A. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with United States Generally Accepted Accounting Principles (US GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reporting period. The carrying value of the Company’s investments in PuraMed BioScience products represent significant estimates. Actual results could differ from those estimates.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Cash, receivables, revolving debt, accounts payable, and accrued liabilities are carried at amounts that reasonably approximate their fair value due to the short-term nature of these amounts or due to variable rates of interest that are consistent with current market rates.

Inventory

Inventory

The Company uses the FIFO valuation method for its inventories. The Company records its inventories at the lower of cost or market.

Property and Equipment

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated on the straight-line method over the estimated useful lives of the assets. Estimated lives are three years for computer software, five years for computer hardware and 7 years for equipment.

PuraMed® BioScience Products

PuraMed® Products

LipiGesic® products consist primarily of the cost of trade secrets, formulas, scientific and manufacturing know-how, trade names, marketing material and other intellectual property and are amortized on a straight-line basis over an estimated life of seven years.

Amortization expense relating to the PuraMed® BioScience Products is expected to be $37,614 in 2014. Amortization in the amount of $48,005 and $48,005 was recorded for 2013 and 2012, respectively.

Trademarks

Trademarks

Trademarks consist of legal fees to acquire our trademarks. As of June 30, 2013, the trademark applications have been approved and amortization is being recorded. Amortization is calculated on the straight-line method over the estimated useful lives of ten years. Amortization in the amount of $1,615 and $1,139 was recorded for 2013 and 2012, respectively.

As of June 30, 2013, amortization expense relating to the trademarks is expected to be as follows:

Year ending June 30,
2014	$	1,614
2015		1,614
2016		1,614
2017		1,614
2018		1,614
Thereafter		5,313
	$	13,383

Patent

In addition to the trademarks, the Company has completed and filed its final patent application on LipiGesic® M and received approval from the US Patent and Trademark Office on April 2, 2013, at which time the Company began amortization on the straight-line method over the estimated useful life of fifteen years. Amortization in the amount of $2,928 and $0 was recorded for 2013 and 2012, respectively.

As of June 30, 2013, amortization expense relating to the patents is expected to be as follows:

Year ending June 30,
2014	$	5,856
2015		5,856
2016		5,856
2017		5,856
2018		5,856
Thereafter		60,231
	$	89,511

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

The carrying value of long-lived assets is reviewed periodically or when factors indicating impairment are present. The impairment loss is measured as the amount by which the carrying value of the assets exceeds the fair value of the assets. The Company believes that no impairment exists at June 30, 2013.

Convertible Debt

Convertible Debt

The Company has obtained funding using convertible notes. These notes may be settled entirely or partly in cash or other stock. It has been determined that these notes have embedded derivatives. See Note D.

Revenue Recognition Policy

Revenue Recognition Policy

Revenue is recorded when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price to the customer is fixed or determinable and (iv) collection of the resulting receivable is reasonably assured.

Research and Development

Research and Development

Research and development costs are expensed as incurred. Assets that are required for research and development activities, and have alternative future use, in addition to its current use, are included in equipment and depreciated over their estimated useful lives.

Loss per Common Share

Loss per Common Share

Basic loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding. Diluted loss per common share assumes the exercise of stock options and warrants using the treasury stock method, if dilutive. Potentially dilutive shares of 3,787,409 and 3,796,060 as of June 30, 2013 and 2012, respectively, were not included in the calculation of diluted shares, as their effect would have been antidilutive.

Stock Based Compensation

Stock Based Compensation

The Company accounts for equity securities issued to non-employees for services and goods under Equity Based Payments to Non-Employees. The equity securities issued for services or goods are for common shares. These shares or warrants are fully vested, non-forfeitable and fully paid or exercisable at the date of grant and require no future performance commitment by the recipient.

For stock based compensation issued to employees, the Company has issued fully vested warrants.

The Company expenses the fair market value of these securities over the period in which the Company receives the related services.

No warrants were issued for stock based compensation during the year ended June 30, 2013. The following inputs and variables were used in the calculation for warrants issued for stock based compensation to employees and non-employees for the year ended June 30, 2012:

Stock Price		$0.30 to $0.405
Exercise Price	$	0.25
Volatility		314.9% to 331.3%
Expected Term (Years)		3
Expected Dividends	$	0
Discount Rate		0.40	%

Fair Value Measurements

Fair Value Measurements

Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.

Level 2: Other inputs that are observable directly or indirectly, such as quoted prices for similar assets and liabilities or market corroborated inputs.

Level 3: Unobservable inputs that are used when little or no market data is available, which require the Company to develop its own assumptions about how market participants would value the assets or liabilities.

Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosure each quarter. Assets and liabilities measured at fair value on a recurring basis as of June 30, 2013 and 2012 are summarized as follows:

	Fair Value as of June 30, 2013
	Level 1	Level 2	Level 3	Total
Liabilities
Derivative Liability – Warrants	$ -	$ -	$ 10,178	$ 10,178
Derivative Liability – Convertible Debt	-	-	400,270	400,270
Total	$ -	$ -	$ 410,448	$ 410,448

	Fair Value as of June 30, 2012
	Level 1	Level 2	Level 3	Total
Liabilities
Derivative Liability – Warrants	$ -	$ -	$ 229,461	$ 229,461
Derivative Liability – Convertible Debt	-	-	202,844	202,844
Total	$ -	$ -	$ 432,305	$ 432,305

The following table presents the fair value reconciliation of Level 3 liabilities measured at fair value on a recurring basis during the year s ended June 30, 2013 and 2012:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Derivative Liability - Warrants	Derivative Liability – Convertible Debt	Total
Balance at June 30, 2011	$ 318,355	$ 208,505	$ 526,860
Issuances	87,090	378,809	465,899
Retirement	-	(359,424)	(359,424)
Gain on Derivative Liability	(359,424)	(25,046)	(201,030)
Balance at June 30, 2012	229,461	202,844	432,305
Issuances	-	371,500	371,500
Retirement	-	(327,442)	(327,442)
(Gain) Loss on Derivative Liability	(219,283)	153,368	(65,915)
Balance at June 30, 2013	$ 10,178	$ 400,270	$ 410,448

A binomial option-pricing model was used to value the derivative liability with the following inputs:

· Stock price – The Stock Price was based on the closing price of the Company’s common stock on the valuation date. The valuation date can either be the date of issuance of the convertible debt or the last day of a reporting period (the Valuation Date). Stock prices on the Valuation Dates ranged from $0.02 to $0.30.

· Exercise Price – The exercise price, or conversion price was based on the terms of the associated agreement, which for the convertible notes is usually based on a percentage of the average of the three lowest stock bid prices out of the last 10 trading days prior to the Valuation Date.

· Time to Maturity – The time to maturity was determined based on the length of time between the Valuation Date and the maturity of the associated instruments.

· Risk Free Rate – The risk free rate was based on the US treasury note rate as the Valuation Dates with term commensurate with the remaining term of the debt. The risk free rates used ranged between .09% and 1.41%

· Volatility – The volatility was based on the historical volatility of the Company, using a time period to calculate volatility commensurate with the Time to Maturity. Volatilities used ranged between 214% and 337%.

Concentrations of Credit Risk

Concentrations of Credit Risk

The Company maintains its cash in bank deposit accounts which may, at times, exceed federally insured limits. To date, the Company has not experienced a loss of or lack of access to its cash. However, no assurance can be provided that access to the Company’s cash will not be impacted by adverse conditions in the financial markets.

Concentrations of net revenues and accounts receivable were as follows during the periods ended June 30, 2013 and 2012:

	2013	2012
Revenues:
Customer A	100%	17%
Customer B	0%	81%
Accounts receivable:
Customer A	96%	100%

The Company purchases a number of components from single sources. In some cases, alternative sources of supply are not available. In other cases, the Company may establish a working relationship with a single source, even when multiple suppliers are available, if the Company believes it is advantageous to do so due to performance, quality, support, deliver, capacity or price considerations. If the supply of a critical single-source material or component were delayed or curtailed, the Company’s ability to ship the related product in desired quantities and in a timely manner could be adversely affected. Even where alternative sources of supply are available, qualification of the alternative suppliers and establishment of reliable suppliers could result in delays and a possible loss of sales, which could adversely affect operating results.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In April 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards (ASC) Update No. 2013-07 – Presentation of Financial Statements. In February 2013, FASB issued ASC 2013-04, Liabilities. In January 2013, FASB issued ASC Update No. 2013-01 – Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. In October 2012, FASB issued ASC Update No. 2012-04 – Technical Corrections and Improvements. In August 2012, FASB issued ASC Update No. 2012-03 – Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22. In July 2012, FASB issued Update No. 2012-02 – Intangibles – Goodwill and Other (Topic 350), testing Indefinite-Lived Intangible Assets for Impairment.

The Company has considered these and other recent accounting pronouncements of which the Company is aware, and the Company believes their adoption has not had, and will not have, any material impact on our financial position or results of operations.