10QSB/A 1 nawlqa093005.htm PREPARED BY: MHUEBOTTER@HOTMAIL.COM

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

FORM 10-QSB/A

(Mark One)
[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934. For the quarterly period ended September 30, 2005

[ ]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the transition period from ________ to ________

Commission file number 0-26108

NATUREWELL, INCORPORATED [Name of small business issuer in its charter]

Delaware (State or other jurisdiction of incorporation or organization)		94-2901715 (IRS Employer identification No.)

110 West C Street, Suite 1300, San Diego, California 92101 (Address of principal executive office) (Zip Code)

Registrant's telephone number including area code: (619) 234-0222

Securities registered pursuant to Section 12(b) of the Act: None (Title of Class)

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 Par Value (Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]

State the number of shares outstanding of each of the issuer's classes of common equity, as of the last practicable date. As of November 18, 2005 the Company had issued and outstanding 118,221,228 shares of $.01 par value common stock.

INDEX

PART I	FINANCIAL INFORMATION	3

ITEM 1.	Financial Statements	3

	Independent Accountants' Report	3

	Consolidated Balance Sheets as of September 30, 2005 (unaudited) and June 30, 2005	4

	Consolidated Statements of Operations for the Three Months Ended September 30, 2005 and 2004 (unaudited)	5

	Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2005 and 2004 (unaudited)	6

	Notes to Consolidated Financial Statements	7


ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18

PART II

ITEM 1.	Legal Proceedings	29

ITEM 2.	Changes in Securities and Use of Proceeds	30

ITEM 3.	Defaults of Senior Securities	30

ITEM 5.	Other Information	31

ITEM 6.	Exhibits	38

	SIGNATURES	39

PART I

ITEM 1. FINANCIAL STATEMENTS

    ARMANDO C. IBARRA
            Certified Public Accountants
             A Professional Corporation

Armando C. Ibarra, C.P.A. Armando Ibarra, Jr., C.P.A., JD	Members of the California Society of Certified Public Accountants Members of the American Institute of Certified Public Accountants Members of the Better Business Bureau since 1997

Report of Independent Registered Public Accounting Firm

To the Board of Directors of Naturewell, Inc.
We have reviewed the accompanying consolidated balance sheet of NatureWell, Inc. as of September 30, 2005 and the related consolidated statements of operations, shareholders' deficit and cash flows for the three months ended September 30, 2005 and 2004. These interim financial statements are the representation of the Company's management.
We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with U.S. generally accepted accounting principles.

/S/ Armando C. Ibarra, CPA-APC Armando C. Ibarra, CPA-APC
Chula Vista, California November 18, 2005

371 E Street, Chula Vista, Ca. 91910
Tel: (619) 422-1348	Fax: (619) 422-1465

NATUREWELL, INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets



ASSETS

			As of September 30, 2005		As of June 30, 2005

				(unaudited)
	Current Assets
		Cash	$	5,520	$	59,682
		Accounts receivable		745		586
		Inventory		17,640		18,861
		Prepaid expenses		-		1,009

	Total Current Assets			23,905		80,138

	Net Property & Equipment			13,143		14,901

	Other Assets
		Inventory		331,123		331,123
		Other assets		1,555		1,555

	Total Other Assets			332,678		332,678


	TOTAL ASSETS		$	369,726	$	427,717





LIABILITIES & STOCKHOLDERS' DEFICIT

	Current Liabilities
		Accounts payable	$	267,291	$	274,322
		Accrued expenses		57,191		53,039
		Accrued litigation costs		130,170		130,170
		Loans payable		440,221		436,910
		Current portion of long-term debt		51,205		50,201
		Due to officers		344,602		273,786

	Total Current Liabilities			1,290,680		1,218,428

	Long-Term Liabilities
		Unsecured convertible notes		43,631		42,776
		Senior secured notes		157,656		155,356
		Subordinated secured notes		1,443,962		1,414,942
		Senior secured convertible notes		1,275,635		1,260,183

	Total Long-Term Liabilities			2,920,884		2,873,257


	TOTAL LIABILITIES		$	4,211,564	$	4,091,685

	Stockholders' Deficit
		Preferred stock, $0.01 par value (Series B; 75 shares issued and outstanding)		1		1
		Common stock, $0.01 par value, (150,000,000 shares authorized; 118,221,228 and 117,629,795 shares issued and outstanding as of September 30, 2005 and June 30, 2005, respectively)		1,182,214		1,182,214
		Additional paid-in capital		18,770,209		18,770,209
		Less: Notes receivable officers		(122,200)		(120,965)
		Accumulated deficit		(23,672,062)		(23,495,427)

	Total Stockholders' Deficit			(3,841,838)		(3,663,968)


		TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT	$	369,726	$	427,717
		TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT	$	369,726	$	427,717

See Notes to Consolidated Financial Statements

NATUREWELL, INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Operations (unaudited)



		For the Three Months Ended
		September 30, 2005		September 30, 2004


Revenues
	Gross Sales	$	13,258	$	15,036
	Discounts		-		-
	Returns		-		-

Net Sales			13,258		15,036

Costs and Expenses
	Costs of goods sold		1,303		2,805
	Selling, general & administrative		116,143		169,121
	Marketing & advertising		2,368		1,936
	Consulting services		7,500		3,000
	Depreciation and amortization		1,758		1,471
	Research & development		2,000		0

Total Costs and Expenses			131,072		178,333


Loss From Operations			(117,814)		(163,297)

Other Income & (Expenses)
	Other expense		-		-
	Other income		-		-
	Interest income		1,235		6,638
	Interest expense		(59,057)		(64,068)

Total Other Income & (Expenses)			(57,822)		(57,430)


Net Loss before loss from discontinued operations			(175,635)		(220,727)

Loss from discontinued operations			-		(13,952)


Net Income (Loss) Before Taxes			(175,635)		(234,679)

	Provision for Income Taxes		(1,000)		(1,000)


Net Income (Loss)		$	(176,635)	$	(235,679)




Basic earnings (loss) per share		$	(0.00)	$	(0.00)




Weighted average number of common shares outstanding			118,221,228		117,794,320

See Notes to Consolidated Financial Statements

NATUREWELL, INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited)



		For the Three Months Ended
		September 30, 2005		September 30, 2004


CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)		$	(176,635)	$	(235,679)
Adjustments to reconcile net loss to net cash used in operating activities:
	Depreciation and amortization		1,758		1,471
	Accrued interest income		(1,235)		(6,638)
	Accrued interest expense		51,943		64,068
	Issuance of stock for services		-		4,103
	Officer shares issued for compensation		-		2,478
	Loss from discontinued operations		-		13,952
Changes in assets and liabilities:
	(Increase) decrease in accounts receivable		(159)		(165)
	(Increase) decrease in inventory		1,221		1,004
	(Increase) decrease in prepaid expenses		1,009		-
	Increase (decrease) in due to officers		70,815		131,554
	Increase (decrease) in accrued expenses		4,152		18,805
	Increase (decrease) in accounts payable		(7,031)		5,134

Net cash provided by (used in) operating activities			(54,162)		87

CASH FLOWS FROM INVESTING ACTIVITIES
	Capital expenditure for property and equipment		-		(470)

Net cash provided by (used in) investing activities			-		(470)


CASH FLOWS FROM FINANCING ACTIVITIES

Net cash provided by (used in) financing activities			-		-


Net increase (decrease) in cash			(54,162)		(383)

Cash at beginning of period			59,682		1,687


Cash at end of period		$	5,520	$	1,304




SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
	Income taxes paid	$	-	$	-



	Interest paid	$	7,114	$	-




NON-CASH ACTIVITIES
	Stock issued for services and syndication costs	$	-	$	6,581

See Notes to Consolidated Financial Statements

NATUREWELL, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

In the opinion of management, the accompanying unaudited consolidated interim financial statements reflect all adjustments (consisting of only normal and recurring adjustments) necessary to present fairly the financial position of NatureWell, Incorporated (the "Company"), as of September 30, 2005, and the results of its operations and cash flows for the three-month period ended September 30, 2005 and 2004. The results of operations for such interim periods are not necessarily indicative of the results for a full year. The accompanying unaudited condensed interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial reporting and with instructions to Form 10-QSB and, accordingly, do not include all disclosures required by accounting principles generally accepted in the United States of America. The condensed financial statements should be read in conjunction with the audited financial statements and the notes to the audited financial statements included in the Company's Form 10-KSB registration report for the period ending June 30, 2005 filed with the Securities and Exchange Commission.

The accounting policies followed for interim financial reporting are the same as those disclosed in Note A of the notes to the financial statements included in the Company's Form 10-KSB registration report for the year ended June 30, 2005.

B. NOTES RECEIVABLE FROM OFFICERS

Notes Receivable for Acquisition of Common Stock:

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

Officer	Issue Date	# of Shares	Note Amount	Rate	Accrued Interest

Donald Brucker	04-02-01	5,000,000	$100,000	4.94%	$22,200

		5,000,000	$100,000		$22,200

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

The receivable of $122,200, which includes related interest of $22,200 is reflected as a contra equity account in the financial statements.

Interest income related to the note receivable was $1,235 and $ 4,940 for the period ending September 30, 2005 and June 30, 2005, respectively.

C. FORMATION OF SUBSIDIARIES:

DIAGNOSTECH, INC.:

In September 1998, the Company incorporated DiagnosTech, Inc. (DTI). DTI was formed to develop and market clinical diagnostic products using immunology and molecular biologic technologies purchased from Amtech Scientific, Inc. (ATS) a company formerly owned and founded by a former officer of the Company. In June of 2005 the board of directors determined that there were no realistic opportunities for DTI to establish a viable business and the Company surrendered all shares that it owned in DTI back to its treasury for no consideration. As a result of the transaction DTI is no longer a subsidiary of the Company as the Company has no ownership interest in DTI.

NASAL MIST, INC.

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

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

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

D. INVENTORY:

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

	September 30, 2005		June 30, 2005

Healthcare products	$	17,640	$	18,861
Other Assets
Healthcare Products		331,123		331,123

	$	348,763	$	349,984

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

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

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

E. 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 the periods ending December 31, 2004 and 2003 pursuant to SFAS 128. Since the Company and its subsidiaries had losses applicable to common stock, the assumed effects of the exercise of outstanding warrants and stock options were anti-dilutive and, accordingly, dilutive per share amounts have not been presented in the accompanying consolidated statements of operations.

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

F. WARRANTS, OPTIONS AND STOCK BASED COMPENSATION:

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

In May of 2004 the Company adopted its 2004 Incentive Stock Bonus and Option Plan (the "Plan"). The Plan is intended to advance the interests of the Company by affording to selected employees, directors and consultants, an opportunity for investment in the Company and the incentives inherent in stock ownership in the Company and to provide the Company with a means of attracting, compensating, and retaining the services of selected employees, directors and consultants. It allows for the issuance of 10,000,000 shares of S-8 stock, subject to the board's authority to amend the Plan, and as of September 30, 2005 9,790,890 shares were issued under the Plan. At November 18, 2005 9,790,890 shares were issued under the Plan. In addition to the shares authorized by the Plan, the Company may issue restricted shares, or securities that convert into restricted common stock (including convertible notes), to non-employees, employees, directors and consultants for services. Shares issued to non-employees, employees and directors in return for services are valued under the fair value method in accordance with SFAS 123.

Total compensation cost recognized in income for stock-based employee compensation was $0 (including officers) and $39,581 for the periods ending September 30, 2005 and June 30, 2005 respectively. Of the $39,581 for June 30, 2005, $30,000 was for payment to officers and $9,581 was for payment to non-officer employees. Total cost recognized in income for shares issued to non-employees for services rendered was $0 and $8,833 for the periods ending September 30, 2005 and June 30, 2005 respectively.

G. PREFERRED STOCK:

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

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

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

	September 30, 2005	June 30, 2005

Loans payable with annual interest varying from 8 to 10%	$ 440,221	$ 436,910

Current Portion of Long Term Notes Payable:	51,205	50,201

	$ 491,426	$ 487,111

Loans payable consists of (i) an unsecured note totaling $14,390 including interest due thereon of $3,121 (this note is held by a former consultant to the Company accruing at 8%, which began amortizing on October 5, 2004 and is paid in 12 equal installments no payments have been made as of the date of this filing), (ii) a senior secured convertible note for $120,000 which is due in May of 2006, and (iii) four senior secured notes totaling $305,831, including interest of $5,831 accrued thereon, due and each payable on March 30, 2006.

The current portion of long-term debt consists of a defaulted note that is junior in right of payment to the Company's senior and second lien debt totaling $51,205 (including accrued interest of $11,204 thereon).

I. LEASES:

The Company leases its corporate office facilities under a Month to Month lease that expires on January 15, 2006. The Company's base rent under the lease is $1,000 per month through September 15, 2004 and $1,400 through January 15, 2006. Office rent and incidental expense was $ 3,200 and $34,018 for the period ending September 30, 2005 and June 30, 2005, respectively. Future minimum lease payments as of September 30, 2005:

September 30,		Operating Lease

2005		$ -

Total minimum lease payments		$ -

J. NOTES PAYABLE AND LONG TERM PAYABLES:

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

	September 2005	June 2005

Subordinated Secured notes, with annual interest varying from 8% to 10%.	1,443,962	1,414,942

Senior Secured Notes, with annual interest of 8%	157,656	155,356

Unsecured Convertible Notes, with annual interest of 8%	43,631	42,776

Senior Secured Convertible Notes, with annual interest of 8%	1,275,653	1,260,183

	$ 2,920,885	$ 2,873,257

The subordinated secured notes totaling $1,443,962 include interest accrued thereon of $385,033. The notes are secured by a subordinate security interest (subordinated to senior debt) in essentially all of the Company's assets, are pari passu (equal in rank and priority) with other subordinate secured debt and continue to accrue interest at the rate of either 8% or 10% until April 1, 2006 and are fully amortized over 24 months from that date forward.

The senior secured notes totaling $157,656 include interest accrued thereon of $17,172. The senior secured notes are secured by a first priority security interest in essentially all of the Company's assets, are pari passu with other senior debt and accrue interest at the rate of 8% until April 1, 2006 and are fully amortized over 24 months from that date forward.

The unsecured convertible notes totaling $43,631 include interest accrued thereon of $4,831 and are convertible, in the aggregate, into 6,695,522 shares of common stock at the holder's option. The notes accrue interest at the rate of 8% until October 1, 2006, at which time they begin paying semi-annual interest until the maturity date of April 1, 2010.

The senior convertible notes totaling $1,275,653 include interest accrued thereon of $90,614, are secured by a first priority security interest in essentially all of the Company's assets, are pari passu with other senior debt and accrue interest at 8% until October 1, 2006 and thereafter pay semi-annual interest only until maturity at April 2010.In the aggregate the senior convertible notes are convertible into 121,814,926 shares of Common Stock at the holder's option.

K. RELATED PARTY TRANSACTIONS

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

At the periods ending September 30, 2005 and June 30, 2005 the Company's Due to Balance owed to its Chief Executive Officer was $207, 387 and $141,253, respectively. The Company also owes the Executive $764,559 pursuant to various senior secured notes, including interest thereon as follows: (i) $203,902 of senior secured notes due on March 30, 2006, and (ii) senior secured convertible notes totaling $560,658.

L. INCOME TAXES:

Provision for income taxes for the years ended June 30, 2005 and 2004 consists solely of the minimum California franchise tax due for the Company and each of its subsidiaries.

Provision for income taxes is summarized as follows:

	June 30, 2005	June 30, 2004

Current income taxes	$ 4,000	$ 4,000
Deferred income taxes	-	-

Provision for income taxes	$ 4,000	$ 4,000

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

Net operating loss carry-forward	$ 7,048,268
Valuation allowance	(7,048,268)

Net deferred tax asset	$ -

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

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.

M. MAJOR CUSTOMER AND SEGMENT INFORMATION

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

N. RESTRUCTURING

The Company has made substantial progress towards the completion of its restructuring and has reached agreements and/or settlements for repayment of most of its past due unsecured creditors. Such cooperating creditors have either received a subordinated note, secured by a second lien on the Company's assets, and one share of restricted common stock for each one dollar owed to the creditor as payment in full of all monies owed to the creditor or have entered into a defined repayment arrangement. The subordinated notes are junior in right of payment to the senior debt and senior in right of payment to the unsecured creditors (see Note J for a description of the notes). At September 30, 2005 approximately $1,443,962 of subordinated notes were outstanding, and the amount owed to past due creditors, not covered by any defined payment arrangement, is approximately $196,000 (excluding amounts owed to officers and directors), which includes a litigation reserve of $130,170 (see also Note O - "Unsecured Creditors").

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

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

Senior Convertible Notes.

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

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

O. COMMITMENTS AND CONTINGENCIES

Insurance

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

Unsecured Creditors of the Company

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

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

Employment Contracts

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

Litigation and Legal Proceedings

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

Increase of Authorized Capital Stock

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

Required Payments to Guarantor

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

P. GOING CONCERN:

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

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

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

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

Capital raising efforts may be influenced by factors outside of the control of the Company, including, but not limited to, capital market conditions.

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

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS

The Company manages all phases of direct and other marketing for its MIGRASPRAY product in the United States, which includes product selection and development, manufacturing by third parties, acquisition of media and advertising, production and broadcast of programming, order processing and fulfillment, and customer service. The Company's ability to execute a business and marketing plan are dependent upon, among other factors, the raising of needed working capital. The Company has conducted small amounts of test-marketing of its MIGRASPRAY product directly to healthcare providers through telemarketing and tradeshows and also markets MIGRASPRAY via the Internet.

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-QSB CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN SUCH FORWARD-LOOKING STATEMENTS.

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

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

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

We have a limited operating history upon which an investor can evaluate our potential for future success. We have generated an accumulated deficit of approximately $23.67 million through September 30, 2005. Although we commenced sales of our migraine product on a national level during the month of September 2001, sales have been limited to date. As a result, there is limited historical financial data upon which an investor can make an evaluation of our performance or make a decision regarding an investment in shares of its common stock.

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

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

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

We May Be Unable To Manage Our Growth.

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

We Face Extensive Government Regulation.

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

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

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

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

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

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

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

A. PRESCRIPTION DRUGS

I. Triptans:

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

II. Anticonvulsants:

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

B. OVER-THE-COUNTER DRUGS

I. Analgesics:

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

II. NSAID's:

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

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

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

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

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

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

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

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

We are attempting to market our migraine relief product nationally. However, as a result of capital constraints, the national marketing of MIGRASPRAY has been very limited, and the Company has experienced minimal sales to date. There can be no assurance that we will obtain the funds necessary to successfully market MIGRASPRAY. Even if we were to obtain the funds necessary to successfully market MIGRASPRAY, there is no assurance that sales of MIGRASPRAY would increase.

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

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

Inflation May Harm Our Financial Results.

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

We Depend Upon Our Key Personnel.

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

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

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

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

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

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

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

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

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

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

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

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

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

Risk Factors Relation To Our Current Financing Arrangements:
We Are Delinquent In Payments To Our Unsecured Creditors And May Face Collection Actions As a Result.

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

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

As of September 30, 2005 the Company had the following secured debt obligations that it believes it will be unable to pay in a timely manner: (i) four senior secured notes totaling $305,831 (including interest accrued thereon of $5,831) that accumulate interest at the rate of 4% per annum and are due and payable on March 30, 2006, (ii) subordinated secured notes totaling $1,443,962 (including interest accrued thereon of $385,033) that accumulate interest at the rate of either 8% or 10% per annum and are scheduled to have principal and interest amortized over 24 equal installments beginning April 1, 2006, and (iii) senior secured notes totaling $157,656 (including interest accrued thereon of $17,172) that accumulate interest at the rate of 8% per annum and are scheduled to have principal and interest amortized over 24 equal installments beginning April 1, 2006.

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

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

Risk Factors Relating to Our Common Stock:

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

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

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

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

In addition, the public float of the Company's common stock is small in comparison to total shares outstanding on a fully diluted basis, resulting in a very thin public market for the trading of the Company's shares. Trading volume on any single day seldom exceeds one hundred thousand shares, while some days have a volume of only a few thousand shares. Limited trading volume entails a high degree of volatility in the stock price. In the 52-week period from September 30, 2004 to September 30, 2005, the closing price for the shares of the Company's stock on the OTC Bulletin Board ranged from $0.0046 to $0.015. This situation of limited liquidity and volatile stock price will most likely continue for the near future.

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

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

* that a broker or dealer approve a person's account for transactions in penny stocks; and
* the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

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

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

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

* sets forth the basis on which the broker or dealer made the suitability determination; and
* that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

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

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

PLAN OF OPERATIONS

EXPECTED CAPITAL REQUIREMENTS

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

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

EXPECTED RESEARCH AND DEVELOPMENT ACTIVITIES

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

RESTRUCTURING

The Company has made substantial progress towards completing its restructuring and reaching agreements and/or settlements for repayment of most of its unsecured and past due creditors. Such cooperating creditors have either received a subordinated note, secured by a second lien on the Company's assets, and one share of restricted common stock for each one dollar owed to the creditor as payment in full of all monies owed to the creditor or have entered into a defined repayment arrangement. The subordinated notes are junior in right of payment to the senior debt and senior in right of payment to the unsecured creditors (see Note J to the Financial Statements for a description of the notes). At September 30, 2005 approximately $1,443,962 of subordinated notes were outstanding, and the amount owed to past due creditors, not covered by any defined payment arrangement, is approximately $196,000 (excluding amounts owed to officers and directors), which includes a litigation reserve of $130,170 (see also Notes N and O to the Financial Statements).

Any holder of subordinated notes (as well as holders of senior secured notes) has entered into an Intercreditor, Subordination and Standby Agreement, and associated documentation, that defines the rights and priorities between the Company and its senior and subordinated lenders.

FINANCIAL RESOURCES

At September 30, 2005 and June 30, 2005, the Company had current assets of $23,905 and $80,138 including cash of $5,520 and $ 59,682, respectively. At September 30, 2005, current assets included inventory valued at $17,640. Other assets for the period ending September 30, 2005 and June 30, 2005 were 332,678 and included inventory of 331,133 for both periods. Total assets for the period ending September 30, 2005 and June 30, 2005 were $369,726 and $427,717, respectively.

Gross sales for the periods ending September 30, 2005 and 2004 were $13,258 and $15,036, respectively. Costs and expenses for the periods ending September 30, 2005 and 2004 were $131,072 and $178,333 resulting in a loss from operations of $117,814 and $163,297, respectively.

EXPECTED PURCHASES OR SALES OF PLANT AND SIGNIFICANT EQUIPMENT

The Company does not expect to purchase and/or sell any significant equipment during the next twelve months. However this does not preclude the Company from doing so if it is deemed necessary for the growth and success of the Company. The Company continues to use a third-party fulfillment center located in Ontario, California for the distribution, warehousing and handling of its product.

EXPECTED CHANGES IN NUMBER OF EMPLOYEES

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

RESULTS OF OPERATIONS

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

THREE MONTH PERIOD ENDING September 30, 2005 AND 2004

On a consolidated basis, the Company had gross sales totaling $13,258 for the period ending September 30, 2005, compared with $15,036 in gross sales for the same period ending September 30, 2005. This represented a decrease of $1,778 or 11.8% in gross sales from the year before.

The Company experienced a net loss of $176,635 for the three-month period ended September 30, 2005, compared with a net loss of $234,679 for the same period ended September 30, 2004. This represents a decrease of $59,044 or 25.1% from the same period ending September 30, 2005. A substantial portion of the decrease in net income is a result of an overall continues decrease in expenditures.

The Company's gross profit margin for the period ending September 30, 2005 was 90.2%, or $11,955. Gross profit margin for the period ending September 30, 2004 was 81.3% or $12,231. The decrease in gross profit margin is attributable to the cost of sales promotions. The Company's cost of products sold for the periods ending September 30, 2005 and 2004 was $1,303 and $2,805, respectively. The Company expects product cost as a percentage of gross sales to remain at these levels as a result of its direct sales strategy.

Consulting fees totaled $7,500 and $3,000 for the periods ending September 30, 2005 and 2004, respectively. Selling, general and administrative expenses incurred by the Company, were $116,143 for the three month period ended September 30, 2005, compared with $169,121 for the same period ended September 30, 2004. This represented a decrease of $52,978 or 31.33% from the prior year. The decrease is primarily attributable to additional reductions in overhead achieved in the Company's restructuring.

LIQUIDITY AND CAPITAL RESOURCES

Assuming it raises the Maximum Offering Amount under its Private Placement the Company anticipates that such proceeds together with revenues from product sales should be sufficient to finance its operations for the next twelve months. However, there can be no assurance that the Company will raise the Maximum Offering Amount ($1.25 million), or that their will be sufficient sales or that any combination thereof will be sufficient to meet its capital needs, which, if not met, could result in the Company being unable to continue as a going concern. (See also "PLAN OF OPERATIONS")

PART II

ITEM 1. LEGAL PROCEEDINGS

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

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

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

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

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On October 26, 2005 the Company sold 75 shares of Series C Convertible Preferred Stock (the "Series C Preferred") to its Chief Executive Officer, James R. Arabia (the "Executive").

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

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 5. OTHER INFORMATION

Subsequent Events

On October 27, 2005 the Company issued 75 shares of Series C Preferred Stock in exchange for the 75 shares of Series B Preferred Stock outstanding at that time. The transaction was disclosed on Form 8-K filed November 1, 2005, which is incorporated herein by reference.

On November 18, 2005 the Company filed a Preliminary Statement of Information detailing its intention to amend the Company's Articles of Incorporation upon receiving written consents from shareholders possessing the requisite voting power to pass such amendments and the expiration of at least twenty (20) days from the mailing of the Definitive Information Statement to non-voting shareholders.

Upon the effectiveness of both amendments detailed in the Information Statement the Articles of Incorporation will be amended as follows; (i) the Company will increase its authorized Common Stock from 150,000,000 shares to 5,000,000,000 authorized shares consisting of 4,980,000,000 shares of regular Common Stock and 20,000,000 shares of Series A Common Stock having 10 votes per share, (ii)the par value of the Common Stock will be reduced from $.01 per share to $.00001 per share, and (iii) the number of authorized shares of stock of any class of stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote irrespective of Section 242(b)(2) of the General Corporation Law of the State of Delaware. The Statement of Information is incorporated herein by reference.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

31.1	Certification by Chief Executive Officer pursuant to Section 302 of Sarbanes Oxley Act of 2002.
31.2	Certification by Chief Financial Officer pursuant to Section 302 of Sarbanes Oxley Act of 2002.
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350

B. Reports on Form 8-K

Form 8-K, Unregistered Sales of Equity Securities, Filed on November 1, 2005, incorporated herein by reference.

The Company incorporates by reference all exhibits to its Form 10-KSB for the year ending June 30, 2005.

SIGNATURES

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

Date: February 10, 2006	NATUREWELL, INCORPORATED

	By: /S/ James R. Arabia James R. Arabia Chief Executive Officer and Chief Financial Officer

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


	Title	Date

/S/ James R. Arabia James R. Arabia	Chief Executive Officer, Chief Financial Officer and Chairman of the Board	February 10, 2006