSOLIDATION:



NatureWell, Inc., a California corporation ("NWI-CA") was originally incorporated on April 26, 1983 (through an earlier predecessor corporation). In August 1998, NWI-CA acquired the assets and technology of Amtech Scientific, Inc. ("ATS") of which the assets were contributed to a newly formed subsidiary of NWI-CA, DiagnosTech, Inc, a California corporation ("DTI"). In September 2001, NWI-CA formed a wholly owned subsidiary in Delaware, NatureWell, Incorporated.  This wholly owned subsidiary was established for the sole purpose of reincorporating NWI-CA in Delaware.  In October 2001, NWI-CA obtained approval from a vote of a majority of its shareholders to reincorporate in Delaware.  On October 25, 2001, the merger of NWI-CA into NatureWell, Incorporated, a Delaware corporation ("NatureWell", "NWI" or the "Company") was consummated.  NWI-CA has been "merged-out" and dissolved as a result of the reincorporation.  The Company has two wholly owned subsidiaries, Unified Technologies, Inc., a California corporation ("UTI") and Chemical Dependency Healthcare of California, Inc., a California corporation ("CDHC"). The Company as of June 30, 2005 also holds a 91.9 percent (91.9%) ownership interest in Nasal Mist, Inc., a California corporation ("NMI").



PRINCIPLES OF CONSOLIDATION:



The consolidated financial statements include the accounts of the Company and its subsidiaries and present them as one economic entity. All significant intercompany transactions and balances have been eliminated in consolidation as of June 30, 2005 and 2004.



BASIS OF ACCOUNTING:



The Company's policy is to use the accrual method of accounting to prepare and present financial statements, which conforms to generally accepted accounting principles ("GAAP').



REVENUE RECOGNITION AND TRADE SPENDING:



The Company recognizes revenue when the following conditions are met, (i) a customer has either paid or made arrangements to pay for the product, (ii) delivery to the customer has been made, (iii) the sale has been made at a fixed price or at a price that is determinable, (iv) collectibility is reasonably assured, (v) title and risk of loss has passed from the Company to the customer, and (vi) the buyer either does not possess any right to return the product and/or there no longer exists any substantial risk of return.



In the case of consigned product ("consigned product" having the broadest meaning as articulated in SAB-101) the Company's policy is that it does not recognize revenue, if any, until (i) title and risk of loss has passed from the Company to the buyer, (ii) the product has been paid for, and (iii) there no longer exists any substantial risk of return.



Notwithstanding the foregoing, the Company may in its discretion voluntarily decide to accept requests for product returns from its customers.



INVENTORY:



Inventory consists of healthcare and nutraceutical products.  Inventory is valued at the lower of (i) cost or (ii) market based on conservatism.  Cost is determined under the first-in, first-out (FIFO) method.





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The Company has inventory that carries expiration dates ranging from June of 2003 to October of 2003, however, under the FDA, Homeopathic Drugs are not required to have an expiration date and such product has not, in actuality, expired. Therefore, the Company re-labels its inventory prior to sale and adds the cost of re-labeling to the cost basis of its inventory. The Company in the future intends to either omit the labeling of an expiration date or extend the labeling of an expiration date from the previous practice of two years.



Inventory has been allocated between short term assets and long terms assets to reflect the fact that it is uncertain that all of the Company's inventory will be disposed of within one year. The allocation reflects current sales trends estimates and does not take into consideration a completion of the Company's restructuring/capital raising efforts, which would presumably lead to increased sales of inventory within one year. Therefore, inventory currently classified as a long term asset, or some portion of it, may be disposed of within one year if sales accelerate from current levels.



For the period ending June 30, 2004 the Company wrote down its raw materials inventory of $162,000 because the Company had either disposed of such materials or was unable to determine whether the materials would be usable in the future. In addition the Company wrote down $17,500 in healthcare products owned by its former subsidiary, Diagnostech, which are no longer usable.  The Company also adjusted $14,522 for display inventory for which the Company disputed payment.



MARKETING AND ADVERTISING COSTS



Marketing and advertising costs for the years ending June 30, 2005 and 2004 of $8,698 and $31,684, respectively, were charged to operations when incurred.



PROPERTY AND EQUIPMENT:



Property and equipment is recorded at cost.  Maintenance, repairs, and minor renewals are expensed as incurred.  When property and equipment are retired or otherwise disposed, the related cost and accumulated depreciation are eliminated and any gain or loss on disposition is reflected in current operations.  Depreciation is accounted for on the straight-line method over the estimated useful lives of the assets, which ranges generally from three to five years.  Property and equipment is shown net of accumulated depreciation of $6,465 and $6,894 for the years ended June 30, 2005 and 2004, respectively.



INCOME TAXES:



Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the basis of various assets for financial and income tax reporting.  The deferred tax asset represents the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled.  Deferred taxes are recognized for net-operating losses that are available to offset future taxable income and tax credits available to offset future income taxes.  A valuation allowance is provided against the deferred tax asset, where

realization is uncertain.



USE OF ESTIMATES:



The preparation of the Company's financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the financial statement date and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates made by management.



SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRONOUNCEMENTS:



In May 2003, the Financial Accounting Standards Board issued SFAS No. 150. The Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity.  The Company does not expect the adoption of this standard to have a significant impact on its financial statements.



In April 2003, the Financial Accounting Standards Board issued SFAS No. 149. The Statement amends Statement 133 for decisions made i. as part of the Derivatives Implementation Group process that effectively required amendments to Statement 133, ii in connection with other Board projects dealing with financial instruments, and iii in connection with implementation issues raised in relation to the application of the definition of a derivative.  The Company does not expect the adoption of this standard to have a significant impact on its financial statements.





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In December 2002, the Financial Accounting Standards Board issued SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure" (SFAS 148).  SFAS 148 amends SFAS No. 123 "Accounting for Stock-Based compensation" (SFAS 123), to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation.  In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results.  SFAS 148 is effective for fiscal years beginning after December 15, 2002.  The interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 15, 2002.  The adoption of SFAS 147 did not have a material effect on the Companies consolidated financial statements.



In October 2002, the Financial Accounting Standards Board issued SFAS No. 147, "Acquisitions of Certain Financial Institutions - an amendment of FASB Statements No. 72 and 144 and FASB interpretation No. 9".  SFAS 147 removes acquisitions of financial institutions from the scope of both Statement 72 and interpretation 9 and requires that those transactions be accounted for in accordance with FASB Statements No. 141, Business Combinations, and No. 142 Goodwill and Other Intangible Assets.  Thus, the requirement in paragraph 5 of Statement 72 to recognize (and subsequently amortize) any excess of the fair value of liabilities assumed over the fair value of tangible and identifiable intangible assets acquired as an unidentifiable intangible asset no longer applies to acquisitions within the scope of this Statement.  In addition, this Statement amends FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, to include in its scope long-term customer-relationship intangible assets of financial institutions such as depositor and borrower relationship intangible assets and credit cardholder intangible assets.  Consequently, those intangible assets are subject to the same undiscounted cash flow recoverability test and impairment loss recognition and measurement provisions that Statement 144 requires for other long-lived assets that are held and used.  SFAS 147 is effective October 1, 2002.  The adoption of SFAS 147 did not have a material effect on the Companies consolidated financial statements.



In June 2002, the Financial Accounting Standards Board issued SFAS No. 146. The standard requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan.  The Company does not expect the adoption of this standard to have a significant impact on its financial statements.



In April 2002, the Financial Accounting Standards Board issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections ("SFAS 145"). Among other things, SFAS 145 eliminates the requirement that gains and losses from the extinguishments of debt be classified as extraordinary items. SFAS 145 is effective for fiscal years beginning after May 15, 2002, with early adoption permitted. The Company does not expect the adoption of this standard to have a significant impact on its financial statements.



B.  ACQUISITIONS:



All acquisitions by the Company, since inception, have been accounted for under the pooling-of-interests method used in a business combination according to GAAP. (Note A).



Under the pooling-of-interests method, UTI's results of operations have been included in the consolidated results of operations since inception (December 3, 1993) and the assets and liabilities of the separate companies have been combined and recorded at their historical cost.



C.  NOTES RECEIVABLE FROM OFFICERS



Notes Receivable for Acquisition of Common Stock:



The following table details stock issuances to officers, directors and employees of the Company in exchange for notes receivable.  The notes accrue interest at the rate indicated in the table below.





|Officer        | Issue Date | # of Shares | Note Amount | Interest
Rate | Accrued
Interest
|-------------- | ---------- | ----------- | ----------- | ------------- | ----------------
|              
|Donald Brucker | 04-02-01   | 5,000,000   | $100,000    | 4.94%         | $ 20,965        
|              
|               |            | 5,000,000   | $100,000    |               | $ 20,965        
|               |            |            
|               |            |             |             |               |                 
|               |            |            





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The note listed above matures on April 15, 2006. The note is collateralized by amounts due from the Company to the Maker of the note for unpaid salaries, bonuses and benefits, which amount owed to the Maker exceeds the amount due from that individual under the note.



The receivable of $120,865, which includes related interest of $20,965, is reflected as a contra equity in the financial statements.



D.  FORMATION OF SUBSIDIARIES:



DIAGNOSTECH, INC.:



In September 1998, the Company incorporated DiagnosTech, Inc. (DTI).  DTI was formed to develop and market clinical diagnostic products using immunology and molecular biologic technologies purchased from Amtech Scientific, Inc. (ATS) a company formerly owned and founded by a former officer of the Company.  In June of 2005 the board of directors determined that there were no realistic opportunities for DTI to establish a viable business and the Company surrendered all shares that it owned in DTI back to its treasury for no consideration. As a result of the transaction DTI is no longer a subsidiary of the Company as the Company has no ownership interest in DTI. As such, the Company no longer shows a liability for debentures issued by DTI as a liability on its balance sheet. The debentures had previously appeared on the Company's consolidated balance sheet as required under the rules of consolidation stated in paragraph 3 of ARB 51. The Company had no responsibility to pay either the principal or interest on the debentures and was neither an obligor nor guarantor of the debentures.



NASAL MIST, INC.



During August 1997, the Company formed Nasal Mist, Inc. (NMI), a subsidiary organized for the production and marketing of herbal nasal sprays.  NMI received approximately $300,000 through a private placement. Pursuant to the private placement, the Company granted NMI a license and rights to receive from the Company and its successors-in-interest, an amount equal to 10% of the net sales, less commissions and discounts of nasal sprays sold. NMI is dormant, not engaged in any business operations and the Company does not intend to engage in any business operations at NMI in the future.



In July of 2002 the Company offered to purchase all outstanding shares of Nasal Mist, Inc. ("NMI") for three shares of the Company's stock for each share of NMI. The Company acquired 149,392 shares of NMI as a result of the offer and at the conclusion of the transaction had increased its ownership of NMI from 72.61% to 91.9%. The acquisition of the NMI stock was accounted for as the acquisition of additional interest in subsidiary resulting in an increase in goodwill for the amount of the fair market value of the shares issued to acquire the NMI stock ($31,372), and then the Company simultaneously wrote-off such goodwill as the Company values the NMI shares at zero.



NMI is dormant and not engaged in any operating activities and there are no plans to engage in any activities in the future.



E.  INVENTORY:



Inventory as of June 30, 2005 and 2004 is comprised of the following:





|                    | 2005        | 2004       
|------------------- | ----------- | -----------
|                    |             |            
|Healthcare products | $    18,861 | $    25,850
|Contact lenses      | -           | -          
|Raw materials       | -           | -          
|Other Assets        |             |            
|Healthcare Products | 331,123     | 331,123    
|                    |             |            
|                    | $   349,984 | $   356,973
|                    |             |            
|                    |             |            
|                    |             |            



Inventory consists of healthcare and nutraceutical products.  Inventory is valued at the lower of (i) cost or (ii) market based on conservatism.  Cost is determined under the first-in, first-out (FIFO) method.





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The Company has inventory that carries expiration dates ranging from June of 2003 to October of 2003, however, under the FDA, Homeopathic Drugs are not required to have an expiration date and such product has not, in actuality, expired. Therefore, the Company re-labels its inventory prior to sale and adds the cost of re-labeling to the cost basis of its inventory. The Company in the future intends to either omit the labeling of an expiration date or extend the labeling of an expiration date from the current practice of two years.



Inventory has been allocated between short term assets and long terms assets to reflect the fact that it is uncertain that all of the Company's inventory will be disposed of within one year. The allocation reflects current sales trends estimates and does not take into consideration a completion of the Company's restructuring/capital raising efforts, which would presumably lead to increased sales of inventory within one year. Therefore, inventory currently classified as a long term asset, or some portion of it, may be disposed of within one year if sales accelerate from current levels.



For the period ending June 30, 2004 the Company wrote down its raw materials inventory of $162,000 because the Company had either disposed of such materials or was unable to determine whether the materials would be usable in the future. In addition the Company wrote down $17,500 in healthcare products owned by its former subsidiary, Diagnostech, which are no longer usable.  The Company also adjusted $14,522 for display inventory for which the Company disputed payment.



F.  BASIC AND FULLY DILUTED LOSS PER COMMON SHARE:



Effective November 30, 1998, the Company adopted the provisions of Statement of Financial Accounting Standards No. 128, Earnings per Share ("SFAS 128") which replaced the presentation of "primary" and "fully-diluted" earnings (loss) per common share required under previously promulgated accounting standards with the presentation of "basic" and "diluted" earnings (loss) per common share.



Basic earnings (loss) per common share is calculated by dividing net income or loss by the weighted average number of common shares outstanding during the period. The calculation of diluted earnings (loss) per common share is similar to that of basic earnings (loss) per common share, except that the numerator and denominator are adjusted to reflect the decrease in earnings per share or the increase in loss per share that could occur if securities or other contracts to issue common stock, such as stock options and convertible notes, were exercised or converted into common stock.



The Company was required to compute primary and diluted loss per share amounts for 2002 and 2001 pursuant to SFAS 128. Since the Company and its subsidiaries had losses applicable to common stock, the assumed effects of the exercise of outstanding warrants and stock options were anti-dilutive and, accordingly, dilutive per share amounts have not been presented in the accompanying consolidated statements of operations.



The per share computations reflect the effect of a 10 for 1 reverse stock split that occurred on April 14, 1995 and a 2 for 1 stock exchange between the Company and UTI on April 17, 1995.  The Company has restated common stock to reflect the reverse stock split as a result of the merger.



G.  WARRANTS, OPTIONS AND STOCK BASED COMPENSATION:



Warrants and options outstanding as of June 30, 2005 and 2004 consists of 250,000 and 250,000, non-redeemable warrants and options to purchase shares of common stock of the Company, which are exercisable into 1 share of common stock at $0.05 per share and expire on October 1, 2007.



In May of 2004 the Company adopted its 2004 Incentive Stock Bonus and Option Plan (the "Plan"). The Plan is intended to advance the interests of the Company by affording to selected employees, directors and consultants, an opportunity for investment in the Company and the incentives inherent in stock ownership in the Company and to provide the Company with a means of attracting, compensating, and retaining the services of selected employees, directors and consultants. It allows for the issuance of 10,000,000 shares of S-8 stock, subject to the board's authority to amend the Plan, and as of June 30, 2005 9,790,890 shares were issued under the Plan. At October 13, 2004 9,790,890 shares were issued under the Plan. In addition to the shares authorized by the Plan, the Company may issue restricted shares, or securities that convert into restricted common stock (including convertible notes), to non-employees, employees, directors and consultants for services. Shares issued to non-employees, employees and directors in return for services are valued under the fair value method in accordance with SFAS 123.





|-  26 -
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Total compensation cost recognized in income for stock-based employee compensation was $39,581 (including officers) and $35,081 for the years ending June 30, 2005 and June 30, 2004 respectively. Of the $39,581 for June 30, 2005, $30,000 was for payment to officers and $9,581 was for payment to non-officer employees. Total cost recognized in income for shares issued to non-employees for services rendered was $8,833 and $131,036 for the years ending June 30, 2005 and June 30, 2004 respectively.



H.  PREFERRED STOCK:



The Company has outstanding 75 shares, $1,000 liquidation preference, of Series B Convertible Preferred Stock. Pursuant to the terms of the Series B Convertible Preferred stock, owned by James R. Arabia, Chairman, President, And Chief Executive Officer of the Company, Mr. Arabia is allowed to cast a vote, on all matters that the Company's shareholders are permitted to vote upon, equal to .7% of all outstanding securities that are eligible to vote at the time of such shareholder action for each share of Series B Convertible Preferred that he owns (.7% X 75 shares = 52.5% of total vote). The shares convert into 1,875,000 shares of the Company's common stock and are non-transferable without the consent of the board of directors.



I.  LOANS PAYABLE AND CURRENT PORTION OF LONG TERM DEBT:



Loans payable as of June 30, 2005 and 2004 consist of the following:





|                                                                                    | 2005         | 2004        
|----------------------------------------------------------------------------------- | ------------ | ------------
|                                                                                    |              |             
|Loans payable with annual interest varying from 8 to 10%                            | $    436,910 | $     13,042
|                                                                                    |              |             
|Current Portion of Long Term Notes Payable (2004 includes $454,851 due to officer): | 50,201       | 501,205     
|                                                                                    |              |             
|                                                                                    |              |             
|                                                                                    | $    487,111 | $    514,247
|                                                                                    |              |             
|                                                                                    |              |             
|                                                                                    |              |             



Loans payable consists of (i) an unsecured note totaling $14,108 including interest due thereon of $2,839 (this note is held by a former consultant to the Company accruing at 8%, which began amortizing on October 5, 2004 and is paid in 12 equal installments no payments have been made as of the date of this filing), (ii) a senior secured convertible note for $120,000 which is due in May of 2006, and (iii) four senior secured notes totaling $302,802, including interest of $2,802 accrued thereon, due and each payable on March 30, 2006.



The current portion of long-term debt consists of a defaulted note that is junior in right of payment to the Company's senior and second lien debt totaling $50,201 (including accrued interest of $10,200 thereon).



J.  LEASES:



The Company leases its corporate office facilities under a Month to Month lease that expires on January 15, 2006. The Company's base rent under the lease is $1,000 per month through September 15, 2004 and $1,400 through January 15, 2006.  Office rent and incidental expense was $34,018 and $547,234 for the years ending June 30, 2005 and 2004, respectively. Future minimum lease payments as of June 30, 2005:





|Year Ending June 30,         | Operating
Lease
|---------------------------- | ---------------
|                             |                
|2005                         | $    1,000     
|                             |                
|Total minimum lease payments | $    1,000     
|                             |                
|                             |                
|                             |                



K.  DTI CONVERTIBLE DEBENTURES:



During 1999, the Company's former subsidiary DTI conducted a convertible debt offering for a maximum amount of $4,000,000.  A total of $571,000 was received from the offering. As a result of the Company's disposition of DTI (see Note D) the Company no longer shows a liability for debentures issued by DTI on its balance sheet. The debentures had previously appeared on the Company's consolidated balance sheet as required under the rules of consolidation stated in paragraph 3 of ARB 51. The Company had no responsibility to pay either the principal or interest on the debentures and was neither an obligor nor guarantor of the debentures.





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L.  NOTES PAYABLE AND LONG TERM PAYABLES:



Notes payable as of June 31, 2005 and June 30, 2004 consist of the following:





|                                                                         | June 2005   |  | June 2004  
|------------------------------------------------------------------------ | ----------- |  | -----------
|                                                                         |             |  |            
|                                                                         |             |  |            
|Subordinated Secured notes, with annual interest varying from 8% to 10%. | 1,414,941   |  | 1,299,477  
|                                                                         |             |  |            
|Senior Secured Notes, with annual interest of 8%                         | 155,356     |  | 157,632    
|                                                                         |             |  |            
|Subordinated Convertible Notes, with annual interest of 8%               | 42,776      |  | 27,182     
|                                                                         |             |  |            
|Senior Secured Convertible Notes, with annual interest of 8%             | 1,260,183   |  | 654,068    
|                                                                         |             |  |            
|                                                                         | $ 2,873,257 |  | $ 2,138,359
|                                                                         |             |  |            
|                                                                         |             |  |            
|                                                                         |             |  |            



The subordinated secured notes totaling $1,414,941 include interest accrued thereon of $356,013. The notes are secured by a subordinate security interest (subordinated to senior debt) in essentially all of the Company's assets, are pari passu with other subordinate secured debt and continue to accrue interest at the rate of either 8% or 10% until April 1, 2006 and are fully amortized over 24 months from that date forward.



The senior secured notes totaling $155,356 include interest accrued thereon of $14,872. The senior secured notes are secured by a first priority security interest in essentially all of the Company's assets, are pari passu with other senior debt and accrue interest at the rate of 8% until April 1, 2006 and are fully amortized over 24 months from that date forward.



The unsecured convertible notes totaling $42,776 include interest accrued thereon of $3,973 and are convertible, in the aggregate, into 6,695,522 shares of common stock at the option of the holder. The senior secured convertible notes totaling $1,260,183 include interest accrued thereon of $75,162 and convert into 50,964,926 shares of common stock at the holders' option.



The senior convertible notes totaling $1,260,183 include interest accrued thereon of $75,162, are secured by a first priority security interest in essentially all of the Company's assets, are pari passu with other senior debt and accrue interest at 8% until October 1, 2006 and thereafter pay semi-annual interest only until maturity at April 2010.In the aggregate the senior convertible notes are convertible into 121,814,926 shares of Common Stock at the option of the holder.





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M.  RELATED PARTY TRANSACTIONS



Under the terms of a security agreement between the Company and its Chief Executive Officer (the "Executive"), each and all of the Company's debts, obligations and liabilities to the Executive now existing or hereafter created, incurred, assumed or guaranteed are secured by a first priority lien on all of the Company's assets, which lien was perfected on July 16, 2002, and are pari passu with other senior debt.



In February 2005 the Company entered into an agreement with its Chief Financial Officer, Robert T. Malasek, that resulted in the forfeiture back to the Company of a senior secured convertible note, face value $7,000, which was convertible into 700,000 shares of common stock, and the issuance of a $6,000 unsecured convertible note which is convertible (subject to restrictions) as follows; (i) from the February 21, 2006 the Conversion Price of the note shall be $.0075, (ii) from February 22, 2006 until February 21, 2007 the Conversion Price of the note shall be $.005, provided however, such reduction in the Conversion Price shall only occur if Malasek has remained in the continuous employ of the Company for the entire preceding year, unless such employment is interrupted by death, disability or termination without cause, and (iii) from February 22, 2007 and thereafter the Conversion Price of the Note shall be $.0025, provided however, such reduction in the Conversion Price shall only occur if Malasek has remained in the continuous employ of the Company for the entire preceding two years, unless such employment is interrupted by death, disability or termination without cause.



In February 2005 the Company reached agreements with its two outside directors (Timothy R. Scott and John W. Huemoeller), that will result in the rescission of certain previous agreements between Mr. Scott and the Company and the forfeiture back to the Company from Mr. Scott of a senior secured convertible note, face value $7,500, which was convertible into 750,000 shares of common stock, and 750,000 shares of common stock. Mr. Huemoeller agreed to forfeit back to the Company a senior secured convertible note, face value $10,000, which was convertible into 1,000,000 shares of common stock. The agreements further require that as payment and settlement of all monies or consideration owed to Messrs. Scott and Huemoeller as of February 21, 2005 (neither director has ever received any cash compensation for their services) the Company shall issue two unsecured convertible notes, aggregate face value $17,500, which convert into 7,000,000 shares of common stock, subject to restrictions on conversion ($10,000 note convertible into 4,000,000 shares for Mr. Scott and $7,500 note convertible into 3,000,000 shares for Mr. Huemoeller).



The convertible notes issued to Messrs. Malasek, Scott and Huemoeller shall be subject to the same restrictions on conversion and covenants by the Company as described below in Sections 7 and 8 of the Arabia Letter Agreement.



In February 2005 the Company entered into an agreement with an employee that resulted in the forfeiture back to the Company of a senior secured convertible note, face value $9,000, which was convertible into 900,000 shares of common stock, and the issuance of a $7,000 unsecured convertible note which is convertible as follows; (i) from the February 21, 2006 the Conversion Price of the note shall be $.0075, (ii) from February 22, 2006 until February 21, 2007 the Conversion Price of the note shall be $.005, provided however, such reduction in the Conversion Price shall only occur if the employee has remained in the continuous employ of the Company for the entire preceding year, unless such employment is interrupted by death, disability or termination without cause, and (iii) from February 22, 2007 and thereafter the Conversion Price of the Note shall be $.0025, provided however, such reduction in the Conversion Price shall only occur if the employee has remained in the continuous employ of the Company for the entire preceding two years, unless such employment is interrupted by death, disability or termination without cause.



In February 2005 the Company and the Chief Executive Officer reached an amended and restated letter agreement (the "Arabia Letter Agreement") having the following terms:





|-  29 -
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|       





|1. | In exchange for that certain senior secured note held by Arabia, face value $382,500, which went into payment default on October 5, 2003 and has a total balance due of $484,698 as of the Effective Date, the Company shall issue to Arabia, or order; (A) 25 shares of convertible preferred stock having the same rights and preferences per share as the 50 shares of Series B preferred stock held by Arabia (including voting rights of .7% per share of all securities entitled to vote),  (B) a senior convertible note, face value $190,000, convertible into common stock (at any time, in whole or in part, at the option of the holder) at a Conversion Price of $.01, which shall; (a) be secured by a first lien on all of the Company's assets and be pari passu with the Company's other senior debt, (b)  accrue interest at the rate of 4% per annum, and (c) mature on October 1, 2010, and (C) a senior secured note, face value $100,000, which shall; (i) be secured by a first lien on all of the Company's assets and be pari passu with the Company's other senior debt, (ii) accrue interest at the rate of 4% per annum, and (iii) mature on March 30, 2006.                                                                                                                                                                                                                                                                                                                                                                                          
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | The Company shall issue 3,000,000 shares of S-8 stock to Arabia as payment for $30,000 of past due compensation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|3. | The Company shall issue a senior secured convertible note to Arabia, face value $110,000, as payment for $110,000 of past due compensation. Such senior convertible note shall; (i) be secured by a first lien on all of the Company's assets and be pari passu with the Company's other senior debt, (ii) accrue interest at the rate of 4% per annum, (iii) mature on October 1, 2010, and (iv) be convertible into the Company's common stock (at any time, in whole or in part, at the option of the holder) at a Conversion Price of $.01, which Conversion Price shall be adjusted on May 15, 2006 to $.005, provided however, such adjustment shall only be made if Arabia has remained in the continuous employ of the Company from the Effective Date until May 15, 2006 unless such employment is interrupted by death, disability or termination without cause (as such terms are defined in Arabia's employment agreement in effect as of the Effective Date). Further, such note shall be convertible into S-8 shares upon the modification by the Company of its Stock Plan to allow such conversion.                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|4. | The Company shall issue to Arabia a senior secured note, face value $150,000, as payment for $150,000 of past due compensation and unpaid benefits. Such senior note shall; (i) be secured by a first lien on all of the Company's assets and be pari passu with the Company's other senior debt, (ii) accrue interest at the rate of 4% per annum, and (iii) mature on March 30, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|5. | Arabia hereby waives/forgives $85,360 owed to him by the Company for compensation and benefits, leaving a balance due of $132,250 as of the Effective Date, which balance is due and payable on or before April 15, 2005 and shall be secured by a first lien on all of the Company's assets and be pari passu with the Company's other senior debt.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|6. | Arabia hereby agrees to waive/forgive all interest accrued up to the Effective Date on those certain convertible debentures owned by Arabia, $200,000 face value and $50,000 face value. Such convertible notes shall also be modified to decrease the interest rate to 4% per annum, which shall accrue until maturity of October 1, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|7. | Notwithstanding anything contained herein or in any convertible note beneficially owned by Arabia to the contrary, Arabia shall be restricted from converting any convertible note now or hereafter beneficially owned by him unless and until for sixty (60) days prior to such conversion  (the "Sixty Day Testing Period") the Company had authorized common stock in an amount great enough to meet the aggregate conversion rights of all of its convertible securities outstanding on each day of the Sixty Day Testing Period, including all convertible securities beneficially owned by Arabia (when calculating aggregate conversion rights it shall be assumed that all convertible securities outstanding at the time the calculation is made have the right to immediately convert into common stock at the lowest possible conversion price that each such security may achieve at any time up to its maturity, even if they do not have such rights at the time of the calculation). The restriction described in this Section 7 shall be null and void and of no force or effect if at any point in time after the Effective Date Arabia was permitted to convert any note subject to this restriction (whether or not he actually converted any such note(s)), unless the parties agree in writing to extend the enforceability of this restriction. Further, if this restriction shall continue to be in force upon the one-year anniversary of the Effective Date, it shall constitute an event of default under the senior convertible notes owned by Arabia.
|8. | The Company represents and covenants that it shall make its reasonable best efforts to accomplish or facilitate an increase of the Company's (or its successor's) authorized common stock to an amount that would render Section 7 null and void.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                





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In February 2005 the Company and its Senior Vice President of Research and Development reached an amended and restated letter agreement (the "Brucker Letter Agreement") having the following terms:





|1. | The Company shall issue an unsecured convertible note to Brucker, face value $12,500, as payment for past due compensation and loans/advances made to the Company. Such convertible note shall; (i) accrue interest at the rate of 4% per annum, (ii) mature on October 1, 2010, and (iii) be convertible into the Company's common stock (at any time, in whole or in part, at the option of the holder) at a Conversion Price of $.0025, provided however, should the par value of the Company (or its successor) become equal to or less than the Conversion Price the Company shall have the right to force conversion into common stock at any time thereafter (5,000,000 shares).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | The Company shall issue a senior secured convertible note to Brucker, face value $25,000, in exchange for that certain senior secured note (and accrued interest thereon) owned by Brucker, face value $18,250, which is dated February 15, 2004, and as payment for services of approximately $5,290. Such senior convertible note shall; (i) be secured by a first lien on all of the Company's assets and be pari passu with the Company's other senior debt, (ii) accrue interest at the rate of 4% annum, (iii) mature on October 1, 2010, and (iv) be convertible into the Company's common stock (at any time, in whole or in part, at the option of the holder) at a Conversion Price of $.0025.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|3. | The Company shall issue to Brucker a senior secured note, face value $50,000, as payment for $50,000 of past due compensation. Such senior note shall; (i) be secured by a first lien on all of the Company's assets and be pari passu with the Company's other senior debt, (ii) accrue interest at the rate of 4% per annum, and (iii) mature on March 30, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|4. | The Company shall amend that certain senior convertible note owned by Brucker, face value $50,000, which is dated February 15, 2004, as follows; (i) the Conversion Price shall be subject to adjustment on May 15, 2006 to $.005, provided however, such adjustment shall only be made if Brucker has remained in the continuous employ of the Company from the Effective Date until May 15, 2006 unless his employment is interrupted by death, disability or termination without cause (as such terms are defined in the employment agreement of James R. Arabia in effect as of the Effective Date), (ii) the interest rate shall be reduced to 4% per annum and will accrue until maturity, (iii) the maturity shall be extended to October 1, 2010, and (iv) all interest accrued up to the Effective Date shall be waived/forgiven.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|5. | Brucker hereby waives/forgives $64,779 owed to him by the Company for compensation, leaving a balance due of $121,816 as of the Effective Date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|6. | Immediately following the forced conversion of the unsecured convertible note described in Section 1, a rescission, together but not separately, of the following agreements between the Company and Brucker shall become effective; the Stock Issuance Agreement, the Stock Purchase Agreement, the Secured Promissory Note and the Security Agreement, all of which are dated April 28, 2001. Upon such rescission Brucker shall promptly forfeit 5,000,000 shares of the Company's common stock owned by him (certificates # LJ 3145, 3146, 3147 and 3148) and shall waive/forgive the balance due to him outlined in Section 6 and all interest that has accrued thereon.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|7. | Notwithstanding anything contained herein or in any convertible note beneficially owned by Brucker to the contrary, Brucker shall be restricted from converting any convertible note now or hereafter beneficially owned by him unless and until for sixty (60) days prior to such conversion  (the "Sixty Day Testing Period") the Company had authorized common stock in an amount great enough to meet the aggregate conversion rights of all of its convertible securities outstanding on each day of the Sixty Day Testing Period, including all convertible securities beneficially owned by Brucker (when calculating aggregate conversion rights it shall be assumed that all convertible securities outstanding at the time the calculation is made have the right to immediately convert into common stock at the lowest possible conversion price that each such security may achieve at any time up to its maturity, even if they do not have such rights at the time of the calculation).The restriction described in this Section 7 shall be null and void and of no force or effect if at any point in time after the Effective Date Brucker was permitted to convert any note subject to this restriction (whether or not he actually converted any such note(s)), unless the parties agree in writing to extend the enforceability of this restriction. Further, if this restriction shall continue to be in force upon the one-year anniversary of the Effective Date, it shall constitute an event of default under the senior convertible notes owned by Brucker.
|8. | The Company represents and covenants that it shall make its reasonable best efforts to accomplish or facilitate an increase of the Company's (or its successor's) authorized common stock to an amount that would render Section 7 null and void.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    



At June 30, 2005 the Company's Due to Balance owed to its Chief Executive Officer was $141,253. The Company also owes the Executive $753,488 pursuant to various senior secured notes, including interest thereon as follows: (i) $200,931 of senior secured notes due on March 30, 2006, and (ii) senior secured convertible notes totaling $552,557.





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N.  COMMITMENTS AND CONTINGENCIES



Insurance



Currently the Company does not carry product liability insurance. Pending the outcome of the Company's restructuring/capital raising efforts, and tests of its new marketing strategy, insurance coverage will be evaluated in amounts that management believes is adequate to cover the risks it faces in the industry in which it competes. There can be no assurance, however, that the Company can afford such insurance coverage or that such insurance coverage will be adequate to cover all losses, which the Company may incur in future periods or that coverage will be available for all of the types of claims the Company faces or may face.



Unsecured Creditors of the Company



The Company is delinquent with a number of unsecured creditors for which no payment arrangements exist or for which no agreement to forestall collection action has been agreed upon. Creditors in this category amount to approximately $196,000, excluding officers and directors, including those accounted for in the Company's litigation reserve of $130,170, and are comprised of a number of creditors owed amounts of less than $5,000. Whenever feasible the Company negotiates with these creditors to reach settlement agreements that are acceptable to the Company, however, if the Company is unable to reach acceptable settlement arrangements it may be subject to various collection actions.



In December of 2003 the Company reached a settlement agreement with its former landlord (for a lease it defaulted under for its previous headquarters in La Jolla, California) that requires payments of $1,500 per month for September 1st,2005 through December 1st, 2005 and a final payment of $44,000 on January 1, 2006. Pursuant to the settlement the Company stipulated to an entry of judgment in the event that it defaults under the payment arrangement in an amount equal to the amount due at such time.



Employment Contracts



Effective July 1, 2004 the Company and its Chief Executive Officer entered into an amended employment contract (the "Amended and Restated Employment Contract") which provides the following to the Executive; (i) Base salary of $250,000, (ii) bonus, if any, determined and payable at the discretion of the board of directors, (iii) $6,000 annual car allowance, and (iv) complete medical coverage. Under the Amended and Restated Employment Contract if the Company terminates the executive without cause, or if he terminates his employment for good reason, the Company is obligated to make a lump sum severance payment equal to one year's base salary.



Litigation and Legal Proceedings



At June 30, 2005 the Company has a litigation reserve totaling $130,170 which it maintains for legal and settlement costs associated with its restructuring efforts and for current litigation arising in the ordinary course of business. Notwithstanding the litigation reserve established, in the light of the Company's current financial condition, the Company's cash liability, if any, arising from legal proceedings, could have a material adverse effect on the Company's financial position, results of operations or cash flows.



Increase of Authorized Capital Stock



The Company will need to increase its authorized capital stock in order to issue additional common stock (and to have stock available for instruments that convert into common stock) in an amount adequate to meet its capital needs and commitments. Currently the Company has authorized common stock of 150,000,000 shares, par value $.01, and authorized preferred stock of 15,000,000 shares, par value $.01. As of June 30, 2005 there were 118,221,228 common shares outstanding and 75 preferred shares outstanding. In order to meet the conversion rights of its outstanding convertible securities as well as the conversion rights of Senior Convertible Notes being offered and other anticipated capital needs, the Company will need to increase the amount of authorized common stock. Therefore the Company intends to achieve an increase in its authorized common and/or other capital stock. Although the Company believes that it will achieve an increase in its authorized stock, there can be no assurance that such an increase will be achieved.





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Required Payments to Guarantor



As consideration for entering into the Guaranty Agreement (see Footnote Q) the Company is required to pay to the Guarantor a fee of; (i) a $25,000 senior secured convertible note, and (ii) $900 of senior secured convertible notes for each $5,000 face value of Senior Convertible Notes sold by the Company (together the "Convertible Note(s)"). Each Convertible Note shall; (a) have a lien on all of the Company's assets, and will be equal in priority with all of the Company's other senior debt, (b) accrue (but not pay current) interest at the annual rate of four percent (4%), (c) mature on October 1, 2010, and (d) be convertible into common stock of the Company at a Conversion Price of $.005. Additionally, should the Guarantor be required to make any payments under the Guaranty Agreement to or for the benefit of holders of the Senior Convertible Notes pursuant to his obligations under the Guaranty the Company shall be obligated to repay Guarantor for all such payments and advances, and shall also be obligated to repay any reasonable fees and expenses, including legal expenses, expended by Guarantor in defending against any unsuccessful attempt by any party to enforce the Guaranty (unless such fees are paid by the losing party). The repayment of all such advances, payments and fees and expenses shall be secured by a first priority lien on essentially all of the Company's assets and will be equal in priority with all other senior secured debt of the Company and will accrue interest at the annual rate of eight percent (8%) and shall be due in full and payable on October 1, 2008.



O.  INCOME TAXES:



Provision for income taxes for the years ended June 30, 2004 and 2003 consists solely of the minimum California franchise tax due for the Company and each of its subsidiaries.



Provision for income taxes is summarized as follows:





|                           | June 30, 2005 | June 30, 2004
|-------------------------- | ------------- | -------------
|                           |               |              
|Current income taxes       | $     4,000   | $     4,000  
|Deferred income taxes      |               |              
|                           |               |              
|Provision for income taxes | $     4,000   | $     4,000  
|                           |               |              
|                           |               |              
|                           |               |              

The Company's total deferred tax asset as of June 30, 2005 is as follows:





|Net operating loss carry-forward | $   7,048,268
|-------------------------------- | -------------
|Valuation allowance              | (7,048,268)  
|                                 |              
|Net deferred tax asset           | $        -   
|                                 |              
|                                 |              
|                                 |              



As of June 30, 2005, the Company had net operating loss carry-forwards totaling approximately $16,446,799 for federal and $7,401,060 for state, before any limitations.  The carry-forwards expire through 2025 for federal and 2010 for state.



The realization of any future income tax benefits from the utilization of net operating losses may be severely limited.  Federal and state tax laws contain complicated change of control provisions (generally when a more than 50 percent ownership change occurs within a three-year period), which, if triggered, could limit or eliminate the use of the Company's net operating loss carry-forwards.



P.  MAJOR CUSTOMER AND SEGMENT INFORMATION



The Company operates solely in one industry segment: the marketing and support of its homeopathic drug used for the treatment and prevention of migraine headaches.  The Company has no customers that exceed 5% of gross revenues for the year ending June 30, 2005. The Company has no operations or assets located outside of the United States. The Company's sales are concentrated in the MigraSpray product, creating a risk of concentration associated with the sale of a single product and limited customer base. The loss of this single product market could cause severe damage to the Company's financial future.



Q.  RESTRUCTURING



The Company has made substantial progress towards the completion of its restructuring and has reached agreements and/or settlements for repayment of most of its past due unsecured creditors. Such cooperating creditors have either received a subordinated note, secured by a second lien on the Company's assets, and one share of restricted common stock for each one dollar owed to the creditor as payment in full of all monies owed to the creditor or have entered into a defined repayment arrangement. The subordinated notes are junior in right of payment to the senior debt and senior in right of payment to the unsecured creditors (see Note L for a description of the notes). At June 30, 2005 approximately $1,414,941 of subordinated notes were outstanding, and the amount owed to past due creditors, not covered by any defined payment arrangement, is approximately $196,000 (excluding amounts owed to officers and directors), which includes a litigation reserve of $130,170 (see also Note N - "Unsecured Creditors").





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The Company believes that the completion of sufficient capital raising efforts is an integral part of its restructuring and in December of 2004 the Company began conducting a private placement offering of $1,250,000 of senior secured convertible notes (the "Senior Convertible Notes"), which offer a third-party guaranty as to the timely payment of principal and interest. As of June 30, 2005 the Company had sold $300,000 face value of Senior Convertible Notes. The Senior Convertible Notes; (i) are secured by a first priority lien on all of the Company's assets and are equal in priority with all of the Company's other senior debt, (ii) either pay 8% annual interest on a quarterly basis beginning on April 1, 2005 or accrue interest at the rate of 6% (the investor chooses the interest payment option), (iii) mature on October 1, 2008, (iv) are convertible at any time at the holder's option, in whole or in part in minimum increments of $5,000, into the Company's common stock at a conversion price of $.025 per share (if covered by the third party guaranty), and (v) may be covered by a third party guaranty agreement at the option of the purchaser of the note (the "Guaranty" or "Guaranty Agreement").  Of the $300,000 sold, all are covered by the Guaranty Agreement. The Senior Convertible Notes are being offered without registration under the Securities Act of 1933 (the "Securities Act") in reliance upon exemption from registration afforded by Section 4(2) of the Securities Act and Rule 506 of Regulation D thereunder. The Offering is being made without any form of general solicitation or general advertising and each purchaser must represent to the Company that they are purchasing the securities for their own account, for investment purposes only and not with a view towards distribution or resale to others.



The Guaranty Agreement is entered into by the Company and Milan Mandaric (the "Guarantor") for the express benefit of any investor that purchases a Senior Convertible Note. It requires that the Guarantor unconditionally and irrevocably and without limitation or exception (other than conditions, limitations or exceptions specifically described in the Guaranty Agreement) guaranty the faithful and complete payment of any sums, including principal and interest, contemplated by any Senior Convertible Note as required by the Guaranty Agreement. The Company is permitted to enforce the Guaranty on behalf of purchasers of the Senior Convertible Notes.



Pursuant to the terms of the Private Placement, the Company has wide latitude, in its sole and absolute discretion, to increase or decrease the size of the offering (although the Guaranty is only available for up to $1.25 million of Senior Convertible Notes) and/or modify any terms of the offering.



In addition to the Private Placement, the Company is evaluating raising capital from institutional sources in amounts greater than the Maximum Offering Amount. The Company believes that it is likely that it will need capital in an amount greater than the amount of funding contemplated by the Private Placement to fully implement its business strategy. There can be no assurance that the Company will timely complete either its financing efforts or other aspects of its restructuring, or that if both goals are reached cash flows will be sufficient to fund the Company's ongoing capital and operating needs. If the Company is unable to complete a successful restructuring, including its financing efforts, the Company will be severely limited in its ability to execute its contemplated business plan and continue as a going concern.



R.  GOING CONCERN:



To date the Company has had limited sales due to the early stage of its efforts to transition into the marketing and distribution of its products. Prior to the first quarter of fiscal year ending June 30, 2002, the Company was primarily engaged in research and development activities. Consequently, the Company has incurred recurring losses from operations. These factors, as well as the risks associated with raising capital through the issuance of equity and/or debt securities creates uncertainty as to the Company's ability to continue as a going concern.



The Company's plans to address its going concern issues include:





|* | Increasing sales of its products through national distribution channels and through direct marketing to consumers;     
|- | -----------------------------------------------------------------------------------------------------------------------
|* | Raising capital through the sale of debt and/or equity securities; and,                                                
|* | Settling outstanding debts and accounts payable, when available, through the issuance of debt and/or equity securities.



There can be no assurance that the Company will be successful in its efforts to increase sales, issue debt and/or equity securities for cash or as payment for outstanding obligations.





|-  34 -
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|       



Capital raising efforts may be influenced by factors outside of the control of the Company, including, but not limited to, capital market conditions. During the year ended June 30, 2005 the Company raised cash and retired outstanding obligations through the issuance of equity and debt/equity securities totaling $1,917,071 in the aggregate. Of this amount, $1,053,378 of equity and debt/equity securities were issued to pay past due creditors.



The Company is in various stages of development on a number of products and is actively attempting to market its migraine relief product nationally. As a result of capital constraints the national marketing of its migraine relief product has been very limited, and the Company has experienced slow sales to date. The Company believes its ability to build upon the current sales levels is enhanced by (i) the efficacy of its migraine product, MIGRASPRAY, as demonstrated by clinical trial results, (ii) the addition of new management, (iii) the implementation of the Company's marketing strategy, and (iv) continued growth of it's distribution platform.



S. OTHER INCOME:



In fiscal years ending June 30, 2005 and 2004 the Company recognized substantial amounts of other income, which is primarily comprised of non-recurring transactions as follows:



For the fiscal year ending June 30, 2005 the Company recognized other income of $606,194 which is comprised of; (i) $48,924 associated with discounted settlements of various accrued liabilities and accounts payable, (ii) $16,000 as a result of income derived from the settlement of a lawsuit, (iii) a reduction of $11,092 to the Company's litigation reserve as a result of the settlement of the lawsuit mentioned above, and (iv) a reduction of $530,178 of accrued salaries and benefits due to the Officers of the Company as a result of the Officers forgiving such accrued salaries and benefits.



For the fiscal year ending June 30, 2004 the Company recognized other income of $951,409, which is comprised of; (i) $94,899 associated with discounted settlements of various accrued liabilities and accounts payable, (ii) a reduction of $210,290 to the Company's litigation reserve as a result of the settlements of accrued liabilities and accounts payable mentioned above, (iii) a reduction of $641,351 of accrued salaries and benefits due to Officers of the Company as a result of the Officers forgiving such accrued salaries and benefits, (iv) $4,671 derived from the collection of a bad debt, and (v) $198 of miscellaneous other income.

T.  RESTATED FINANCIAL STATEMENTS



The Company's audited financial statements as of June 30, 2005 with an auditors report date of October 10, 2005 have been restated.



- Note S was added.



- Cash flow statement was revised.



| |  |  |  | 
| |  |  |  | 



ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING WITH FINANCIAL DISCLOSURE.



None.



ITEM 8A.  CONTROLS AND PROCEDURES.



Disclosure Controls and Procedures



The Company's Chief Executive Officer is also the Chief Financial Officer ("Certifying Officers") and is responsible for establishing and maintaining disclosure controls and procedures for the Company. The Certifying Officers have concluded (based on his evaluation of these controls and procedures as of the end of the period covered by this report) that the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-14(C) under the Securities Exchange Act of 1934) adequately meet intended objectives and are effective to ensure that all material information required to be filed in this 10-KSB have been made known to him in a timely fashion. No significant changes were made in the Company's internal controls or in other factors that could significantly affect those controls subsequent to the date of the evaluation, including any corrective actions with regard to significant deficiencies or material weaknesses.



PART III



ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT



CHANGE OF CHIEF FINANCIAL OFFICER



Effective May 23, 2005 the Company's Chief Financial Officer, Robert T. Malasek, resigned from his position. James R. Arabia, the Company's Chief Executive officer, assumed the role of Chief Financial Officer on an interim basis. At such time as the Company is able to raise capital and expand its business it intends to seek an individual to assume the position of Chief Financial Officer.



DIRECTORS AND EXECUTIVE OFFICERS



The following table sets forth certain information such as the name, age, and current position(s) of each director and executive officer of the Company.



|Name                   | Age | Position                                                                 
|---------------------- | --- | -------------------------------------------------------------------------
|                       |     |                                                                          
|James R. Arabia        | 48  | Chairman, President, Chief Executive Officer, and Chief Financial Officer
|                       |     |                                                                          
|Donald Brucker, O.D.   | 72  | Director, Senior Vice President of Research and Development              
|                       |     |                                                                          
|Timothy R. Scott, PhD. | 53  | Director                                                                 
|                       |     |                                                                          
|John W. Huemoeller     | 49  | Director                                                                 





|-  35 -
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|       



JAMES R. ARABIA



Mr. Arabia assumed the role of Chairman of the Board of Directors in January 2002, and became President and Chief Executive Officer of the Company during September 2001 and Chief Financial Officer in May of 2005. From February 1997 through June 2000, Mr. Arabia served as Chairman, Chief Executive Officer and President of ICH Corporation, an American Stock Exchange listed company.  During Mr. Arabia's tenure, ICH grew from a non-operational company to becoming the parent company of various subsidiaries that owned and operated 265 fast food and family dining restaurants, generating approximately $245 million in revenues and employing approximately 7,800 people.  From 1982 through 1997, Mr. Arabia provided financial advisory and investment banking services to a variety of private clients.



DONALD BRUCKER, O.D.



Dr. Brucker a founder of the Company, currently serves as director and Executive Vice President of Research and Development.  From inception until September 2001, Dr. Brucker served as Chairman of the Board of Directors. From inception until October 2000 Dr. Brucker served as Chief Executive Officer. From October 2000 through July 2001 Dr Brucker served as Co-Chief Executive with Mr. Timothy Connor.  Dr. Brucker has over 40 years of experience in the medical industry. He was founder and Chief Executive Officer of Continuous Curve Contact Lenses, Inc. (at one time the second largest manufacturer of contact lens products).  During Dr. Brucker's tenure, Continuous Curve conducted an initial public offering and was later sold to Revlon for more than $100,000,000.  Subsequent to the sale to Revlon, Dr. Brucker served as President of Revlon Vision Care, subsidiary. From 1981 to 1982, Dr. Brucker served as Chief Executive Officer of Dura Pharmaceuticals (fka Immunotech Pharmaceuticals).  From 1982 to 1989 Dr. Brucker provided consulting services to a number of healthcare and medical device companies in the Southern California region.  Dr. Brucker has been instrumental in obtaining one of the first HIV diagnostic FDA approvals in the United States.  Dr. Brucker graduated from the University of California, Berkeley.



TIMOTHY R. SCOTT, PHD



Dr. Scott has served on the Board of Directors since September 2001.  From April 1998 to June 2000, Dr. Scott served as a member of the Board of Directors of ICH Corporation, and as a member of ICH's compensation committee.  Dr. Scott also serves as President and Senior Pastor of a 1,200-member church located in San Diego, California and hosts a radio talk show called "Dr. Scott Live."  Dr. Scott received his Ph.D. in theology from Christian University in 1981, and served as a professor of philosophy and religion at Pacific International College from 1981 to 1985.



JOHN W. HUEMOELLER



Mr. Huemoeller is the CEO and founder of Humware Media Corp. ("Humware"), a company engaged in publishing and diversified sports media. Prior to forming Humware in 1996 Mr. Huemoeller spent approximately 14 years in the securities industry as a registered representative and registered principal



All members of the Board of Directors are elected to serve until their respective successors for the Class (as defined below) have been elected and qualified or until their earlier death, resignation or removal in the manner specified in the Company's by-laws. The Board of Directors is divided into three classes, with the term of office of the first class to expire at the first annual meeting of stockholders following such classification ("Class 1 Directors") and the term of office of the second class to expire at the second annual meeting following such classification ("Class 2 Directors") and the term of office of the third class to expire at the third annual meeting following such classification ("Class 3 Directors"). The three classes of directors shall be as nearly equal in number as possible. At each annual meeting of stockholders following such initial classification, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election. Both Mr. Huemoeller and Dr. Scott are Class 1 Directors, Mr. Arabia is a Class 2 Director, and Dr. Brucker is a Class 3 Director.



ITEM 10.  EXECUTIVE COMPENSATION



SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION



The following table shows, for the most recent three fiscal years, the cash compensation paid by the Company, as well as all other compensation paid or accrued for those years to the Chief Executive Officer and the Company's other executive officers as of June 30, 2005.





|-  36 -
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|       





|SUMMARY COMPENSATION TABLE                
|------------------------------------------
|                                          
|                                          
|Name andPrincipal Position                
|                                          
|James R. Arabia                           
|Chief Executive Officer                   
|2002(1)                                   
|                                          
|Donald Brucker                            
|Former Sr. VP of R&D                      
|2002                                      
|                                          
|Robert T. Malasek                         
|Former Chief Financial Officer            
|2002                                      
|                                          
|Ken J. Yonika, CPA                        
|Former Chief Financial Officer            
|2002                                      
|                                          
|Jason J. Belice, Esq.                     
|General Counsel and VP of Business Affairs
|2002                                      
|                                          
|                                          
|                                          
|                                          
|(1)                                       
|                                          
|(2)                                       
|                                          
|(3)                                       
|                                          
|(4)                                       
|                                          
|(5)                                       



The following table represents the options granted to the Named Executive Officers in the last fiscal year and the value of such options.



OPTION GRANTS IN LAST FISCAL YEAR





|                    |                                                                                             | Realized
Assumed
Rates
of Stock
Appreciation
for
Term 10%($) |  | Options
Granted(#) |  | Number of
Securities
Underlying
in Fiscal
Year |  | Individual
Grants
% if Total
Options
Granted to
Employees
Base
Price($/SH) |  | Exercise
or
Expiration
Date |  | Potential
Value of
Annual
Price
Option
5%($)
|------------------- | ------------------------------------------------------------------------------------------- | ------------------------------------------------------------ |  | ------------------ |  | ---------------------------------------------- |  | -------------------------------------------------------------------------- |  | --------------------------- |  | --------------------------------------------
|                    |                                                                                             |                                                              |  |                    |  |                                                |  |                                                                            |  |                             |  |                                             
|                    |                                                                                             |                                                              |  |                    |  |                                                |  |                                                                            |  |                             |  |                                             
|James R. Arabia     | (1)                                                                                         | $   -                                                        |  | -                  |  | 0.0%                                           |  | $   -                                                                      |  | N/A                         |  | $   -                                       
|Donald Brucker O.D. | (1)                                                                                         | $   -                                                        |  | -                  |  | 0.0%                                           |  | $   -                                                                      |  | N/A                         |  | $   -                                       
|                    |                                                                                             |                                                              |  |                    |  |                                                |  |                                                                            |  |                             |  |                                             
|                    |                                                                                             |                                                              |  |                    |  |                                                |  |                                                                            |  |                             |  |                                             
|                    |                                                                                            
|                    |                                                                                             |                                                              |  |                    |  |                                                |  |                                                                            |  |                             |  |                                             
|(1)                 | There were no option grants during the year ending June 30, 2005 or subsequent to year-end.





|-  37 -
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|       



Option Holdings



The following table represents certain information with respect to options held by the Named Executive Officers.



FISCAL YEAR-END OPTION VALUES





|                    |                                                                  |             | Number of Securities
Underlying Unexercised
Options at Fiscal Year-End (#) |               | Value of Unexercised
In-the-Money Options
at Fiscal Year-End ($)
|------------------- | ---------------------------------------------------------------- | ----------- | -------------------------------------------------------------------------- | ------------- | ----------------------------------------------------------------
|                    |                                                                  |             |                                                                           
|                    |                                                                  |             |                                                                           
|                    |                                                                  |             |                                                                            |               |                                                                 
|Name                |                                                                  | Exercisable |                                                                            | Unexercisable |                                                                 
|                    |                                                                  |             |                                                                            |               |                                                                 
|                    |                                                                  |             |                                                                            |               |                                                                 
|James R. Arabia     | (1)                                                              |             | -                                                                          |               | -                                                               
|Donald Brucker O.D. | (1)                                                              |             | -                                                                          |               | -                                                               
|                    |                                                                  |             |                                                                            |               |                                                                 
|                    |                                                                  |             |                                                                            |               |                                                                 
|                    |                                                                 
|                    |                                                                  |             |                                                                            |               |                                                                 
|(1)                 | There were no options being held by any Named Executive Officer.



COMPENSATION OF DIRECTORS



All director fees have been accrued and no director has received to date cash compensation for his services as a director. All directors are entitled to be reimbursed for travel and other expenses incurred while attending meetings of the Board of Directors.





|NAME                  |                                                                                                                                                                                                                                                                                                                   | FISCAL
YEAR
ISSUED |  | Director fees |  | # OF SHARES |  | $ VALUE OF
GRANT
|--------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------ |  | ------------- |  | ----------- |  | ----------------
|                      |                                                                                                                                                                                                                                                                                                                   |                    |  |               |  |             |  |                 
|Timothy R. Scott, PhD |                                                                                                                                                                                                                                                                                                                   | 2004(1)            |  | $(12,167)     |  | -           |  | -               
|                      |                                                                                                                                                                                                                                                                                                                   | 2003(1)            |  | $ 12,167      |  | -           |  | -               
|                      |                                                                                                                                                                                                                                                                                                                   | 2002(1)            |  | $ 15,000      |  | -           |  | -               
|                      |                                                                                                                                                                                                                                                                                                                   |                    |  |               |  |             |  |                 
|John W. Huemoeller    |                                                                                                                                                                                                                                                                                                                   | 2004(2)            |  | $ (3,750)     |  | -           |  | -               
|                      |                                                                                                                                                                                                                                                                                                                   | 2003(2)            |  | $ 15,000      |  | -           |  | -               
|                      |                                                                                                                                                                                                                                                                                                                   | 2002(2)            |  | $  1,250      |  | -           |  | -               
|                      |                                                                                                                                                                                                                                                                                                                   |                    |  |               |  |             |  |                 
|                      |                                                                                                                                                                                                                                                                                                                   |                    |  |               |  |             |  |                 
|                      |                                                                                                                                                                                                                                                                                                                  
|                      |                                                                                                                                                                                                                                                                                                                   |                    |  |               |  |             |  |                 
|(1)                   | Director fees shown for Dr. Scott consist of a $10,000 convertible note, which is convertible into 4,000,000 shares of restricted common stock at the holder's option. The negative income shown for 2004 reflects the fact that Dr. Scott waived director fees that had been accrued in previous years.         
|                      |                                                                                                                                                                                                                                                                                                                   |                    |  |               |  |             |  |                 
|(2)                   | Director fees shown for Mr. Huemoeller consist of a $7,500 convertible note, which is convertible into 3,000,000 shares of restricted common stock at the holder's option. The negative income shown for 2004 reflects the fact that Mr. Huemoeller waived director fees that had been accrued in previous years.



EMPLOYMENT CONTRACTS



James R. Arabia, Chairman, President, and Chief Executive Officer



Effective July 1, 2004 the Company and its Chief Executive Officer entered into an amended employment contract (the "Amended and Restated Employment Contract") which provides the following to the Executive; (i) Base salary of $250,000, (ii) bonus, if any, determined and payable at the discretion of the board of directors, (iii) $6,000 annual car allowance, and (iv) complete medical coverage. Under the Amended and Restated Employment Contract if the Company terminates the executive without cause, or if he terminates his employment for good reason, the Company is obligated to make a lump sum severance payment equal to one year's base salary.





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ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT



PRINCIPAL STOCKHOLDERS



The following table sets forth information with respect to the beneficial ownership of Common Stock, as of June 30, 2005 (assuming the exercise of options, issuance of stock grants, the conversion of convertible debt or preferred stock with underlying common stock conversion rights, and warrants that are exercisable within 60 days of the date hereof) by:



(i) each person known to the Company to beneficially own more than 5 percent of the outstanding shares of Common Stock, (ii) each of the Company's directors, (iii) each of the Company's executive officers named in the Summary Compensation Table above, and (iv) all directors and officers of the Company as a group.  Unless otherwise indicated below, the persons and entities named in the table have sole voting and sole investment power with respect to all the shares beneficially owned, subject to community property laws, where applicable.  Percentage ownership assumes all warrants and options of listed person exercised and all other warrant and options unexercised. Total shares issued and outstanding for calculation of percentage ownership are 118,221,228.





|Name and Address                                                                             |  | Amount     |  | Percent
|-------------------------------------------------------------------------------------------- |  | ---------- |  | -------
|                                                                                             |  |            |  |        
|James R. Arabia (1)(2)(3)
c/o NatureWell, Inc.
110 W C St. Suite 1300
San Diego, CA 92101    |  | 52,037,743 |  | 31.5%  
|                                                                                             |  |            |  |        
|Financial Acquisition Partners, LP (4)
4019 Goldfinch Street, Suite 474
San Diego, CA 92103  |  | 16,750,000 |  | 13.0%  
|                                                                                             |  |            |  |        
|Lowell Blankfort (5)
c/o NatureWell, Inc.
110 W C St. Suite 1300
San Diego, CA 92101         |  | 22,526,653 |  | 8.7%   
|                                                                                             |  |            |  |        
|Donald Brucker, O.D. (1)(6)
c/o NatureWell, Inc.
110 W C St. Suite 1300
San Diego, CA 92101  |  | 27,529,360 |  | 19.9%  
|                                                                                             |  |            |  |        
|Timothy R. Scott, PhD (1)(7)
c/o NatureWell, Inc.
110 W C St. Suite 1300
San Diego, CA 92101 |  | 4,000,000  |  | 3.3%   
|                                                                                             |  |            |  |        
|John W. Huemoeller (1)(8)
c/o NatureWell, Inc.
110 W C St. Suite 1300
San Diego, CA 92101    |  | 3,000,000  |  | 2.5%   
|                                                                                             |  |            |  |        
|Milan Mandaric (1)(9)
c/o NatureWell, Inc.
110 W C St. Suite 1300
San Diego, CA 92101        |  | 15,800,000 |  | 12.0%  
|                                                                                             |  |            |  |        
|All directors and executive officers as a group (four individuals)                           |  | 86,567,103 |  | 45.1%  
|                                                                                             |  |            |  |        
|                                                                                             |  |            |  |        
|                                                                                             |  |            |  |        
|                                                                                             |  |            |  |        





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|       





|    |                                                                                                                                                                                                                                                                                                                                                                                                               |  |  | 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | 
|    |                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                               |  |  | 
|(1) | Includes convertible securities which are restricted from exercising their conversion rights until certain conditions are met pursuant to an agreement between the owner and the Company (see section 7 of the Arabia Letter Agreement under Note M to the Financial Statements for a description of the type of conditional restriction on conversion that governs the owner of the convertible securities).
|    |                                                                                                                                                                                                                                                                                                                                                                                                               |  |  | 
|(2) | Does not include 5,750,000 shares held by Financial Acquisition Partners, LP ("FALP"), a partnership for which Mr. Arabia is the sole General Partner. Mr. Arabia claims sole investment and voting power with regard to the 5,750,000 shares.                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                               |  |  | 
|(3) | Includes 75 shares of Series B Convertible Preferred Stock which converts into 1,875,000 shares of common stock,(see Item 12. "PREFERRED STOCK"). Also includes the effect of $450,000 face value of senior secured convertible notes owned by Mr. Arabia, which are convertible into 45,000,000 shares of common stock.                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                               |  |  | 
|(4) | Includes the effect of a $110,000 face value senior secured convertible note owned by Financial Acquisition Partners which is convertible into 11,000,000 shares of common stock.                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                               |  |  | 
|(5) | Includes the effect of $325,000 face value of convertible notes owned by Mr. Blankfort in either the Blankfort Trust or Blankfort Unlimited, Inc. Such notes are convertible into 17,755,224 shares ofcommon stock.                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                               |  |  | 
|(6) | Includes the effect of $87,500 aggregate face value of convertible notes owned by Dr. Brucker which are convertible into 20,000,000 shares of common stock. Also includes 7,529,360 shares owned by A.K. Trust, for which Dr. Brucker claims beneficial interest. Dr. Brucker along with his wife is co-trustee of the AK Trust (see also Note M to Financial Statements).                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                               |  |  | 
|(7) | Includes the effect of a $10,000 face value convertible note owned by Dr. Scott which is convertible into 4,000,000 shares of common stock. Does not include 2,868,781 shares that were transferred from Mr. Arabia to DHP, Inc., a Christian non-profit 501(c)3 corporation, for which Dr. Scott serves as president (see also Note M to Financial Statements).                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                              
|(8) | Includes the effect of a $7,500 face value convertible note owned by Mr. Huemoeller, which is convertible into 3,000,000 shares of common stock (see also Note M to Financial Statements).                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                              
|(9) | Includes the effect of $79,500 face value of senior secured convertible notes owned by Mr. Mandaric, which are convertible into 15,800,000 shares of common stock. Does not include 5,750,000 shares owned by FALP of which Mr. Mandaric is the sole limited partner.                                                                                                                                        



ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



In February 2005 the Company entered into an agreement with its Chief Financial Officer, Robert T. Malasek, that resulted in the forfeiture back to the Company of a senior secured convertible note, face value $7,000, which was convertible into 700,000 shares of common stock, and the issuance of a $6,000 unsecured convertible note which is convertible (subject to restrictions) as follows; (i) from the February 21, 2006 the Conversion Price of the note shall be $.0075, (ii) from February 22, 2006 until February 21, 2007 the Conversion Price of the note shall be $.005, provided however, such reduction in the Conversion Price shall only occur if Malasek has remained in the continuous employ of the Company for the entire preceding year, unless such employment is interrupted by death, disability or termination without cause, and (iii) from February 22, 2007 and thereafter the Conversion Price of the Note shall be $.0025, provided however, such reduction in the Conversion Price shall only occur if Malasek has remained in the continuous employ of the Company for the entire preceding two years, unless such employment is interrupted by death, disability or termination without cause.



In February 2005 the Company reached agreements with its two outside directors (Timothy R. Scott and John W. Huemoeller), that will result in the rescission of certain previous agreements between Mr. Scott and the Company and the forfeiture back to the Company from Mr. Scott of a senior secured convertible note, face value $7,500, which was convertible into 750,000 shares of common stock, and 750,000 shares of common stock. Mr. Huemoeller agreed to forfeit back to the Company a senior secured convertible note, face value $10,000, which was convertible into 1,000,000 shares of common stock. The agreements further require that as payment and settlement of all monies or consideration owed to Messrs. Scott and Huemoeller as of February 21, 2005 (neither director has ever received any cash compensation for their services) the Company shall issue two unsecured convertible notes, aggregate face value $17,500, which convert into 7,000,000 shares of common stock, subject to restrictions on conversion ($10,000 note convertible into 4,000,000 shares for Mr. Scott and $7,500 note convertible into 3,000,000 shares for Mr. Huemoeller).



The convertible notes issued to Messrs. Malasek, Scott and Huemoeller shall be subject to the same restrictions on conversion and covenants by the Company as described below in Sections 7 and 8 of the Arabia Letter Agreement.





|-  40 -
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In February 2005 the Company entered into an agreement with an employee that resulted in the forfeiture back to the Company of a senior secured convertible note, face value $9,000, which was convertible into 900,000 shares of common stock, and the issuance of a $7,000 unsecured convertible note which is convertible as follows; (i) from the February 21, 2006 the Conversion Price of the note shall be $.0075, (ii) from February 22, 2006 until February 21, 2007 the Conversion Price of the note shall be $.005, provided however, such reduction in the Conversion Price shall only occur if the employee has remained in the continuous employ of the Company for the entire preceding year, unless such employment is interrupted by death, disability or termination without cause, and (iii) from February 22, 2007 and thereafter the Conversion Price of the Note shall be $.0025, provided however, such reduction in the Conversion Price shall only occur if the employee has remained in the continuous employ of the Company for the entire preceding two years, unless such employment is interrupted by death, disability or termination without cause.



In February 2005 the Company and the Chief Executive Officer reached an amended and restated letter agreement (the "Arabia Letter Agreement") having the following terms:





|1. | In exchange for that certain senior secured note held by Arabia, face value $382,500, which went into payment default on October 5, 2003 and has a total balance due of $484,698 as of the Effective Date, the Company shall issue to Arabia, or order; (A) 25 shares of convertible preferred stock having the same rights and preferences per share as the 50 shares of Series B preferred stock held by Arabia (including voting rights of .7% per share of all securities entitled to vote),  (B) a senior convertible note, face value $190,000, convertible into common stock (at any time, in whole or in part, at the option of the holder) at a Conversion Price of $.01, which shall; (a) be secured by a first lien on all of the Company's assets and be pari passu with the Company's other senior debt, (b)  accrue interest at the rate of 4% per annum, and (c) mature on October 1, 2010, and (C) a senior secured note, face value $100,000, which shall; (i) be secured by a first lien on all of the Company's assets and be pari passu with the Company's other senior debt, (ii) accrue interest at the rate of 4% per annum, and (iii) mature on March 30, 2006.                                                                                                                                                                                                                                                                                                                                                                                          
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | The Company shall issue 3,000,000 shares of S-8 stock to Arabia as payment for $30,000 of past due compensation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|3. | The Company shall issue a senior secured convertible note to Arabia, face value $110,000, as payment for $110,000 of past due compensation. Such senior convertible note shall; (i) be secured by a first lien on all of the Company's assets and be pari passu with the Company's other senior debt, (ii) accrue interest at the rate of 4% per annum, (iii) mature on October 1, 2010, and (iv) be convertible into the Company's common stock (at any time, in whole or in part, at the option of the holder) at a Conversion Price of $.01, which Conversion Price shall be adjusted on May 15, 2006 to $.005, provided however, such adjustment shall only be made if Arabia has remained in the continuous employ of the Company from the Effective Date until May 15, 2006 unless such employment is interrupted by death, disability or termination without cause (as such terms are defined in Arabia's employment agreement in effect as of the Effective Date). Further, such note shall be convertible into S-8 shares upon the modification by the Company of its Stock Plan to allow such conversion.                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|4. | The Company shall issue to Arabia a senior secured note, face value $150,000, as payment for $150,000 of past due compensation and unpaid benefits. Such senior note shall; (i) be secured by a first lien on all of the Company's assets and be pari passu with the Company's other senior debt, (ii) accrue interest at the rate of 4% per annum, and (iii) mature on March 30, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|5. | Arabia hereby waives/forgives $85,360 owed to him by the Company for compensation and benefits, leaving a balance due of $132,250 as of the Effective Date, which balance is due and payable on or before April 15, 2005 and shall be secured by a first lien on all of the Company's assets and be pari passu with the Company's other senior debt.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|6. | Arabia hereby agrees to waive/forgive all interest accrued up to the Effective Date on those certain convertible debentures owned by Arabia, $200,000 face value and $50,000 face value. Such convertible notes shall also be modified to decrease the interest rate to 4% per annum, which shall accrue until maturity of October 1, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|7. | Notwithstanding anything contained herein or in any convertible note beneficially owned by Arabia to the contrary, Arabia shall be restricted from converting any convertible note now or hereafter beneficially owned by him unless and until for sixty (60) days prior to such conversion  (the "Sixty Day Testing Period") the Company had authorized common stock in an amount great enough to meet the aggregate conversion rights of all of its convertible securities outstanding on each day of the Sixty Day Testing Period, including all convertible securities beneficially owned by Arabia (when calculating aggregate conversion rights it shall be assumed that all convertible securities outstanding at the time the calculation is made have the right to immediately convert into common stock at the lowest possible conversion price that each such security may achieve at any time up to its maturity, even if they do not have such rights at the time of the calculation). The restriction described in this Section 7 shall be null and void and of no force or effect if at any point in time after the Effective Date Arabia was permitted to convert any note subject to this restriction (whether or not he actually converted any such note(s)), unless the parties agree in writing to extend the enforceability of this restriction. Further, if this restriction shall continue to be in force upon the one-year anniversary of the Effective Date, it shall constitute an event of default under the senior convertible notes owned by Arabia.
|8. | The Company represents and covenants that it shall make its reasonable best efforts to accomplish or facilitate an increase of the Company's (or its successor's) authorized common stock to an amount that would render Section 7 null and void.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                





|-  41 -
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In February 2005 the Company and its Senior Vice President of Research and Development reached an amended and restated letter agreement (the "Brucker Letter Agreement") having the following terms:





|1. | The Company shall issue an unsecured convertible note to Brucker, face value $12,500, as payment for past due compensation and loans/advances made to the Company. Such convertible note shall; (i) accrue interest at the rate of 4% per annum, (ii) mature on October 1, 2010, and (iii) be convertible into the Company's common stock (at any time, in whole or in part, at the option of the holder) at a Conversion Price of $.0025, provided however, should the par value of the Company (or its successor) become equal to or less than the Conversion Price the Company shall have the right to force conversion into common stock at any time thereafter (5,000,000 shares).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | The Company shall issue a senior secured convertible note to Brucker, face value $25,000, in exchange for that certain senior secured note (and accrued interest thereon) owned by Brucker, face value $18,250, which is dated February 15, 2004, and as payment for services of approximately $5,290. Such senior convertible note shall; (i) be secured by a first lien on all of the Company's assets and be pari passu with the Company's other senior debt, (ii) accrue interest at the rate of 4% annum, (iii) mature on October 1, 2010, and (iv) be convertible into the Company's common stock (at any time, in whole or in part, at the option of the holder) at a Conversion Price of $.0025.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|3. | The Company shall issue to Brucker a senior secured note, face value $50,000, as payment for $50,000 of past due compensation. Such senior note shall; (i) be secured by a first lien on all of the Company's assets and be pari passu with the Company's other senior debt, (ii) accrue interest at the rate of 4% per annum, and (iii) mature on March 30, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|4. | The Company shall amend that certain senior convertible note owned by Brucker, face value $50,000, which is dated February 15, 2004, as follows; (i) the Conversion Price shall be subject to adjustment on May 15, 2006 to $.005, provided however, such adjustment shall only be made if Brucker has remained in the continuous employ of the Company from the Effective Date until May 15, 2006 unless his employment is interrupted by death, disability or termination without cause (as such terms are defined in the employment agreement of James R. Arabia in effect as of the Effective Date), (ii) the interest rate shall be reduced to 4% per annum and will accrue until maturity, (iii) the maturity shall be extended to October 1, 2010, and (iv) all interest accrued up to the Effective Date shall be waived/forgiven.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|5. | Brucker hereby waives/forgives $64,779 owed to him by the Company for compensation, leaving a balance due of $121,816 as of the Effective Date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|6. | Immediately following the forced conversion of the unsecured convertible note described in Section 1, a rescission, together but not separately, of the following agreements between the Company and Brucker shall become effective; the Stock Issuance Agreement, the Stock Purchase Agreement, the Secured Promissory Note and the Security Agreement, all of which are dated April 28, 2001. Upon such rescission Brucker shall promptly forfeit 5,000,000 shares of the Company's common stock owned by him (certificates # LJ 3145, 3146, 3147 and 3148) and shall waive/forgive the balance due to him outlined in Section 6 and all interest that has accrued thereon.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|7. | Notwithstanding anything contained herein or in any convertible note beneficially owned by Brucker to the contrary, Brucker shall be restricted from converting any convertible note now or hereafter beneficially owned by him unless and until for sixty (60) days prior to such conversion  (the "Sixty Day Testing Period") the Company had authorized common stock in an amount great enough to meet the aggregate conversion rights of all of its convertible securities outstanding on each day of the Sixty Day Testing Period, including all convertible securities beneficially owned by Brucker (when calculating aggregate conversion rights it shall be assumed that all convertible securities outstanding at the time the calculation is made have the right to immediately convert into common stock at the lowest possible conversion price that each such security may achieve at any time up to its maturity, even if they do not have such rights at the time of the calculation).The restriction described in this Section 7 shall be null and void and of no force or effect if at any point in time after the Effective Date Brucker was permitted to convert any note subject to this restriction (whether or not he actually converted any such note(s)), unless the parties agree in writing to extend the enforceability of this restriction. Further, if this restriction shall continue to be in force upon the one-year anniversary of the Effective Date, it shall constitute an event of default under the senior convertible notes owned by Brucker.
|8. | The Company represents and covenants that it shall make its reasonable best efforts to accomplish or facilitate an increase of the Company's (or its successor's) authorized common stock to an amount that would render Section 7 null and void.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    





|-  42 -
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|       



PREFERRED STOCK



The Company has outstanding 75 shares, $1,000 liquidation preference, of Series B Convertible Preferred Stock. Pursuant to the terms of the Series B Convertible Preferred stock, owned by James R. Arabia, Chairman, President, And Chief Executive Officer of the Company, Mr. Arabia is allowed to cast a vote, on all matters that the Company's shareholders are permitted to vote upon, equal to .7% of all outstanding securities that are eligible to vote at the time of such shareholder action for each share of Series B Convertible Preferred that he owns (.7% X 75 shares = 52.5% of total vote). The shares convert into 1,875,000 shares of the Company's common stock and are non-transferable without the consent of the board of directors.



ITEM 13(a). EXHIBITS REQUIRED BY ITEM 601 OF REGULATION SB





| | (a) | The following documents are filed as part of this report:
| | --- | ---------------------------------------------------------
| |     | 1.                                                       
| |     | 2.                                                       



ITEM 13(b). REPORTS ON FORM 8-K



None.



EXHIBIT INDEX





|EXHIBIT
NUMBER |  | DESCRIPTION                                                                                                                                                   
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |  |                                                                                                                                                               
|               |  |                                                                                                                                                               
|4.5**          |  | 2004 Incentive Stock Bonus and Option Plan                                                                                                                    
|               |  |                                                                                                                                                               
|10.4******     |  | Morgan & Sampson, Inc. Distribution Service Agreement                                                                                                         
|               |  |                                                                                                                                                               
|10.6*****      |  | Employment Agreement for James R. Arabia.                                                                                                                     
|               |  |                                                                                                                                                               
|10.7*****      |  | Employment Agreement for Donald Brucker.                                                                                                                      
|               |  |                                                                                                                                                               
|10.8*****      |  | Consulting Agreement for Timothy J. Connor.                                                                                                                   
|               |  |                                                                                                                                                               
|10.9****       |  | Senior Note dated October 5, 2002 in the amount of $382,500 between NatureWell, Incorporated ("Debtor") and James R. Arabia ("Holder").                       
|               |  |                                                                                                                                                               
|10.10****      |  | Security Agreement for Senior Note dated October 5, 2002 in the amount of $382,500 between NatureWell, Incorporated ("Debtor") and James R. Arabia ("Holder").
|               |  |                                                                                                                                                               
|10.12*****     |  | Stock Issuance Agreement for Donald Brucker with Exhibit A ("Stock Purchase Agreement"), Exhibit B ("Promissory Note") and Exhibit C ("Security Agreement").  
|               |  |                                                                                                                                                               
|10.13*****     |  | Stock Issuance Agreement for Timothy J. Connor with Exhibit A "Stock Purchase Agreement"), Exhibit B ("Promissory Note") and Exhibit C ("Security Agreement").
|               |  |                                                                                                                                                               
|10.14*****     |  | Stock Issuance Agreement for Timothy R. Scott with Exhibit A ("Promissory Note") and Exhibit B ("Security Agreement").                                        
|               |  |                                                                                                                                                               
|10.15*****     |  | Stock Issuance Agreement for David A. Gotz with Exhibit A ("Promissory Note") and Exhibit B ("Security Agreement").                                           





|-  43 -
|-------
|       





|           |  |                                                                                                                                                                                                                                                                          
|---------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.16***** |  | Stock Issuance Agreement for Jason J. Belice with Exhibit A ("Stock Purchase Agreement"), Exhibit B ("Promissory Note") and Exhibit C ("Security Agreement").                                                                                                            
|           |  |                                                                                                                                                                                                                                                                          
|10.17***** |  | Stock Issuance Agreement for Alan S. Udin with Exhibit A ("Stock Purchase Agreement"), Exhibit B ("Promissory Note") and Exhibit C ("Security Agreement").                                                                                                               
|           |  |                                                                                                                                                                                                                                                                          
|10.18****  |  | Amended and Restated Security Agreement dated September 2, 2003 with Exhibit A (January 28, 2002 Security Agreement), Exhibit B (October 5, 2002 Security Agreement).                                                                                                    
|           |  |                                                                                                                                                                                                                                                                          
|10.19****  |  | Intercreditor agreement dated September 2, 2003 with Exhibit A (asset description).                                                                                                                                                                                      
|           |  |                                                                                                                                                                                                                                                                          
|10.20***   |  | Term Sheet between NatureWell, Incorporated and Alan S. Udin dated November 15, 2003.                                                                                                                                                                                    
|           |  |                                                                                                                                                                                                                                                                          
|10.21***   |  | Term Sheet between NatureWell, Incorporated and Timothy R. Scott dated November 15, 2003.                                                                                                                                                                                
|           |  |                                                                                                                                                                                                                                                                          
|10.22***   |  | Form of Senior Note issued as part of Company Restructuring.                                                                                                                                                                                                             
|           |  |                                                                                                                                                                                                                                                                          
|10.23***   |  | Form of Senior Convertible Note issued as part of Company Restructuring and Private Placement.                                                                                                                                                                           
|           |  |                                                                                                                                                                                                                                                                          
|10.24***   |  | Form of Subordinate Note issued as part of Company Restructuring.                                                                                                                                                                                                        
|           |  |                                                                                                                                                                                                                                                                          
|10.25***   |  | Form of Security Agreement securing Senior Notes issued as part of Company Restructuring (Security Agreement used for all debts and obligations, however incurred, payable by the Company to James R. Arabia previously reported as Exhibit 10.18 to June 30, 2003 10-K).
|           |  |                                                                                                                                                                                                                                                                          
|10.26***   |  | Form of Security Agreement securing Senior Convertible Notes issued as part of Company Restructuring and Private Placement.                                                                                                                                              
|           |  |                                                                                                                                                                                                                                                                          
|10.27***   |  | Form of Subordinate Security Agreement securing Subordinate Notes issued as part of Company Restructuring.                                                                                                                                                               
|           |  |                                                                                                                                                                                                                                                                          
|10.28***   |  | Form of Intercreditor, Subordination and Standby Agreement used for Company Restructuring.                                                                                                                                                                               
|           |  |                                                                                                                                                                                                                                                                          
|10.29**    |  | Amended and Restated Employment Contract Between NatureWell, Incorporated and James R. Arabia dated July 1, 2004.                                                                                                                                                        
|           |  |                                                                                                                                                                                                                                                                          
|10.30*     |  | Guaranty Agreement.                                                                                                                                                                                                                                                      
|           |  |                                                                                                                                                                                                                                                                          
|10.31*     |  | Mandaric Letter Agreement.                                                                                                                                                                                                                                               
|           |  |                                                                                                                                                                                                                                                                          
|10.32*     |  | Addendum to Mandaric Letter Agreement.                                                                                                                                                                                                                                   
|           |  |                                                                                                                                                                                                                                                                          
|10.33*     |  | Arabia Letter Agreement.                                                                                                                                                                                                                                                 
|           |  |                                                                                                                                                                                                                                                                          
|10.34*     |  | Brucker Letter Agreement.                                                                                                                                                                                                                                                
|           |  |                                                                                                                                                                                                                                                                          
|10.35*     |  | Malasek Letter Agreement.                                                                                                                                                                                                                                                
|           |  |                                                                                                                                                                                                                                                                          
|10.36*     |  | Scott Letter Agreement.                                                                                                                                                                                                                                                  
|           |  |                                                                                                                                                                                                                                                                          
|10.37*     |  | Huemoeller Letter Agreement.                                                                                                                                                                                                                                             





|-  44 -
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|       





|       |                                                                                                                            |                                                                                                                                                                   
|------ | -------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|23.1   |                                                                                                                            | Consent of Armando C. Ibarra, CPA, dated February 10, 2006, filed Herewith.                                                                                       
|       |                                                                                                                            |                                                                                                                                                                   
|31.1   |                                                                                                                            | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a), filed herewith.                                                                
|       |                                                                                                                            |                                                                                                                                                                   
|31.2   |                                                                                                                            | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a), filed herewith.                                                                
|       |                                                                                                                            |                                                                                                                                                                   
|32.1   |                                                                                                                            | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
|       |                                                                                                                            |                                                                                                                                                                   
|32.2   |                                                                                                                            | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
|       |                                                                                                                            |                                                                                                                                                                   
|       |                                                                                                                            |                                                                                                                                                                   
|       |                                                                                                                           
|       |                                                                                                                            |                                                                                                                                                                   
|*      | Incorporated by reference to the applicable exhibits to the Company's Form 10-QSB for the period ending March 31, 2005.   
|       |                                                                                                                            |                                                                                                                                                                   
|**     | Incorporated by reference to the applicable exhibit to the Company's Form 10-KSB filed on October 14, 2004.               
|       |                                                                                                                            |                                                                                                                                                                   
|***    | Incorporated by reference to the applicable exhibits to the Company's Form 10-QSB for the period ending December 31, 2003.
|       |                                                                                                                            |                                                                                                                                                                   
|****   | Incorporated by reference to the applicable exhibit to the Company's Form 10-KSB-A filed on October 15, 2003.             
|       |                                                                                                                           
|*****  | Incorporated by reference to the applicable exhibit to the Company's Form 10-KSB filed on October 15, 2002.               
|       |                                                                                                                           
|****** | Incorporated by reference to the applicable exhibit to the Company's Form 10-KSB filed on October 15, 2001.               







SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|Date:  February 10, 2006 | NATUREWELL, INCORPORATED                                                                   
|------------------------ | -------------------------------------------------------------------------------------------
|                         |                                                                                            
|                         | By:  /S/ James R. ArabiaJames R. Arabia
Chief Executive Officer and Chief Financial Officer
|                        
|                        

In accordance with the Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.



|                                | Title                                                                       | Date             
|------------------------------- | --------------------------------------------------------------------------- | -----------------
|                                |                                                                             |                  
|/S/ James ArabiaJames R. Arabia | Chief Executive Officer,
Chief Financial Officer 
and Chairman of the Board | February 10, 2006





|-  45 -
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|