|UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K                                                                                                                                                                                                                                                                                                                
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|(Mark One)                                                                                                                                                                                                                                                                                                                                                                                       
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|[  ]                                                                                                                                                                                                                                                                                                                                                                                             
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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) 237-1350                                                                                                                                                                                                                                                                                                                               
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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, $0.00001 Par Value
(Title of Class)                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                 
|Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
[  ] YES   [X] NO                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                 
|Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
[X] YES   [  ] NO                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                 
|Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
[X] YES   [  ] NO                       
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|Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K.  [X]                            
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|Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the Definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12-b2 of the Exchange Act.                                                                                              
|Large accelerated filer [  ]                                                                                                                                                                                                                                                                                                                                                                     
|Non-accelerated filer [  ]
(Do not check if a smaller reporting company)                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                 
|Indicate by check whether registrant is a shell company (as defined in Rule 12b-2 of the Act).
[X] YES   [  ] NO                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                 
|State the aggregate market value of the voting and non-voting stock held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter. As of December 31, 2008 the aggregate market value was $149,577.
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|State the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of December 4, 2009 the Company had issued and outstanding 2,448,665,750 shares of regular common stock and 19,000,000 shares of Series A Common Stock.                                                                                                            
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|Documents incorporated by reference and parts of Form 10-K into which incorporated:  None.                                                                                                                                                                                                                                                                                                       



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|Table of Contents
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|Part I           
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|Part II          
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|Part III         
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|Part IV          
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|Signatures       



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THIS REPORT ON FORM 10-K 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.



PART I



Item 1.  BUSINESS

NatureWell, Incorporated, a Delaware corporation (the "Company"), is a public company traded on the Over-the-Counter Bulletin Board ("OTC-BB") under the symbol "NAWL." The Company was formerly engaged in the research and development of unique proprietary healthcare products intended for a variety of conditions.



On May 9, 2008 the Company completed the sale of essentially all of its assets. Pursuant to the terms of the asset purchase agreement (the "APA") the Company sold all of its assets with the exception of the following: (i) all contract rights contained in that certain Registration Rights Agreement and that certain Investment Agreement, both dated March 31, 2006 and both by and between the Company and Dutchess Private Equities Fund, LP ("Dutchess"), (ii) that lease (rental agreement) by and between the Company and A-1 Self Storage located in El Cajon, California, and (iii) $500 cash.

The assets were sold to NatureWell, Incorporated, a Nevada corporation ("NWNV"), which is a private corporation wholly owned by the Company's Chief Executive Officer, James R. Arabia. The Asset Sale was approved by unanimous consent of the Board of Directors, a majority of the Company's stockholders and both the holders of a majority of the Company's Senior (secured) Debt and the holders of a majority of the Company's Subordinated (secured) Debt pursuant to a procedure outlined in an Intercreditor, Subordination and Standby Agreement dated September 2, 2003, as amended (the "Intercreditor Agreement"), which governs the rights of the Company's secured creditors.



Pursuant to the APA, as consideration for the assets being purchased, NWNV agreed that within ten (10) days following the Closing Date to forgive its right to payment of presently existing obligations totaling $1,087,500 due to NWNV by



In addition to the Consideration, NWNV also agreed to indemnify the Company against having to pay certain of its remaining debt and obligations (the "Indemnification"). Pursuant to the Indemnification NWNV must pay for all indemnified obligations, if the Company becomes required to pay them subject to certain conditions, up to $340,000, but not before the Company has spent $25,000 itself to repay such indemnified obligations. Pursuant to the APA the obligations subject to the Indemnification totaled approximately $555,453. Of this amount $352,369 are secured notes that are governed by the Intercreditor Agreement, which among other things, prohibits any collection action of any kind by any secured lender without the prior written consent of the holders of a majority of the senior debt, and eliminates any waiver, contained in any loan document relating to such secured debt, of the Company's ability to plead any statute of limitations as a defense against any claim made by a secured lender. The indemnified amount also includes $90,000 face value of secured notes issued to Mr. Arabia on April 30, 2008, which accrue interest at the rate of 4% until their maturity on July 1, 2012, and for which the Company has the right to convert into shares of common stock at any time after July 1, 2010 at an average conversion price of $.015 (6,750,000 shares based on the face value of the notes).  In addition to the Consideration and the Indemnification, NWNV also agreed to assume approximately $11,083 of the Company's liabilities.



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In arriving at the amount of Consideration received for the assets the Company considered the following factors:

- The Company had an amount of debt that, when combined with its inability to obtain financing under favorable terms, makes it impossible for the Company to continue to fund its operations and to implement a viable business plan.



- That improving the Company's balance sheet in order to make it more attractive for an acquisition of, or merger with, another more viable company was the best available strategy for the Company.



- That the cooperation of Dutchess and Mr. Arabia were essential in achieving a restructuring of the Company's balance sheet.



- That the Asset Sale to NWNV would provide adequate incentive for Mr. Arabia to remain as the Company's Chief Executive Officer and facilitate the restructuring and relinquish his voting control of the Company and to sell his debt to NWNV for its eventual cancellation pursuant to the terms of the APA.



- That the value received for the Company's assets was significantly more than the Company could receive for the assets in a sale to an uninterested third-party in view of the significant losses the Company had sustained while trying to operate its business.



- That the amount of outstanding secured debt issued by the Company was significantly more than any realistic valuation of the assets and that having received the approval for the Asset Sale from the creditors secured by such assets the Consideration, in the judgment of the parties directly affected by their sale, as well as the Company, was appropriate.



Business Strategy

As a result of the consummation of the transactions contemplated by the APA, the Company has become a shell company as defined under Rule 12b-2 of the Exchange Act.



The Company is currently seeking business opportunities including an acquisition or merger with an operating business. The Company can give no assurance that an acquisition or merger will occur.



Item 1A.  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.



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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 locate an acquisition or merger candidate under terms that it finds favorable; 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-K, 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 No Current Operations and We May Never Be Able to Acquire or Merge with an Operating Company.



As discussed herein the Company sold essentially all of its assets on May 9, 2008 and discontinued its operations, which was intended to improve the Company's balance sheet in order to make it more attractive for an acquisition of, or merger with, a more viable company. However, there can be no assurance that such an acquisition or merger will materialize.



The Company's Large Amount of Debt May Make it Difficult to Attract an Acquisition or Merger Candidate.



The Company has a considerable amount of secured and unsecured debt remaining on its balance sheet following the disposal of its assets. Such debt may make the Company unattractive to potential acquisition or merger candidates.



In Order to Facilitate an Acquisition or Merger the Company's Creditors May Have to Convert Some or All of Their Debt into Equity Thereby Substantially Diluting Current Shareholders.



Because the Company continues to carry a considerable amount of debt on its Balance sheet, and that such debt may make the Company unattractive to potential acquisition or merger candidates, it is likely that a further restructuring of the Company's balance sheet would be necessary in order to facilitate an acquisition or merger. Such a restructuring would likely include the conversion of some or all of the Company's debt into equity, which would lead to substantial dilution of existing shareholders.



Our Ability to Generate Revenues Depends Our Ability to Acquire or Merge with an Operating Company.



If the Company is unable to acquire or merge with an operating company it will be unable to generate any revenues. Additionally, the inability to generate revenues will make it unlikely that the Company would be able to service or repay any of its debt or current liabilities.



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 to remain until an acquisition or merger has been accomplished. In light of the Company's cash position and balance sheet there can be no assurance that the Company could provide the necessary incentive for Mr. Arabia to remain.



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



In their report accompanying the audit of our June 30, 2009 financial statements, our auditors expressed doubt as to our ability to continue as a going concern. Currently, the Company has no sales as a result of the disposition of its assets. 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 previous operations. These factors, as well as the risks associated with the Company being able to consummate an acquisition of or merger with an operating business and 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 believes that capital raised, together with cash on hand, will be sufficient to fund the Company's operations, which, as a shell company, essentially consists of complying with reporting requirements as a public company.  However, there can be no assurance that the Company will be able to complete these efforts. To the extent that cash on hand along with proceeds from the capital raising efforts 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 plan to address its going concern issues is to locate a viable operating business to acquire or merge with, however, there can be no assurance that the Company will be able to consummate such a transaction, or if a transaction is completed that it would be on terms that are favorable to the then-shareholders.



An Acquisition or Merger Would Likely Require Significant Amounts of Additional Financing Which Could Result in Dilution to Investors; Additional Financing Could be Unavailable or Have Unfavorable Terms



If the Company were to enter into an acquisition or merger it is possible that a substantial amount of capital would be needed to consummate such a transaction. Such capital may be raised in a variety of ways including through equity and/or debt financings (including convertible debt). Any equity financings would likely result in substantial 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 unable to consummate an acquisition or merger. The Company's actual capital requirements for an acquisition or merger will depend on many factors, including, but not limited to, the financial strength of a particular acquisition or merger candidate and the need for capital to expand or grow their business.



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Risk Factors Relating 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, 2009 the Company has a litigation reserve totaling $125,102 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 affect on the Company's financial position, results of operations or cash flows. Unsecured creditors are comprised of a number of creditors owed amounts of less than $10,000. 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 are in Default



As of June 30, 2009, the Company was in payment default on the following secured notes; (i) one senior secured note issued to Dutchess totaling $309,068, (ii) other senior secured notes totaling $176,898 and (iii) subordinated secured notes totaling $213,019.



The Company has no scheduled repayment arrangements in regard to any of the defaulted debt listed above. 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, as amended, 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, 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 (see also Financial Footnote P - "Restructuring", Amendments to the Intercreditor Agreement).



The Company may 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 the Company's 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 consummate an acquisition of or merger with an operating business or company.



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 announcement of an acquisition or merger, if any, announcements relating to strategic relationships, government regulatory actions, general conditions in overall market conditions and other unforeseen factors may have a significant impact on the market price of the common stock. In addition, in recent years the stock market for penny stocks in general, has experienced extreme price fluctuations. This volatility has had a substantial effect on the market prices of penny stock 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.



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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. Limited trading volume entails a high degree of volatility in the stock price. In the 52-week period from July 1, 2008 to June 30, 2009, the closing price for the shares of the Company's stock on the OTC Bulletin Board ranged from $0.0001 to $0.0001 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                                                                          
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|* | 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                                                                                                                                                                 
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|* | 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                
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|* | 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, 2009, the Company had outstanding approximately1,658,544,638 shares of common stock and 19,000,000 shares of Series A 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. The SEC recently adopted amendments to Rule 144 which became effective on February 15, 2008 and apply to securities acquired both before and after that date.  Under these amendments, a person who has beneficially owned restricted shares of our common stock for at least six months would be entitled to sell their securities provided that (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the three months preceding, a sale, (ii) we are subject to the Exchange Act reporting requirements for at least 90 days before the sale and (iii) if the sale occurs prior to satisfaction of a one-year holding period, we provide current information at the time of sale.

Persons who have beneficially owned restricted shares of our common stock or warrants for at least six months but who are our affiliates at the time of, or at any time during the three months preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of:



|· | 1% of the total number of securities of the same class then outstanding; or                                                                                
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|· | the average weekly trading volume of such securities during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.

provided, in each case, that we are subject to the Exchange Act periodic reporting requirements for at least three months before the sale.



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Item 2.  PROPERTIES

The Company's corporate offices are located at 110 West "C" St, Suite 1300, San Diego, California 92101. The offices are approximately 150 square feet and are currently made available to the Company by NWNV at no charge on a month to month basis. The Company also maintains storage space in El Cajon, California at a cost of $340 per month.



Item 3.  LEGAL PROCEEDINGS

At June 30, 2009 the Company has a litigation reserve totaling $125,102 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.



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

None.



PART II



Item 5.  MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

As of June 30, 2009, 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 2006: |        |       
|First Quarter     | 0.0060 | 0.0016
|Second Quarter    | 0.0030 | 0.0008
|Third Quarter     | 0.0031 | 0.0007
|Fourth Quarter    | 0.0020 | 0.0010
|                  |        |       
|Fiscal Year 2007: |        |       
|First Quarter     | 0.0011 | 0.0005
|Second Quarter    | 0.0006 | 0.0001
|Third Quarter     | 0.0002 | 0.0001
|Forth Quarter     | 0.0001 | 0.0001
|                  |        |       
|Fiscal Year 2008: |        |       
|First Quarter     | 0.0001 | 0.0001
|Second Quarter    | 0.0001 | 0.0001
|Third Quarter     | 0.0001 | 0.0001
|Fourth Quarter    | 0.0001 | 0.0001



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Recent Sales of Unregistered Securities



In January of 2009 the Company issued (i) 3,115 restricted shares of its Series E Convertible Preferred Stock to Dutchess Private Equities Fund, Ltd. ("Dutchess") as settlement of $3,104,139 of senior secured debt held by Dutchess, (ii) a senior secured note, face value $1,883,000, to Dutchess in exchange for $1,883,000 of senior secured debt held by Dutchess (see Footnote J - "Notes Payable and Long Term Payables"), and (iii) a senior secured note, face value $300,000 in exchange for $300,000of senior secured debt held by Dutchess (see Note H - "Loans Payable").



In February of 2009 the Company issued a senior secured note to Dutchess, face value $25,000, in exchange for proceeds of $25,000. This note accrues interest at the rate of 8% until maturity on January 1, 2012.



In May of 2009 the Company issued a senior secured note to Dutchess, face value $15,000, in exchange for proceeds of $15,000. This note accrues interest at the rate of 8% until maturity on January 1, 2012.



Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



The Company intends to seek opportunities to acquire or merge with an operating company and is actively seeking such a transaction. However, there can be no assurance that the Company will be successful in locating an acquisition or merger candidate or that it will be able to consummate a transaction with a candidate over the next twelve months. The Company's ability to repay its debt and/or further restructure its balance sheet is highly dependent upon its success in identifying and transacting an acquisition or merger. Additionally, the Company believes that an acquisition or merger may require the raising of additional capital to facilitate such a transaction, however at this time the Company has no specific plans for raising additional capital as such needs, if any, are unknown at this time.



PLAN OF OPERATION



The Company has no ongoing operations and any plan of operations would be developed in conjunction with the transaction of an acquisition or merger of an operating company as yet unidentified.



EXPECTED CAPITAL REQUIREMENTS



Over the next twelve months the Company's capital requirements are unknown except in regard to monies needed to make its filings required by the Securities and Exchange Commission. The Company expects that its current cash on hand along with additional borrowings from Dutchess Private Equities Fund, Ltd. ("Dutchess") will be adequate to cover the expenses related to continuing to report as a public company, however, there can be no assurance that Dutchess will be willing to provide such further funding.



EXPECTED RESEARCH AND DEVELOPMENT ACTIVITIES



None.



EXPECTED PURCHASES OR SALES OF PLANT AND SIGNIFICANT EQUIPMENT



None.



EXPECTED CHANGES IN NUMBER OF EMPLOYEES



The Company has 2 consultants/officers (a part-time CEO and part-time CFO) and does not expect to add any new employees over the next twelve months unless an acquisition or merger is completed within that time-frame.



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 had been developing various healthcare products until it discontinued operations in May of 2008 following the Asset Sale.



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FISCAL YEAR ENDED JUNE 30, 2009 COMPARED TO THE CORRESPONDING PERIOD IN 2008.



The Company experienced a net loss of $523,837 for the twelve-month period ended June 30, 2009, compared with a net loss of $45,165 for the same period ended June 30, 2008. This represents an increase of $478,672 or 1059.82% from the prior year. The increase in net loss is primarily attributable to a decrease in extraordinary income related to retirement of debt at a discount to its carrying value on the Company's balance sheet.



Consulting fees totaled $37,550 for the year ended June 30, 2009, compared with $10,000 for the same period ending June 30, 2008. This represents a increase of $27,550 from the prior year or 275.50%. The increase is due to additional need of consultants to assist the Company in the preparation of its filings. General and administrative expenses incurred by the Company were $47,865 for the year ended June 30, 2009, compared with $10,405 for the same period ended June 30, 2008. This represents an increase of $37,460 from the prior year due to the fact that there were $1,540,274 of general and administrative expenses for the year ended June 30, 2008 that were included in general and administrative expenses for discontinued operations.



DISCONTINUED OPERATIONS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 (ELEVEN-MONTHS)



For the fiscal year ended June 30, 2008 the Company's discontinued operations had gross sales totaling $339,256.



The Company experienced a net loss from discontinued operations of $682,610 for the period ended June 30, 2008.



The Company had a gross profit margin of 85.4% or $289,871 for the year ended June 30, 2008 and the Company's cost of products sold for the year ended June 30, 2008 was $49,385.



For the year ended June 30, 2008, consulting fees totaled $203,741;marketing and advertising costs totaled $88,510 and selling, general and administrative expenses incurred by the Company were $1,504,274.



The Company had a gain on disposal of discontinued operation of $1,612,455 in May 2008.



FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES



Pending an acquisition of or merger with another business or company, the Company anticipates that it will need capital to continue to make its required public filings, defend against creditor suits or actions and to reach settlements with creditors when advisable. The Company will need to obtain additional working capital to fund its business operations through additional working capital loans from Dutchess. There can be no assurance that Dutchess will provide any additional financing to the Company, which, if not provided, could result in the Company being unable to continue as a going concern.



At June 30, 2009 and 2008, the Company had current assets of $79,888 and $11,396, respectively, including cash of $441 and $11,396. The report of the Company's independent auditors on the financial statements for the fiscal year ended June 30, 2009, 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 consummating a business acquisition or merger.



NEW ACCOUNTING STANDARDS



In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No. 163, "Accounting for Financial Guarantee Insurance Contracts - An interpretation of FASB Statement No. 60".  SFAS 163 requires that an insurance enterprise recognize a claim liability prior to an event of default when there is evidence that credit deterioration has occurred in an insured financial obligation. It also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities, and requires expanded disclosures about financial guarantee insurance contracts. It is effective for financial statements issued for fiscal years beginning after December 15, 2008, except for some disclosures about the insurance enterprise's risk-management activities. SFAS 163 requires that disclosures about the risk-management activities of the insurance enterprise be effective for the first period beginning after issuance. Except for those disclosures, earlier application is not permitted.  The adoption of this statement is not expected to have a material effect on the Company's financial statements.



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In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles". SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States.  It is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles". The adoption of this statement is not expected to have a material effect on the Company's financial statements.



In March 2008, FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities - an amendment to FASB Statement No. 133". SFAS No. 161 is intended to improve financial standards for derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows. Entities are required to provide enhanced disclosures about: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows.  It is effective for financial statements issued for fiscal years beginning after November 15, 2008, with early adoption encouraged. The adoption of this statement is not expected to have a material effect on the Company's financial statements.



In December 2007, the FASB issued SFAS No. 141R, "Business Combinations".  This statement replaces SFAS 141 and defines the acquirer in a business combination as the entity that obtains control of one or more businesses in a business combination and establishes the acquisition date as the date that the acquirer achieves control. SFAS 141R requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date. SFAS 141R also requires the acquirer to recognize contingent consideration at the acquisition date, measured at its fair value at that date. This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. The adoption of this statement is not expected to have a material effect on the Company's financial statements.



In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements Liabilities -an Amendment of ARB No. 51".  This statement amends ARB 51 to establish accounting and reporting standards for the Noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. The adoption of this statement is not expected to have a material effect on the Company's financial statements.



In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115".  This statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS No. 159 apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities" applies to all entities with available-for-sale and trading securities. SFAS No. 159 is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provision of SFAS No. 157, "Fair Value Measurements". The adoption of this statement did not have a material effect on the Company's financial statements.



In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements". The objective of SFAS 157 is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements.  SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. The provisions of SFAS No. 157 are effective for fair value measurements made in fiscal years beginning after November 15, 2007. The adoption of this statement did not have a material effect on the Company's financial statements.



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Item 8.   FINANCIAL STATEMENTS



|INDEX TO FINANCIAL STATEMENTS   
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|REPORT OF INDEPENDENT ACCOUNTANT
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|FINANCIAL STATEMENTS:           
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REPORT OF INDEPENDENT ACCOUNTANT



Chang G. Park, CPA, Ph. D.t





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Report of Independent Registered Public Accounting Firm





To the Board of Directors of
Naturewell, Incorporated and subsidiaries
(A Development Stage company)

We have audited the accompanying consolidated balance sheets of Naturewell, Incorporated and subsidiaries (the "Company") as of June 30, 2009 and 2008 and the related consolidated statements of operations, changes in shareholders' equity and cash flows for the years then ended and for the period of May 13, 2008 to June 30, 2009. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.



We conducted our audit 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Naturewell, Incorporated and subsidiaries as of June 30, 2009 and 2008, and the consolidated results of its operations and its cash flows for the years then ended and for the period of May 13, 2008 to June 30, 2009 in conformity with U.S. generally accepted accounting principles.



The consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note Q to the consolidated financial statements, the Company has no operating business and has substantial amounts of debt that is in default as well as having a number of unpaid creditors. Without an operating business the Company has no revenue, cash flow or earnings available to meet its obligations. Those factors raise substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.









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October 2, 2009, except for Note S, as to which the date is December 2, 2009

San Diego, CA. 92108







|2667 Camino Del Rio South Plaza B, San Diego, CA 92108
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|Tel: (858) 722-5953                                   

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|NATUREWELL, INCORPORATED AND SUBSIDIARIESConsolidated Balance Sheets
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See Notes to Consolidated Financial Statements.

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|NATUREWELL, INCORPORATED AND SUBSIDIARIESConsolidated Statements of Operations
For the Years Ended June 30, 2009 and 2008
and for the period from May 13, 2008 to June 30, 2009
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|Other Income & (Expenses)                                                                                                                                                      
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|Discontinued operation                                                                                                                                                         
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See Notes to Consolidated Financial Statements.

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|NATUREWELL INCORPORATED AND SUBSIDIARIESConsolidated Statement of Changes in Stockholders' Equity
For the Years Ended  June  30, 2009 and 2008
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See Notes to Consolidated Financial Statements.

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|NATUREWELL, INCORPORATED AND SUBSIDIARIESConsolidated Statements of Cash Flows
For the Year Ended June 30, 2009 and 2008
and for the period from May 13, 2008 to June 30, 2009
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|CASH FLOWS FROM OPERATING ACTIVITIES                                                                                                                                          
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|Adjustments to reconcile net loss to net cash used in operating activities:                                                                                                   
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|Gain on disposal on discontinued operations                                                                                                                                   
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|CASH FLOWS FROM INVESTING ACTIVITIES                                                                                                                                          
|Proceed from fixed assets sales                                                                                                                                               
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|CASH FLOWS FROM FINANCING ACTIVITIES                                                                                                                                          
|Stock issued for cash                                                                                                                                                         
|Payments made on loans payable                                                                                                                                                
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See Notes to Consolidated Financial Statements.





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NATUREWELL, INCORPORATED AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDING JUNE 30, 2009 AND 2008



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"). Both UTI and CDHC are dormant and not engaged in any operating activities and there are no plans to engage in any activities in the future. The Company as of June 30, 2009 also holds a 91.9 percent (91.9%) ownership interest in Nasal Mist, Inc., a California corporation ("NMI"). NMI is also dormant and not engaged in any operating activities and there are no plans to engage in any activities in the future.

PRINCIPLES OF CONSOLIDATION:

The audited 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, 2009 and 2008.



BASIS OF ACCOUNTING:

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



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 audited 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.



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NATUREWELL, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDING JUNE 30, 2009 AND 2008



A.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):



SUMMARY OF SIGNIFICANT ACCOUNTING PRONOUNCEMENTS:



In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No. 163, "Accounting for Financial Guarantee Insurance Contracts - An interpretation of FASB Statement No. 60".  SFAS 163 requires that an insurance enterprise recognize a claim liability prior to an event of default when there is evidence that credit deterioration has occurred in an insured financial obligation. It also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities, and requires expanded disclosures about financial guarantee insurance contracts. It is effective for financial statements issued for fiscal years beginning after December 15, 2008, except for some disclosures about the insurance enterprise's risk-management activities. SFAS 163 requires that disclosures about the risk-management activities of the insurance enterprise be effective for the first period beginning after issuance. Except for those disclosures, earlier application is not permitted.  The adoption of this statement is not expected to have a material effect on the Company's financial statements.



In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles". SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States.  It is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles". The adoption of this statement is not expected to have a material effect on the Company's financial statements.

`In March 2008, FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities - an amendment to FASB Statement No. 133". SFAS No. 161 is intended to improve financial standards for derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows. Entities are required to provide enhanced disclosures about: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows.  It is effective for financial statements issued for fiscal years beginning after November 15, 2008, with early adoption encouraged. The adoption of this statement is not expected to have a material effect on the Company's financial statements.`

In December 2007, the FASB issued SFAS No. 141R, "Business Combinations".  This statement replaces SFAS 141 and defines the acquirer in a business combination as the entity that obtains control of one or more businesses in a business combination and establishes the acquisition date as the date that the



In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements Liabilities -an Amendment of ARB No. 51".  This statement amends ARB 51 to establish accounting and reporting standards for the Noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. The adoption of this statement is not expected to have a material effect on the Company's financial statements.



In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115".  This statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS No. 159 apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities" applies to all entities with available-for-sale and trading securities. SFAS No. 159 is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provision of SFAS No. 157, "Fair Value Measurements". The adoption of this statement did not have a material effect on the Company's financial statements.



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NATUREWELL, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDING JUNE 30, 2009 AND 2008



A.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):



In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements". The objective of SFAS 157 is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements.  SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. The provisions of SFAS No. 157 are effective for fair value measurements made in fiscal years beginning after November 15, 2007. The adoption of this statement did not have a material effect on the Company's financial statements.



B.  FORMATION OF SUBSIDIARIES:



NASAL MIST, INC.



The Company owns 91.9% of Nasal Mist ("NMI"), a subsidiary formed by the Company during August 1997, NMI is dormant and not engaged in any operating activities and there are no plans to engage in any activities in the future.



C.  INVENTORY:

As of June 30, 2009 and 2008 the Company has no inventory.



D.  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 2009 and 2008 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 are the same as basic earnings (loss) per share.



E.  WARRANTS, OPTIONS AND STOCK BASED COMPENSATION:

There are no warrants or options outstanding as of June 30, 2009 and 2008.

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 initially allowed for the issuance of 10,000,000 shares of S-8 stock, subject to the board's authority to amend the Plan.



On December 21, 2005 the Plan was amended to allow for the issuance of up to 30,000,000 shares of S-8 stock. 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. At June 30, 2009 18,642,742 shares were issued under the Plan.



Total compensation cost recognized in income for stock-based employee compensation was 0 and $35,000 (including officers) for the years ending June 30, 2009 and June 30, 2008, respectively. Of the $35,000 for June 30, 2008, $35,000 was for payment to an officer.



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NATUREWELL, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDING JUNE 30, 2009 AND 2008



F.  PREFERRED STOCK:

The Company has outstanding 75 shares of Series C Convertible Preferred Stock (the "Series C Preferred"). Each share of Series C Preferred has a $1,000 liquidation preference, and all 75 shares are owned by Dutchess Private Equities Fund, Ltd. ("Dutchess"), the Company's largest senior secured creditor (see also Note H - "Loans Payable" and Note K - "Related Party Transactions"). Pursuant to the terms of the Certificate of Designation for the Series C Preferred, Dutchess is allowed to cast a vote on all matters that the Company's shareholders are permitted to vote upon, equal to 0.7% of all outstanding securities that are eligible to vote at the time of such shareholder action for each share of Series C Convertible Preferred that it owns (0.7% X 75 shares = 52.5% of total vote). Each share of Series C Preferred is convertible into 25,000 shares of the Company's common stock (1,875,000 total).



The Company has outstanding 3,115 shares of Series E Convertible Preferred Stock (the "Series E Preferred"). Each share of Series E Preferred has a $1,000 liquidation preference, and all 3,155 shares are owned by Dutchess (see also Note H - "Loans Payable" and Note K - "Related Party Transactions"). Pursuant to the terms of the Certificate of Designation for the Series E Preferred, each share is convertible into 1,333 shares of common stock (which conversion price is not subject to adjustment due to a reverse split), provided however, in no event shall the Company permit such conversion, into that number of shares of common stock which, when added to number of shares of common stock already beneficially owned (as such term is defined under Section 13(d) and Rule 13d-3 of the Securities Exchange Act of 1934, as amended), by the holder, would cause the holder's beneficial ownership of common stock to exceed 4.99% of the number of shares of common stock outstanding as of the conversion date for the shares of Series E Preferred that the holder seeks to convert. On any matter for which the shareholders of the Company are entitled to vote, each share of Series E Preferred shall be entitled to cast a number of votes equal to the number of whole shares of common stock into which such share of Series E Preferred could then be converted into.



G.  SERIES A COMMON STOCK



The Company has 20,000,000 authorized shares of Series A Common Stock of which 19,000,000 shares are issued and outstanding all of which are owned by Dutchess. Each share of Series A Common Stock shall entitle the holder to cast ten (10) votes for all matters presented to the shareholders for vote, and each share may be converted at the option of the holder into one share of regular Common Stock by surrendering to the Company the certificate or certificates evidencing the shares of Series A Common Stock to be converted together with a written request that the shares be so converted. Holders of regular Common Stock and Series A Common Stock shall vote together as a single class on all matters as to which holders of the class of common stock are entitled to vote, except as may be otherwise required by law.



At June 30, 2009, the 19,000,000 shares of Series A Common Stock were eligible to cast a vote equal to 7.2% of the eligible votes possessed by the common stock as a class (190,000,000 votes of an eligible 2,638,665,750 votes) and 3.41% of the eligible votes possessed by the common stock and preferred stock voting together (190,000,000 votes of an eligible 5,563,770,621).



H.  LOANS PAYABLE :

Loans payable as of June 30, 2009 and 2008 are as follows:



|                                                                                                                                             | 2009         | 2008          
|-------------------------------------------------------------------------------------------------------------------------------------------- | ------------ | --------------
|                                                                                                                                             |              |               
|Loans payable with annual interest varying from 8 to 12% (net of debt discount of  0 and $49,847 as of June 30, 2009 and 2008, respectively) | $    328,026 | $    3,367,008
|                                                                                                                                             |              |               
|                                                                                                                                             | $    328,026 | $    3,367,008
|                                                                                                                                             |              |               
|                                                                                                                                             |              |               
|                                                                                                                                             |              |               



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NATUREWELL, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDING JUNE 30, 2009 AND 2008



H.  LOANS PAYABLE (continued):

Loans payable as of June 30, 2009 consist of the following:



|(1) | The current portion ($96,000) of a senior secured note issued to Dutchess, face value $300,000, which matures on January 1, 2012, pays interest of six percent per annum, requires minimum monthly payments of $6,000 beginning on March 1, 2009, is secured by a lien on all of the Company's assets, and is equal in rank with all other senior secured debt of the Company. The Company did not make the required March 1, 2009 payment on the note or any required payments thereafter, however Dutchess has not initiated any collection action and has not given notice of any intent to exercise any remedies available under the terms of the note (see also Note K - "Related Party Transactions"").                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Other notes that are in payment default are as follows; (i) one unsecured note totaling $19,007, including interest thereon of $7,054 which accrues interest at the rate of 8% per annum, and  (ii) two subordinated secured notes totaling $213,019 including interest thereon of $74,201 which accrue interest at the rate of 8% and 10%.  The two subordinated secured defaulted notes listed above have either passed their original stated maturity or are entitled to accelerated payment of principal under the default provisions of such notes. None of the holders of the defaulted subordinated notes has initiated any collection action and the notes are governed by the terms of the Intercreditor Agreement (see Note P - "Restructuring", Amendments to the Intercreditor Agreement).



I.  LEASES:

The Company's corporate offices are located at 110 West "C" St, Suite 1300, San Diego, California 92101. The offices are approximately 150 square feet and are currently made available to the Company by NWNV at no charge on a month to month basis. Office rent and incidental expense was 0 and $37,667 for the fiscal years ending June 30, 2009 and 2008, respectively. The Company also maintains storage space in El Cajon, California at a cost of $340 per month.



J.  NOTES PAYABLE AND LONG TERM PAYABLES:

Notes payable as of June 30, 2009 and June 30, 2008 consist of the following:



|                                                                   | June 2009  |  | June 2008  
|------------------------------------------------------------------ | ---------- |  | -----------
|                                                                   |            |  |            
|Senior Secured Notes, with annual interest of 8%                   | $2,213,128 |  | $1,705,589 
|Subordinated Secured Convertible Notes, with annual interest of 4% | 47,140     |  | 45,301     
|Senior Secured Convertible Notes, with annual interest of 4% to 8% | 224,038    |  | 208,727    
|                                                                   |            |  |            
|                                                                   | $2,484,306 |  | $ 1,959,617
|                                                                   |            |  |            
|                                                                   |            |  |            
|                                                                   |            |  |            



The senior secured notes totaling $2,213,128 includes interest accrued thereon of $86,130 and are comprised of four senior secured notes that are issued to Dutchess. The notes are secured by a first priority security interest in essentially all of the Company's assets, are equal in rank with other senior debt and accrues interest at rates between 6% and 8%.  One of the notes totaling $1,959,073, including interest thereon of $76,073, matures on January 1, 2011 and the remaining three notes mature on January 1, 2012.



The subordinated secured convertible notes totaling $47,140 includes interest accrued thereon of $2,140 and is comprised of a note that was issued to the Company's Chief Executive Officer, James R. Arabia (see Note K - "Related Party Transactions") and was secured by a subordinate security interest (subordinated to senior debt) in essentially all of the Company's assets, is equal in rank with other subordinate secured debt, accrues interest at the rate of 4% per annum until maturity on July 1, 2012 and is convertible into the Company's common stock at a conversion price of $.02 at the option of the holder, however, after July 1, 2010 the Company shall have the right to force conversion of the note at the conversion price.



The senior secured convertible notes totaling $224,038 include interest accrued thereon of $69,038, were secured by a first priority security interest in essentially all of the Company's assets and are equal in rank with other senior debt. Included in this amount is a senior convertible note issued to the Company's Chief Executive Officer, James R. Arabia (see Note K - "Related Party Transactions") totaling $47,140 including interest thereon of $2,140. Mr. Arabia's note accrues interest at the rate of 4% per annum until maturity on July 1, 2012 and is convertible into the Company's common stock at a conversion price of $.01 at the option of the holder, however, after July 1, 2010 the Company shall have the right to force conversion of the note at the conversion price. The remaining senior convertible notes ($176,898, including interest thereon of $66,898) are in payment default and bear annual interest of 8% and are convertible into the Company's common stock, at the option of the holder, at a conversion price of $.01. None of the holders of the defaulted senior convertible notes has initiated any collection action and the notes are governed by the terms of the Intercreditor Agreement (see Note P - "Restructuring", Amendments to the Intercreditor Agreement).



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NATUREWELL, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDING JUNE 30, 2009 AND 2008



K.  RELATED PARTY TRANSACTIONS



The Arabia Letter Agreement



On April 30, 2008, Naturewell Incorporated (the "Company") entered into a Letter Agreement (the "Agreement") with James R. Arabia, the Company's President and Chief Executive Officer, whereby Mr. Arabia agreed to cancel all debt owed to him by the Company as of the Effective Date of the Agreement totaling $786,621 and to also terminate his employment contract dated July 1, 2004. The Agreement replaced all previous agreements and understanding between the Company and Mr. Arabia up to its Effective Date. As part of the Agreement the Company agreed to pay to Mr. Arabia $750,000 as full and final settlement of unreimbursed business expenses and other unreimbursed expenses related to loans, refinancings and debt incurred by Arabia for the benefit of the Company, and for unreinbursed medical expenses. The repayment of these expenses was made by issuing to Mr. Arabia the following notes:



- Senior Secured Note, face value $425,000, dated April 30, 2008, which accrues interest at the rate of 10% until its maturity on July 1, 2009.
- Subordinated Secured Note, face value $325,000, dated April 30, 2008, which accrues interest at the rate of 10% until its maturity on July 1, 2009.



The Company also agreed to pay Mr. Arabia consideration of $100,000 for agreeing to terminate his employment contract. The payment of this consideration was made by issuing to Mr. Arabia the following:



- Senior Secured Convertible Note, face value $45,000, dated April 30, 2008, which accrues interest at the rate of 4% until its maturity on July 1, 2012. The Company shall have the right to force the conversion of this note into common stock any time after July 1, 2010 at a conversion price of $.01.
- Subordinated Secured Convertible Note, face value $45,000, dated April 30, 2008, which accrues interest at the rate of 4% until its maturity on July 1, 2012. The Company shall have the right to force the conversion of this note into common stock any time after July 1, 2010 at a conversion price of $.02.
- 100,000,000 restricted shares of the Company's regular common stock.



The parties agreed that Mr. Arabia shall be compensated in the future for his duties as Chief Executive Officer in an amount that is mutually agreeable to him and the Board of Directors.



Settlement Agreement with James R. Arabia



Effective May 9, 2008 the Company entered into a settlement agreement and mutual general release (the "Arabia Settlement Agreement") with its Chief Executive Officer, James R. Arabia, Dutchess Private Equities Fund, Ltd. ("Dutchess"), and NatureWell, Incorporated, a Nevada corporation ("NWNV"). NWNV is a private corporation wholly owned by Mr. Arabia.



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NATUREWELL, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDING JUNE 30, 2009 AND 2008



K.  RELATED PARTY TRANSACTIONS (continued)



Under the terms of the Arabia Settlement Agreement the parties agreed to the following:



- That Mr. Arabia would sell to NWNV two notes owned by him and issued by the Company pursuant to the April 30, 2008 Letter Agreement described above; a senior secured note, face value $425,000, and a subordinated secured note, face value $325,000 (the "Arabia Notes"). As payment for his notes, NWNV would issue to Mr. Arabia its own new notes having an aggregate face value of $750,000. Following its acquisition of the Arabia Notes, NWNV would agree to cancel the Arabia Notes as partial consideration for the purchase of essentially all of the Company's assets pursuant to an asset purchase agreement between the Company and NWNV (the "Asset Sale"). The Asset Sale is described below.



- That Mr. Arabia would sell to Dutchess the 75 shares of voting-control Series C Convertible Preferred Stock that he owns (see also Note F - "Preferred Stock").



- That Mr. Arabia would sell to Dutchess the 9,000,000 shares of super-voting Series A Common Stock that he owns, and that he would also cause Financial Acquisition Partners, LP, a limited partnership for which Mr. Arabia is the sole general partner, to sell to Dutchess 10,000,000 shares of the Series A Common Stock that it owns (see also Note G - "Series A Common Stock").



- The Company would issue to Mr. Arabia 250,000,000 restricted shares of its common stock as an incentive to enter into the Arabia Settlement Agreement (the "Incentive Shares"), which shares would be earned upon the signing of the Arabia Settlement Agreement by the parties.



- That all of the transactions described above, except for the issuance of the Incentive Shares, along with the exchange of a mutual general release between the parties, would become effective on the day that is one (1) day after the last of the following two events have occurred; (i) receipt of the Incentive Shares by Mr. Arabia, and (ii) the closing of the Asset Sale.



All of the transactions described in the Arabia Settlement Agreement have been completed as of May 14, 2008.



Settlement Agreement with Financial Acquisition Partners, LP



Effective May 9, 2008 the Company also entered into a settlement agreement and mutual general release (the "FALP Settlement Agreement") with Financial Acquisition Partners, LP ("FALP"), Dutchess, and NWNV. Mr. Arabia, the Company's Chief Executive Officer, is the sole general partner for FALP.



Under the terms of the FALP Settlement Agreement the parties agreed to the following:



- That FALP would agree to accept 108,835,739 restricted shares of the Company's common stock as full and final settlement of its two senior secured notes and four senior secured convertible notes issued by the Company which have an approximate aggregate balance due of $265,286 as of the effective date of the exchange.



- That the requirement to issue the restricted shares in exchange for the secured notes, along with the exchange of a mutual general release between the parties, would become effective upon (i) receipt by the Debtor of an executed version of the FALP Settlement Agreement, and (ii) either the closing of the Asset Sale or NWNV agreeing to permit the issuance of the shares prior to the closing of the Asset Sale.



The closing of the Asset Sale was completed (see Note O - "Disposition of Assets") and the notes owned by FALP were exchanged for 108,835,739 restricted shares of the Company's common stock on May 13, 2008.



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NATUREWELL, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDING JUNE 30, 2009 AND 2008



K.  RELATED PARTY TRANSACTIONS (continued)



The Mandaric Letter Agreement



In a Letter Agreement between the Company, NWNV and Milan Mandaric, the Company agreed to issue to FALP, of which Mr. Mandaric is the sole limited partner and Mr. Arabia is the sole General Partner, 80,000,000 restricted shares of its common stock as an investment banking advisory fee and to issue 10,000,000 restricted shares of its common stock to Mr. Mandaric for entering into the Letter Agreement.



Mr. Mandaric provided a guaranty for the repayment of six senior secured notes issued by the Company having an aggregate face value of $297,500. The Letter Agreement outlines Mr. Mandaric's agreement to allow NWNV to acquire the Mandaric Guaranteed Notes using new notes issued by NWNV, and that such notes issued by NWNV will also be guaranteed by Mr. Mandaric. NWNV agreed to cancel any Mandaric Guaranteed Notes that it did acquire as partial consideration for the purchase of essentially all of the Company's assets pursuant to the Asset Sale described in Note O - "Disposition of Assets". All of the transactions described in the Letter Agreement could only occur upon the closing of the Asset Sale, which occurred on May 9, 2008. The issuance of the 80,000,000 shares to FALP and 10,000,000 shares to Mr. Mandaric was completed on May 13, 2008. Additionally, the Mandaric Guaranteed Notes were acquired by NWNV and have been cancelled effective May 10, 2008.



Dutchess Settlement Agreements



On October 15, 2008 the Company and Dutchess entered into a Settlement Agreement made effective June 15, 2008 for the payment of penalties and liquidated damages on twelve promissory notes that the Company issued to Dutchess (the "Promissory Notes"), all of which are in payment default (see Note H - "Loans Payable "). Pursuant to the Settlement the Company agreed to pay Dutchess $1,700,000 as full and final payment for any and all penalties or liquidated damages due on the Promissory Notes through June 15, 2008 (the "Compromise Payment"). Dutchess agreed to accept the Compromise Payment in the form of a senior secured note for $1,700,000 (see Footnote J - "Notes Payable and Long Term Payables").



On January 26, 2009 the Company entered into a new Settlement Agreement and Mutual General Release (the "Agreement") with Dutchess. The Agreement was made effective as of January 1, 2009. Pursuant to the terms of the Agreement, Dutchess agreed to exchange seventeen (17) senior secured notes issued to it by the Company (including the Promissory note issued pursuant to the June 15, 2008 Settlement Agreement described above), for which there was an aggregate remaining balance due, including all accrued and unpaid interest and/or penalties, if any, in the amount of approximately $5,298,139 as of January 1, 2009, for the following; (i) A senior secured note, face value $300,000, which matures on January 1, 2012, pays interest of six percent (6%) per annum and requires minimum monthly payments of $6,000 beginning on March 1, 2009. The $300,000 note is secured by a lien on all of the Company's assets and is equal in rank with all other senior secured debt of the Company; and (ii) A senior secured note, face value $1,883,000, which accrues interest at the rate of eight percent (8%) per annum until maturity on January 1, 2011, at which time all principal and interest accrued thereon are due in full. The $1,883,000 note is secured by a lien on all of the Company's assets and is equal in rank with all other senior secured debt of the Company; and (iii) 3,115 restricted shares of the Company's Series E Convertible Preferred Stock.



The Agreement also contains a full mutual general release between the parties and each of their respective Affiliated Parties.



Two of the Company's directors, Douglas H. Leighton and Michael A. Novielli, are also directors of Dutchess.



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NATUREWELL, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDING JUNE 30, 2009 AND 2008



L.  COMMITMENTS AND CONTINGENCIES



Unsecured Creditors of the Company



As of June 30, 2009 the Company maintains a litigation reserve of $125,102 for the payment of past due unsecured creditors for which it does not have a defined payment arrangement (including creditors whose debts were extinguished due to the statute of limitations expiring for such creditors to take legal action to collect their debt - see also Note R -  "Extraordinary Gain and Other Income"). Additionally, the Company is in payment default on an unsecured note totaling $19,007, including interest thereon of $7,054 which accrues interest at the rate of 8% per annum. Whenever feasible the Company negotiates with these creditors to reach settlement agreements that are acceptable to the Company, including agreements to swap equity for debt owed to these creditors. However, if the Company is unable to reach acceptable settlement arrangements it may be subject to various collection actions.



Litigation and Legal Proceedings



At June 30, 2009 the Company has a litigation reserve totaling $125,102 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.



M.  STOCK ISSUANCES:



For the year ended June 30, 2008 the Company issued; (i) 90,000,000 restricted shares of common stock for $9,000 of services rendered, (ii) 350,000,000 restricted shares of common stock for payment of an incentive fee valued at $35,000 for Mr. Arabia to enter into the Letter Agreement and Settlement Agreement described in Note K - "Related Party Transactions",  (iii) 388,355,689 restricted shares of common stock to Dutchess, valued at $38,836, representing the remaining balance of  an incentive payment of 397,000,000 restricted shares for making $3,063,500 of loans to the Company,  (iv) 733,877,099 restricted shares of common stock for the retirement of approximately $2,427,678 of debt outstanding, and (v) 282,499,644 shares of common stock for cash proceeds of $101,568.



For the year ended June 30, 2009 the Company issued 3,115 restricted shares of its Series E Convertible Preferred Stock to Dutchess Private Equities Fund, Ltd. (the Series E Preferred is described in Footnote F - "Preferred Stock") as part of a Settlement Agreement reached with Dutchess on January 26, 2009 (the Settlement is described in Footnote K - "Related Party Transactions").



N.  INCOME TAXES:



As of June 30, 2009, the Company had net operating loss carry-forwards totaling approximately $26,629,764, before any limitations. The carry-forwards expire through 2027.



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.



O.  DISPOSITION OF ASSETS



On May 9, 2008 the Company completed the sale of essentially all of its assets. Pursuant to the terms of the Asset Purchase Agreement (the "APA") the Company sold all of its assets with the exception of the following: (i) all contract rights contained in that certain Registration Rights Agreement and that certain Investment Agreement, both dated March 31, 2006 and both by and between the Company and Dutchess Private Equities Fund, LP ("Dutchess"), and (ii) that lease (rental agreement) by and between the Company and A-1 Self Storage located in El Cajon, California, and (iii) $500 cash.



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NATUREWELL, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDING JUNE 30, 2009 AND 2008



O.  DISPOSITION OF ASSETS (continued)



The assets were sold to NatureWell, Incorporated, a Nevada corporation ("NWNV"), which is a private corporation wholly owned by the Company's Chief Executive Officer, James R. Arabia. The Asset Sale was approved unanimously by the Board of Directors, the shareholders and by both the holders of a majority of the Company's Senior (secured) Debt and the holders of a majority of the Company's Subordinated (secured) Debt pursuant to a procedure outlined in the Intercreditor, Subordination and Standby Agreement dated September 2, 2003, as amended (the "Intercreditor Agreement", see Note P - "Restructuring"), which governs the rights of the Company's secured creditors.



Pursuant to the APA, as consideration for the assets being purchased, NWNV agreed that within ten (10) days following the Closing Date to forgive its right to payment of presently existing obligations totaling $1,087,500 due to NWNV bythe Company (the "Consideration"). Such obligations consisted of $750,000 of the Arabia Notes (see Arabia Settlement Agreement, Note K - "Related Party Transactions"), $297,500 of the Mandaric Guaranteed Notes (see Mandaric Letter Agreement, Note K - "Related Party Transactions"), and $40,000 face value of another note that NWNV had the right to acquire from a creditor of the Company. NWNV had the contractual right to acquire the notes listed above and NWNV fulfilled all of the pre-conditions for acquiring such notes as of May 14, 2008, which automatically resulted in the cancellation of such notes and the timely payment of the Consideration under the terms of the APA.



In addition to the Consideration, NWNV also agreed to indemnify the Company against having to pay certain of its remaining debt and obligations (the "Indemnification"). Pursuant to the Indemnification NWNV must pay for all indemnified obligations, if the Company becomes required to pay them subject to certain conditions, up to $340,000, but not before the Company has spent $25,000 itself to repay such indemnified obligations. Pursuant to the APA the obligations subject to the Indemnification totaled approximately $555,453. Of this amount $352,369 are secured notes that are governed by the Intercreditor Agreement, which among other things, prohibits any collection action of any kind by any secured lender without the prior written consent of the holders of a majority of the senior debt, and eliminates any waiver, contained in any loan document relating to such secured debt, of the Company's ability to plead any statute of limitations as a defense against any claim made by a secured lender. The indemnified amount also includes $90,000 face value of secured notes issued to Mr. Arabia (pursuant to the Arabia Letter Agreement, see Note K - "Related Party Transactions"), which accrue interest at the rate of 4% until their maturity on July 1, 2012, and for which the Company has the right to convert into shares of common stock at any time after July 1, 2010 at an average conversion price of $.015 (6,750,000 shares based on the face value of the notes).  In addition to the Consideration and the Indemnification, NWNV also agreed to assume approximately $11,083 of the Company's liabilities.



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NATUREWELL, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDING JUNE 30, 2009 AND 2008



O.  DISPOSITION OF ASSETS (continued)



As a result of its disposition of assets the Company's financial statements for the year ended June 30, 2008 present income statements for consolidated operations that do not include any sales from discontinued operations, but do include the net gain (loss) from discontinued operations. Results for discontinued operations for the year ended June 30, 2008 are shown below:





|NATUREWELL, INCORPORATED AND SUBSIDIARIES
Consolidated Statement of Discontiuned Operations 
For the Year Ended June 30, 2008
|-----------------------------------------------------------------------------------------------------------------------------
|                                                                                                                             
|                                                                                                                             
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|                                                                                                                             
|Revenues                                                                                                                     
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|Costs and Expenses                                                                                                           
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|Total Costs and Expenses                                                                                                     
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|Loss From Operations                                                                                                         
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|Other Income & (Expenses)                                                                                                    
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|Total Other Income & (Expenses)                                                                                              
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|Income (Loss) from discontinued continuing operations before income tax                                                      
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|Net Income (Loss) from discontinued continuing operations                                                                    
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NATUREWELL, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDING JUNE 30, 2009 AND 2008



P.  RESTRUCTURING



Amendments to the Intercreditor Agreement



Effective May 2, 2008 four (4) amendments to the Company's Intercreditor, Subordination and Standby Agreement dated September 2, 2003, as amended (the "Intercreditor Agreement") were passed by the holders of a majority of the Company's senior secured debt and the holders of a majority of the Company's subordinated secured debt. All of the Company's senior secured creditors and subordinated secured creditors are parties to the Intercreditor Agreement. The Intercreditor Agreement affects the rights of such creditors as well as the terms of any debt they hold that has been issued by the Company.



The amendments were passed pursuant to Section 17(b) of the Intercreditor Agreement, which permits amendments upon the consent of the holders of a majority of the Senior Debt and the holders of a majority of the Subordinated Debt. Pursuant to the amendments; (1) all amendments to the Intercreditor Agreement require the consent of the Company, (2) Senior Lenders and Subordinated Lenders are prohibited  from taking any legal action to obtain a judgment for all or any portion of either any Senior Debt or any Subordinated Debt without the express prior written consent of the holders of a majority of the Senior Debt, (3) (i) the time-period that must elapse before the Company may plead any statute of limitations as a defense to any claim made by any Senior Lender or Subordinated Lender shall be (shortened to) two and one half (2/12) years, (ii) any provision contained in any Senior Loan Document or any Subordinated Loan Document that waives or terminates the Company's right to plead any statute of limitations shall be null and void, (iii) all Senior Lenders and all Subordinated Lenders waive any right to plead or assert in any court of law that any statute of limitations is/was either waived, prevented from starting, tolled, interrupted or restarted for any reason, and (4) if the Company sells all or part of its assets, not in the ordinary course of business (such assets are the Collateral for the Company's Senior Debt and Subordinated Debt), such asset sale shall be deemed to be in compliance with the Intercreditor Agreement if it was either approved by both the holders of a majority of the Senior Debt and the holders of a majority of the Subordinated Debt or was approved by the holders of a majority of the Senior Debt in the case of an asset sale resulting in proceeds (or would have resulted in proceeds) that are less than the amount of Senior Debt outstanding at the time of the asset sale.



The Company's Chief Executive Officer, James R. Arabia, as holder of both Senior Debt and Subordinated Debt, voted for passage of the amendments. Mr. Arabia also voted for passage of the amendments in his capacity as general partner of a limited partnership that holds Senior Debt issued by the Company. Timothy R. Scott, a director for the Company at the time of the amendments, in his capacity as president of a corporation holding Senior Debt issued by the Company, also voted for passage of the amendments.



It is likely that the Company will attempt to negotiate debt for equity swaps with certain defaulted creditors, which could lead to the issuance of additional substantial amounts of common stock and substantial dilution of then-existing shareholders. There can be no assurance that any of the Company's secured creditors will accept equity in exchange for their debt.



Q.  GOING CONCERN:



Currently the Company is a shell company as defined under Rule 12b-2 of the Exchange Act and has no operating business. The Company requires capital to comply with its reporting requirements under the Act and also has substantial amounts of debt that is in default as well as having a number of unpaid creditors. Without an operating business the Company has no revenue, cash flow or earnings available to meet its obligations. Consequently, the Company will likely need to raise additional capital to meet its reporting requirements and to defend, when necessary, against creditors that attempt to collect on their debt. 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 plan to address its going concern issues is to locate a viable operating business to acquire or merge with, however, there can be no assurance that the Company will be able to consummate such a transaction, or that if a transaction is completed that it would be on terms that are favorable to the then-shareholders.



R.  EXTRAORDINARY GAIN AND OTHER INCOME:



For the fiscal year ending June 30, 2008 the Company had other income and substantial amounts of extraordinary gain, which is primarily comprised of non-recurring transactions as follows:



For the fiscal year ending June 30, 2008 the Company recognized other income of $41,229, which is comprised of various accounts payable which have exceeded the statute of limitations for debt collection and therefore written off by the Company and $2,454,287 of extraordinary gain related to the retirement of debt at a discount to its carrying value on the Company's balance sheet.



S.  SUBSEQUENT EVENTS:



On October 13, 2009 the Company filed a Form15-12G. The purpose of the filing was to terminate the Company's filing obligations under Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Act"). Subsequent to the filing of the Form 15-12G the Company reconsidered its decision and decided to continue as a reporting company. On December 1, 2009 the Company filed an amended Form 15-12G/A which serves to withdraw the original Form 15-12G and allow the Company continue as a reporting company pursuant to Section 12(g) of the Act.



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Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.



There have been no changes or disagreements with our accountants on accounting and financial disclosure.



Item 9A(T).  CONTROLS AND PROCEDURES

(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

We maintain a system of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) that are designed to ensure that information required to be disclosed in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and to ensure that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management's control objectives.

Management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as of the end of the period covered by this Annual Report on Form 10-K. Based upon this evaluation, management concluded that our disclosure controls and procedures were effective as of the end of the fiscal year.

(B) MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management with the participation of the Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our internal control over financial reporting as of June 30, 2009. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on this evaluation, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, concluded that, as of June 30, 2009 we did maintain effective internal controls over financial reporting.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in the Annual Report.

LIMITATIONS ON THE EFFECTIVENESS OF INTERNAL CONTROLS

Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material errors. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving our objectives and our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at that reasonable assurance level. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

(C) CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING

There have been no significant changes in our internal controls over financial reporting during the quarter ended June 30, 2009 that have materially affected or are reasonably likely to materially affect such controls.



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Item 9B.  OTHER INFORMATION

None.



PART III



Item 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE



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      | 52  | Chairman, President, and Chief Executive Officer
|                     |     |                                                 
|Robert T. Malasek    | 41  | Chief Financial Officer, Treasurer and Secretary
|                     |     |                                                 
|Douglas H. Leighton. | 41  | Director                                        
|                     |     |                                                 
|Michael A. Novielli  | 45  | Director                                        

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.



ROBERT T. MALASEK

Effective August 15, 2006 the Company re-appointed Robert T. Malasek to serve as its Chief Financial Officer and Secretary. Mr. Malasek had previously served as Controller for the Company from September of 2001 until October of 2002 at which time he began serving as Chief Financial Officer and Secretary until his resignation in May of 2005. From May 2005 until the present Mr. Malasek has rendered accounting consulting services to a variety of clients (including the Company), including a number of public companies. From September 1987 until August 1999 Mr. Malasek was employed with Starwood Hotel & Resorts Worldwide, Inc. in a number of positions within the accounting department and became Assistant Controller in 1998 until his departure in 1999. Mr. Malasek received his Bachelor of Science in Accountancy from San Diego State University in 1998.



DOUGLAS H. LEIGHTON



Mr. Leighton is a co-founder and principal of Dutchess Capital Management LLC ("DCM"), which since 1996 had arranged private equity and debt financings for publicly traded-companies. Since 2000, he has overseen the trading, investment due diligence, transaction structure, and risk management of DCM managed Funds and is a member of the firm's Investment Committee.  Mr. Leighton has over 16 years of experience in securities, investment banking and asset management.  In 1990 he received a combined Bachelor of Arts and Bachelor of Science degree in Economics and Finance from the University of Hartford.  Mr. Leighton also is a director of EGPI Firecreek, Inc.



Mr. Leighton is also a director of Dutchess Private Equities Fund, Ltd. ("Dutchess"). Dutchess holds four senior secured notes issue by the Company totaling $2,309,130, including interest accrued thereon. One of the four loans, face value $300,000, is in payment default as of the date of this report.



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MICHAEL A. NOVIELLI

Mr. Novielli is a co-founder and principal of Dutchess Capital Management, LLC ("DCM"). Since 2000, he has overseen transaction structure, risk management and regulatory compliance for DCM managed funds, including Dutchess Private Equities Fund, LTD., and is a member of the firm's Investment Committee. Mr. Novielli has over 15 years experience in securities, investment banking and asset management including tenure with PaineWebber (now UBS). He received a Bachelor of Science degree in Business from the University of South Florida in 1987. Mr. Novielli is also a director of EGPI Firecreek, Inc. and director and Chairman of Siena Technologies, Inc.  Mr. Novielli is also a director of Dutchess Private Equities Fund, Ltd. ("Dutchess").



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. Mr. Novielli is a Class I director, Mr. Arabia is a Class 2 Director and Mr. Leighton is a Class III director.



The members of the board of directors maintained regular informal contact throughout the year and acted, when necessary, upon unanimous written consent.



Item 11.  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, 2009.



|SUMMARY COMPENSATION TABLE                                                                       |                                                                            
|------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------
|                                                                                                 |                                                                            
|                                                                                                 |                                                                            
|Name and Principal Position                                                                      | Fiscal Year                                                                
|                                                                                                 |                                                                            
|James R. Arabia
Chief Executive Officer                                                          | 2008                                                                       
|2007                                                                                             | $250,000(1)(2)                                                             
|2006                                                                                             | 250,000(1)(2)                                                              
|                                                                                                 |                                                                            
|Robert T. Malasek
Current and Former Chief Financial Officer (current CFO as of August 15, 2006) | 2008                                                                       
|2007                                                                                             | -                                                                          
|2006                                                                                             | -                                                                          
|                                                                                                 |                                                                            
|                                                                                                 |                                                                            
|                                                                                                 |                                                                            
|(1)                                                                                              | Accrued but not paid.                                                      
|(2)                                                                                              | Subsequently waived by Executive.                                          
|(3)                                                                                              | Other income earned by Mr. Malasek as an outside consultant to the Company.



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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                         |  | $   -                                       
|Robert T. Malasek | (1)                                                                                         | $   -                                                        |  | -                  |  | 0.0%                                           |  | $   -                                                                      |  | N/A                         |  | $   -                                       
|                  |                                                                                             |                                                              |  |                    |  |                                                |  |                                                                            |  |                             |  |                                             
|                  |                                                                                             |                                                              |  |                    |  |                                                |  |                                                                            |  |                             |  |                                             
|(1)               | There were no option grants during the year ending June 30, 2009 or subsequent to year-end.

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)                                                              |             | -                                                                          |               | -                                                               
|Robert T. Malasek | (1)                                                              |             | -                                                                          |               | -                                                               
|                  |                                                                  |             |                                                                            |               |                                                                 
|                  |                                                                  |             |                                                                            |               |                                                                 
|(1)               | There were no options being held by any Named Executive Officer.



COMPENSATION OF DIRECTORS

Currently, none of the Company's directors receives any compensation for serving on the Board of Directors.



|NAME                  |  | FISCAL
YEAR
ISSUED |  | Director fees |  | # OF SHARES |  | $ VALUE OF
GRANT
|--------------------- |  | ------------------ |  | ------------- |  | ----------- |  | ----------------
|                      |  |                    |  |               |  |             |  |                 
|Timothy R. Scott, PhD |  | 2007               |  | $5,750        |  | -           |  | -               



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Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS



The following table sets forth information with respect to the beneficial ownership of Common Stock, as of June 30, 2009 (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.





|Name and Address                                                                                              |  | Common Stock beneficially owned (1) |  | Percent of Common Stock beneficially owned (1)
|------------------------------------------------------------------------------------------------------------- |  | ----------------------------------- |  | ----------------------------------------------
|                                                                                                              |  |                                     |  |                                               
|James R. Arabia (2)
c/o NatureWell, Incorporated
110 W C St. Suite 1300
San Diego, CA 92101                   |  | 555,448,482                         |  | 22.5%                                         
|                                                                                                              |  |                                     |  |                                               
|Financial Acquisition Partners, LP 
325 W. Washington St. #2-474
San Diego, CA 92103                          |  | 194,585,739                         |  | 7.9%                                          
|                                                                                                              |  |                                     |  |                                               
|Douglas H. Leighton (3)
c/o Dutchess Private Equities Fund Ltd.
50 Commonwealth Ave., Ste. 2
Boston, MA 02116 |  | 422,027,295                         |  | 17.1%                                         
|                                                                                                              |  |                                     |  |                                               
|Michael A. Novielli (4)
c/o Dutchess Private Equities Fund, Ltd.
50 Commonwealth Ave., Ste 2
Boston, MA 02216 |  | 422,027,295                         |  | 17.1%                                         
|                                                                                                              |  |                                     |  |                                               
|Dutchess Private Equities Fund, Ltd. (5)
50 Commonwealth Ave., Ste 2
Boston, MA 02216                         |  | 422,027,295                         |  | 17.1%                                         
|                                                                                                              |  |                                     |  |                                               
|Robert T Malasek
c/o NatureWell, Inc.
110 W C St. Suite 1300
San Diego, CA 92101                              |  | 6,348,533                           |  | 0.3%                                          
|                                                                                                              |  |                                     |  |                                               
|All directors and executive officers as a group (five individuals)                                            |  | 984,574,310                         |  | 39.7%                                         
|                                                                                                              |  |                                     |  |                                               
|                                                                                                              |  |                                     |  |                                               
|                                                                                                              |  |                                     |  |                                               





|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | Applicable percentage ownership is based on 2,467,665,750  shares of common stock outstanding as of June 30, 2009 (which includes 19,000,000 shares of Series A common stock), together with securities exercisable or convertible into shares of Common Stock within 60 days of June 30, 2009 for each stockholder. Includes shares of common stock underlying convertible securities. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities.
|2. | Includes the following securities; 6,000,000 shares of common stock underlying two convertible notes owned by Mr. Arabia with a face value of $90,000, 354,862,743 shares of common stock owned by Mr. Arabia and 194,585,739 shares of common stock 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 194,585,739 shares.                                                                                                            
|3. | Includes the following shares all of which are owned by Dutchess Private Equities Fund Ltd. of which Mr. Leighton is a director and shares investment and voting power over the shares along with the co-director of the fund, Michael A. Novielli (see below); 1,875,000 shares of common stock underlying the Series C convertible preferred stock, 4,152,295 underlying the Series C convertible preferred stock, 19,000,000 shares of Series A common stock and 397,000,000 shares of common stock.                                                                        
|4. | Includes the following shares all of which are owned by Dutchess Private Equities Fund Ltd. of which Mr. Novielli is a director and shares investment and voting power over the shares along with the co-director of the fund, Douglas H. Leighton (see above); 1,875,000 shares of common stock underlying the Series C convertible preferred stock, 4,152,295 underlying the Series C convertible preferred stock,19,000,000 shares of Series A common stock and 397,000,000 shares of common stock.                                                                         
|5. | Includes 1,875,000 shares of common stock underlying the Series C convertible preferred stock, 4,152,295 underlying the Series C convertible preferred stock, 19,000,000 shares of Series A common stock and 397,000,000 shares of common stock.                                                                                                                                                                                                                                                                                                                               



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Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



The Arabia Letter Agreement

On April 30, 2008, Naturewell Incorporated (the "Company") entered into a Letter Agreement (the "Agreement") with James R. Arabia, the Company's President and Chief Executive Officer, whereby Mr. Arabia agreed to cancel all debt owed to him by the Company as of the Effective Date of the Agreement totaling $786,621 and to also terminate his employment contract dated July 1, 2004. The Agreement replaced all previous agreements and understanding between the Company and Mr. Arabia up to its Effective Date. As part of the Agreement the Company agreed to pay to Mr. Arabia $750,000 as full and final settlement of unreimbursed business expenses and other unreimbursed expenses related to loans, refinancings and debt incurred by Arabia for the benefit of the Company, and for unreinbursed medical expenses. The repayment of these expenses was made by issuing to Mr. Arabia the following notes:



- Senior Secured Note, face value $425,000, dated April 30, 2008, which accrues interest at the rate of 10% until its maturity on July 1, 2009.
- Subordinated Secured Note, face value $325,000, dated April 30, 2008, which accrues interest at the rate of 10% until its maturity on July 1, 2009.



The Company also agreed to pay Mr. Arabia consideration of $100,000 for agreeing to terminate his employment contract. The payment of this consideration was made by issuing to Mr. Arabia the following:



- Senior Secured Convertible Note, face value $45,000, dated April 30, 2008, which accrues interest at the rate of 4% until its maturity on July 1, 2012. The Company shall have the right to force the conversion of this note into common stock any time after July 1, 2010 at a conversion price of $.01.
- Subordinated Secured Convertible Note, face value $45,000, dated April 30, 2008, which accrues interest at the rate of 4% until its maturity on July 1, 2012. The Company shall have the right to force the conversion of this note into common stock any time after July 1, 2010 at a conversion price of $.02.
- 100,000,000 restricted shares of the Company's regular common stock.



The parties agreed that Mr. Arabia shall be compensated in the future for his duties as Chief Executive Officer in an amount that is mutually agreeable to him and the Board of Directors.

Settlement Agreement with James R. Arabia

Effective May 9, 2008 the Company entered into a settlement agreement and mutual general release (the "Arabia Settlement Agreement") with its Chief Executive Officer, James R. Arabia, Dutchess Private Equities Fund, Ltd. ("Dutchess"), and NatureWell, Incorporated, a Nevada corporation ("NWNV"). NWNV is a private corporation wholly owned by Mr. Arabia.



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Under the terms of the Arabia Settlement Agreement the parties agreed to the following:



- That Mr. Arabia would sell to NWNV two notes owned by him and issued by the Company pursuant to the April 30, 2008 Letter Agreement described above; a senior secured note, face value $425,000, and a subordinated secured note, face value $325,000 (the "Arabia Notes"). As payment for his notes, NWNV would issue to Mr. Arabia its own new note having a face value of $750,000. Following its acquisition of the Arabia Notes, NWNV would agree to cancel the Arabia Notes as partial consideration for the purchase of essentially all of the Company's assets pursuant to an asset purchase agreement between the Company and NWNV (the "Asset Sale"). The Asset Sale is described below.

- That Mr. Arabia would sell to Dutchess the 75 shares of voting-control Series C Convertible Preferred Stock that he owns (see also Note F - "Preferred Stock").



- That Mr. Arabia would sell to Dutchess the 9,000,000 shares of super-voting Series A Common Stock that he owns, and that he would also cause Financial Acquisition Partners, LP, a limited partnership for which Mr. Arabia is the sole general partner, to sell to Dutchess 10,000,000 shares of the Series A Common Stock that it owns (see also Note G - "Series A Common Stock").



- The Company would issue to Mr. Arabia 250,000,000 restricted shares of its common stock as an incentive to enter into the Arabia Settlement Agreement (the "Incentive Shares"), which shares would be earned upon the signing of the Arabia Settlement Agreement by the parties.

- That all of the transactions described above, except for the issuance of the Incentive Shares, along with the exchange of a mutual general release between the parties, would become effective on the day that is one (1) day after the last of the following two events have occurred; (i) receipt of the Incentive Shares by Mr. Arabia, and (ii) the closing of the Asset Sale.

All of the transactions described in the Arabia Settlement Agreement have been completed as of May 14, 2008.



Settlement Agreement with Financial Acquisition Partners, LP



Effective May 9, 2008 the Company also entered into a settlement agreement and mutual general release (the "FALP Settlement Agreement") with Financial Acquisition Partners, LP ("FALP"), Dutchess, and NWNV. Mr. Arabia, the Company's Chief Executive Officer, is the sole general partner for FALP.



Under the terms of the FALP Settlement Agreement the parties agreed to the following:



- That FALP would agree to accept 108,835,739 restricted shares of the Company's common stock as full and final settlement of its two senior secured notes and four senior secured convertible notes issued by the Company which have an approximate aggregate balance due of $265,286 as of the effective date of the exchange.

- That the requirement to issue the restricted shares in exchange for the secured notes, along with the exchange of a mutual general release between the parties, would become effective upon (i) receipt by the Debtor of an executed version of the FALP Settlement Agreement, and (ii) either the closing of the Asset Sale or NWNV agreeing to permit the issuance of the shares prior to the closing of the Asset Sale.



The closing of the Asset Sale was completed (see Note O - "Disposition of Assets") and the notes owned by FALP were exchanged for 108,835,739 restricted shares of the Company's common stock on May 13, 2008.



The Mandaric Letter Agreement



In a Letter Agreement between the Company, NWNV and Milan Mandaric, the Company agreed to issue to FALP, of which Mr. Mandaric is the sole limited partner and Mr. Arabia is the sole General Partner, 80,000,000 restricted shares of its common stock as an investment banking advisory fee and to issue 10,000,000 restricted shares of its common stock to Mr. Mandaric for entering into the Letter Agreement.



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Mr. Mandaric provided a guaranty for the repayment of six senior secured notes issued by the Company having an aggregate face value of $297,500. The Letter Agreement outlines Mr. Mandaric's agreement to allow NWNV to acquire the Mandaric Guaranteed Notes using new notes issued by NWNV, and that such notes issued by NWNV will also be guaranteed by Mr. Mandaric. NWNV agreed to cancel any Mandaric Guaranteed Notes that it did acquire as partial consideration for the purchase of essentially all of the Company's assets pursuant to the Asset Sale described in Note O - "Disposition of Assets". All of the transactions described in the Letter Agreement could only occur upon the closing of the Asset Sale, which occurred on May 9, 2008. The issuance of the 80,000,000 shares to FALP and 10,000,000 shares to Mr. Mandaric was completed on May 13, 2008. Additionally, the Mandaric Guaranteed Notes were acquired by NWNV and have been cancelled effective May 10, 2008.



Dutchess Settlement Agreements



On October 15, 2008 the Company and Dutchess entered into a Settlement Agreement made effective June 15, 2008 for the payment of penalties and liquidated damages on twelve promissory notes that the Company issued to Dutchess (the "Promissory Notes"), all of which are in payment default (see Note H - "Loans Payable "). Pursuant to the Settlement the Company agreed to pay Dutchess $1,700,000 as full and final payment for any and all penalties or liquidated damages due on the Promissory Notes through June 15, 2008 (the "Compromise Payment"). Dutchess agreed to accept the Compromise Payment in the form of a senior secured note for $1,700,000 (see Footnote J - "Notes Payable and Long Term Payables").



On January 26, 2009 the Company entered into a new Settlement Agreement and Mutual General Release (the "Agreement") with Dutchess. The Agreement was made effective as of January 1, 2009. Pursuant to the terms of the Agreement, Dutchess agreed to exchange seventeen (17) senior secured notes issued to it by the Company (including the Promissory note issued pursuant to the June 15, 2008 Settlement Agreement described above), for which there was an aggregate remaining balance due, including all accrued and unpaid interest and/or penalties, if any, in the amount of approximately $5,298,139 as of January 1, 2009, for the following; (i) A senior secured note, face value $300,000, which matures on January 1, 2012, pays interest of six percent (6%) per annum and requires minimum monthly payments of $6,000 beginning on March 1, 2009. The $300,000 note is secured by a lien on all of the Company's assets and is equal in rank with all other senior secured debt of the Company; and (ii) A senior secured note, face value $1,883,000, which accrues interest at the rate of eight percent (8%) per annum until maturity on January 1, 2011, at which time all principal and interest accrued thereon are due in full. The $1,883,000 note is secured by a lien on all of the Company's assets and is equal in rank with all other senior secured debt of the Company; and (iii) 3,115 restricted shares of the Company's Series E Convertible Preferred Stock.



The Agreement also contains a full mutual general release between the parties and each of their respective Affiliated Parties.



Two of the Company's directors, Douglas H. Leighton and Michael A. Novielli, are also directors of Dutchess.



PREFERRED STOCK



The Company has outstanding 75 shares, $1,000 liquidation preference, of Series C Convertible Preferred Stock. Pursuant to the terms of the Series C Convertible Preferred stock, owned by Dutchess Private Equities Fund, Ltd. ("Dutchess"), the Company's largest senior secured creditor (see also Financial Footnotes H - "Loans Payable" and K - "Related Party Transactions"). Dutchess 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 C Convertible Preferred that it owns (.7% X 75 shares = 52.5% of total vote). The shares convert into 1,875,000 shares of the Company's common stock.



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Item 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES



(1)  Audit Fees

The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for our audit of annual financial statements and review of financial statements included in our Form 10-QSBs or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years was:

2008 - $17,500
2007 - $30,000

(2)  Audit-Related Fees

The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountants that are reasonably related to the performance of the audit or review of our financial statements and are not reported in the preceding paragraph:

2008 - $0
2007 - $0

(3)  Tax Fees

The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning was:

2008 - $    0
2007 - $2,300

(4)  All Other Fees

The aggregate fees billed in each of the last two fiscal years for the products and services provided by the principal accountant, other than the services reported in paragraphs (1), (2), and (3) was:

2008 - $0
2007 - $0



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PART IV.



Item 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES



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

EXHIBIT INDEX



|EXHIBITNUMBER |  | DESCRIPTION                                                                                                                                                       
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              |  |                                                                                                                                                                   
|10.1(a)       |  | Arabia Letter Agreement dated as of April 30, 2008                                                                                                                
|              |  |                                                                                                                                                                   
|10.2(b)       |  | Amendments to Intercreditor Agreement.                                                                                                                            
|              |  |                                                                                                                                                                   
|10.3(c)       |  | Arabia Settlement Agreement dated as of May 9, 2008.                                                                                                              
|              |  |                                                                                                                                                                   
|10.4(d)       |  | Settlement Agreement with Financial Acquisition Partners, LP dated May 9, 2008.                                                                                   
|              |  |                                                                                                                                                                   
|10.5(e)       |  | Asset Purchase Agreement dated as of May 9, 2008.                                                                                                                 
|              |  |                                                                                                                                                                   
|10.6(f)       |  | Certificate of Designation for the Series D Preferred Stock.                                                                                                      
|              |  |                                                                                                                                                                   
|10.7(g)       |  | Certificate of Designation for the Series E Preferred Stock.                                                                                                      
|              |  |                                                                                                                                                                   
|10.8(h)       |  | Dutchess Settlement Agreement dated as of June 15, 2008.                                                                                                          
|              |  |                                                                                                                                                                   
|23.1          |  | Auditor Consent Letter dated December 3, 2009.                                                                                                                    
|              |  |                                                                                                                                                                   
|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.
|              |  |                                                                                                                                                                   
|              |  |                                                                                                                                                                   
|              | 
|(a)           |  | Incorporated by reference to Exhibit 10.1 to Form 8K filed on May 6, 2008.                                                                                        
|(b)           |  | Incorporated by reference to Exhibit 10.1 to Form 8K filed on May 8, 2008.                                                                                        
|(c)           |  | Incorporated by reference to Exhibit 10.1 to Form 8K filed on May 15, 2008.                                                                                       
|(d)           |  | Incorporated by reference to Exhibit 10.2 to Form 8K filed on May 15, 2008.                                                                                       
|(e)           |  | Incorporated by reference to Exhibit 10.3 to Form 8K filed on May 15, 2008.                                                                                       
|(f)           |  | Incorporated by reference to Exhibit 10.1 to Form 8K filed on September 23, 2008                                                                                  
|(g)           |  | Incorporated by reference to Exhibit 10.2 to Form 8K filed on September 23, 2008                                                                                  
|(h)           |  | Incorporated by reference to Exhibit 10.8 to Form 10KSB filed on October 20, 2008.                                                                                



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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:  December 4, 2009 | NATUREWELL, INCORPORATED                                                                                         
|----------------------- | -----------------------------------------------------------------------------------------------------------------
|                        |                                                                                                                  
|                        | By:   /s/ James R. Arabia
James R. Arabia
Chief Executive Officer, Chairman 
(Principal Executive Officer)       
|                        |                                                                                                                  
|                        | By:   /s/ Robert T. MalasekRobert T. Malasek
Chief Financial Officer
(Principal Financial and Accounting 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 R. ArabiaJames R. Arabia | Chief Executive Officer
and Chairman of the Board | December 4, 2009





|                                             | Title    | Date            
|-------------------------------------------- | -------- | ----------------
|                                             |          |                 
|/s/   Douglas H. LeightonDouglas H. Leighton | Director | December 4, 2009





|                                             | Title    | Date            
|-------------------------------------------- | -------- | ----------------
|                                             |          |                 
|/s/   Michael A. NovielliMichael A. Novielli | Director | December 4, 2009



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