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EX-23.1 - AUDITOR CONSENT LETTER - Brazil Interactive Media, Inc.ex23_1consent.htm
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EX-32.1 - 906 CFO CERTIFICATION - Brazil Interactive Media, Inc.ex32_1906ceocert.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-K

 

(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2012 or
[   ] Transition report pursuant to Section 13 or 15(d) of the Securities 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.)

 

800 Brickell Avenue, Suite 901, Miami, Florida 33131

(Address of principal executive office) (Zip Code)

 

Registrant's telephone number including area code:  (305) 789-6621

 

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, $0.00001 Par Value

(Title of Class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [  ] No [X]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

Yes [X] No [  ]

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [  ] No [X]

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. [X]

 

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the Definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12-b2 of the Exchange Act.

 

Large Accelerated filer [  ] Accelerated Filer [  ]
Non-Accelerated Filer [  ] Smaller Reporting Company [X]

 

Indicate by check whether the registrant is a shell company (as defined in Rule 12b-2 of the Act):

Yes [ ]   No [X]

 

State the aggregate market value of the voting and non-voting stock held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter. As of December 31, 2012 the aggregate market value was $149,587.

 

State the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of February 12, 2013 the Company had issued and outstanding 2,448,665,750 shares of regular common stock and 19,000,000 shares of Series A Common Stock.

 

Documents incorporated by reference and parts of Form 10-K into which incorporated:  None.

 

 

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

 

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

 

 

 

 

 

 

Item 1.  BUSINESS

 

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

 

On May 9, 2008 the Company completed the sale of essentially all of its assets. As a result of the consummation of the sale of its assets, the Company has become a shell company as defined under Rule 12b-2 of the Exchange Act.

 

On March 13, 2013 the Company entered into an Agreement and Plan of Merger Agreement (“Merger Agreement”) with Brazil Interactive Media, Inc., a Delaware corporation (“Brazil Interactive Media”), pursuant to which the Company acquired all of the issued and outstanding shares of Brazil Interactive Media. Prior to entering into the Merger Agreement, there was no relationship between the Company or its affiliates and Brazil Interactive Media, other than in respect of the Merger Agreement and the transactions contemplated thereby. In accordance with the Merger Agreement, the shareholders of Brazil Interactive Media were issued an aggregate of 3,740,000 shares of Series G Convertible Preferred Stock of the Company (the “Series G Convertible Preferred Stock”) in exchange for all of the issued and outstanding Brazil Interactive Media Shares, or approximately 4 shares of the Company’s Series G Convertible Preferred Stock for every Brazil Interactive Media share held by the Brazil Interactive Media Shareholders. On March 27, 2013, as provided for in the Merger Agreement, the Company filed a certificate of merger with the state of Delaware, causing the merger of the Company’s wholly-owned merger subsidiary into Brazil Interactive Media pursuant to Delaware Law. Brazil Interactive Media was the surviving company, and became a wholly-owned subsidiary of NatureWell. Once the required notice period is over, the Company’s name will be changed to Brazil Interactive Media, Inc.

 

Item 1A.  RISK FACTORS

 

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

 

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

 

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

 

 

 

As described above, the forward-looking statements contained in this report involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks, uncertainties and other factors include, but are not limited to the following: the Company's lack of operating history and the uncertainty of profitability; the Company's ability to obtain capital, which is critical to its future existence, and if able to obtain capital it can do so on terms that are advantageous or desirable to current shareholders and/or stakeholders of the Company; the Company's ability to locate an acquisition or merger candidate under terms that it finds favorable; changes in or failure to comply with governmental regulation; the Company's dependence on key employees; and general economic and business conditions and other factors referenced in this report. Accordingly, any investment in the Company's common stock hereby involves a high degree of risk. In addition to the other information contained in this Form 10-K, the Company's business should be considered carefully before purchasing any of the securities of the Company. In addition to other information contained in this report, prospective investors should carefully consider the following factors before purchasing securities of the Company. Prospective investors are cautioned that the statements in this Section that are not descriptions of historical facts may be forward-looking statements that are subject to risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors, including those identified in "Risk Factors," "Business," and elsewhere in this report.

 

We could be materially adversely affected by changes or imbalances in foreign currency exchange and other rates.

 

Given the location of our business in the country of Brazil, we have significant exposures to risks related to changes in foreign currency exchange rates, and interest rates, which can have material adverse effects on our business. For example, significant strengthening of the Brazilian Real relative to the U.S. dollar would affect the profitability of our U.S. parent company. In addition, in preparing our consolidated financial statements, we translate our revenues and expenses outside the U.S. into U.S. Dollars using the average foreign currency exchange rate for the period and the assets and liabilities using the foreign currency exchange rate at the balance sheet date. As a result, foreign currency fluctuations and the associated translations could have a material adverse effect on our results of operations.

 

Our business outside the U.S. exposes us to additional risks that may materially adversely affect our business.

 

Our business income is generated outside the U.S. We are pursuing growth opportunities for our business in the Federal Republic of Brazil. Operating in a foreign country exposes us to political, economic, and other risks, as well as multiple foreign regulatory requirements that are subject to change, including:

 

·Economic downturns in foreign countries or geographic regions where we have significant operations, such as Brazil;
·Economic tensions between governments and changes in international trade and investment policies, including imposing restrictions on the repatriation of dividends, especially between the United States and Brazil;
·Foreign regulations restricting our ability to market our products in those countries;
·Differing labor regulations and union relationships; 
·Consequences from changes in tax laws;
·Difficulties in obtaining financing in foreign countries for local operations; and
·Political and economic instability, natural calamities, war, and terrorism.

 

The effects of these risks may, individually or in the aggregate, materially adversely affect our business. 

 

Our success depends on our management team, the loss of any of whom could disrupt our business operations.

 

 

 

We believe that our continued success will depend to a significant extent upon the efforts and abilities of our management team, particularly our CEO, Themistocles Psomiadis, and our CFO, Jesus Quintero.  We cannot ensure that we will be able to retain the services of such officers and our failure to retain them could adversely affect our operations.  We do not currently have employment agreements executed with these two executives but anticipate entering into such agreements definitively in the near future. Further, we do not currently carry key-man life insurance on any of our executive officers.

 

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 "Pink Sheets" under the ticker symbol NAWL. The market price of the Company's common stock has been, and is likely to continue to be, volatile. Factors such as announcement of an acquisition or merger, if any, announcements relating to strategic relationships, government regulatory actions, general conditions in overall market conditions and other unforeseen factors may have a significant impact on the market price of the common stock. In addition, in recent years the stock market for penny stocks in general, has experienced extreme price fluctuations. This volatility has had a substantial effect on the market prices of penny stock securities issued by many companies for reasons unrelated to the operating performance of the specific companies. These broad market fluctuations may adversely affect the market price of the Company's common stock.

 

In addition, the public float of the Company's common stock is small in comparison to total shares outstanding on a fully diluted basis, resulting in a very thin public market for the trading of the Company's shares. Limited trading volume entails a high degree of volatility in the stock price. In the 52-week period from January 1, 2012 to December 31, 2012, the closing price for the shares of the Company's stock on the OTC "Pink Sheets" ranged from $0.0001 to $0.0004 This situation of limited liquidity and volatile stock price will most likely continue for the near future.

 

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

 

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

 

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

 

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

 

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

 

 

 

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

 

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

 

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

 

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

 

Rule 144 Stock Sales

 

As of December 31, 2012, the Company had outstanding approximately 1,658,544,638 shares of common stock and 19,000,000 shares of Series A common stock as "restricted securities" which may be sold only in compliance with Rule 144 adopted under the Securities Act of 1933, as amended or other applicable exemptions from registration. The SEC recently adopted amendments to Rule 144 which became effective on February 15, 2008 and apply to securities acquired both before and after that date.  Under these amendments, a person who has beneficially owned restricted shares of our common stock for at least six months would be entitled to sell their securities provided that (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the three months preceding, a sale, (ii) we are subject to the Exchange Act reporting requirements for at least 90 days before the sale and (iii) if the sale occurs prior to satisfaction of a one-year holding period, we provide current information at the time of sale.

 

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

 

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

 

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

 

Item 2.  PROPERTIES

 

Following the Merger Agreement, Company's leased corporate offices for mailing and meeting services are located at 801 Brickell Avenue, Suite 900, Miami, Florida 33131. Our principal offices and television studios in Brazil are located in the city of São Paulo, state of São Paulo, at Alameda Uapixana, 278 - Planalto Paulista, São Paulo, SP CEP: 04085-030, Brazil.

 

Item 3.  LEGAL PROCEEDINGS

 

There are no material legal proceedings that are pending or have been threatened against us of which management is aware.

 

 

 

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

 

As part of the Merger Agreement signed with Brazil Interactive Media on March 13, 2013, the board of directors of the Company unanimously declared the advisability of, and recommended that the stockholders adopt the name change and the reverse split at a ratio of 1 for 8,484 of the issued shares of the Company’s Common Stock, as described in the Merger Agreement. As of March 13, 2013, the name change and the reverse split embodied in the Merger Agreement were adopted by the written consent of holders of a majority of the voting rights represented by the Company’s Series C Convertible Preferred Stock (“Class C Stock”) entitled to vote thereon, in accordance with Section 228 of the General Corporation Law of the State of Delaware (the “DGCL”). The board of directors decided to obtain the written consent of the holders of a majority of the voting rights represented by the Company’s outstanding shares of stock entitled to vote upon the Merger Agreement and the necessary amendment to the Company’s articles of incorporation in order to eliminate the costs and management time required to hold a special meeting of stockholders and to implement the reverse stock split in a timely manner.

 

PART II

 

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

 

As of December 31, 2012, there were over 600 holders of record of the Common Stock. The Company has not paid cash dividends on its capital stock since inception and does not have any plans to do so in the future. The Company currently intends to retain earnings, if any, for use in its business.

 

Market Information

 

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

 

   HIGH  LOW
Fiscal Year 2010:          
First Quarter   0.0003    0.0001 
Second Quarter   0.0004    0.0002 
Third Quarter   0.0007    0.0001 
Fourth Quarter   0.0006    0.0002 
Fiscal Year 2011:          
First Quarter   0.0004    0.0002 
Second Quarter   0.0002    0.0001 
Third Quarter   0.0002    0.0001 
Fourth Quarter   0.0001    0.0001 

 

 

 

Fiscal Year 2012:          
First Quarter   0.0002    0.0001 
Second Quarter   0.0002    0.0001 
Third Quarter   0.0002    0.0001 
Fourth Quarter   0.0001    0.0001 
           

 

Recent Sales of Unregistered Securities

 

For the year ended December 31, 2012 the Company made no sales of unregistered securities.

 

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

 

On March 13, 2013 (“Closing Date”), the Company entered into an Agreement and Plan of Merger Agreement (“Merger Agreement”) with Brazil Interactive Media, Inc., a Delaware corporation (“Brazil Interactive Media”), pursuant to which the Company acquired all of the issued and outstanding shares of Brazil Interactive Media. Prior to entering into the Merger Agreement, there was no relationship between the Company or its affiliates and Brazil Interactive Media, other than in respect of the Merger Agreement and the transactions contemplated thereby. Prior to the Merger the Company was a shell company with no operations or revenues.

 

 

OVERVIEW

 

Brazil Interactive Media, Inc. (“Brazil Interactive Media”), a corporation organized under the laws of Delaware on September 11, 2012, is the parent of Brazil Interactive Media Participações, Ltda., a Brazilian holding company, which through its wholly-owned subsidiary EsoTV Promoção Publicidade Licenciamento e Comércio Ltda. (“EsoTV”), combines live television broadcasts with an interactive telephone calling component using its own unique and proprietary program formats that include quiz shows, games, psychics and adult entertainment. Brazil Interactive Media, Brazil Interactive Media Participações, Ltda. and EsoTV shall be collectively referred to herein as “BIM”. BIM commenced operations in 2011. BIM’s program content reaches the nationwide Brazilian television audience via an in-studio satellite signal uplink to Brazilian television broadcasting companies. BIM creates income by generating telephone call volume and sharing the resulting revenue by means of co-billing contracts with Brazilian telecommunications providers.

 

At its facilities in São Paulo, Brazil, BIM operates two modern television studios, producing and transmitting via satellite live television content to TV stations throughout Brazil. BIM has the capacity to broadcast the same signal throughout Latin America. Through the negotiation and purchase of block television time for strategic times and networks, BIM is able to distribute its content directly to its target audience throughout Brazil. BIM currently leases two satellite uplinks and produces three daily live shows, providing 13 hours of live television program content daily. Brazilian television viewers participate in the shows in real time through “pay-per-calls”. BIM’s Brazilian telecommunications partners charge audience participants various per-minute rates for the incoming calls and share a portion of the revenue with BIM.

 

 

EXPECTED CAPITAL REQUIREMENTS

 

The Company anticipates that its operational and general and administrative expenses for the 12-month period ending December 31, 2013 will total approximately $500,000. The foregoing represents its best estimate of its cash needs based on current planning and business conditions. The exact allocation, purposes and timing of any monies raised in subsequent private financings may vary significantly depending upon the exact amount of funds raised and its progress with the execution of its business plan. The Company’s post-merger cash on hand and working capital are sufficient to meet its working capital requirements for the next twelve month period. However, expansion of the Company’s plan of operations is subject to attaining adequate revenue. There can be no assurance that adequate revenues will be generated. Without adequate revenues within the next twelve months, the Company still anticipates being able to continue with its post-merger activities, but it may require financing to achieve operation and growth goals and to meet its working capital requirements. If the Company is able to conduct an equity offering there will be dilution to the current stockholders of the Company and to the investors that acquire shares in the offering; and if the Company is able to conduct a debt offering, it will likely be subject to various covenants on its business operations and may be required to make payments during the term of the securities.

 

EXPECTED RESEARCH AND DEVELOPMENT ACTIVITIES

 

None.

 

EXPECTED PURCHASES OR SALES OF PLANT AND SIGNIFICANT EQUIPMENT

 

None.

 

EXPECTED CHANGES IN NUMBER OF EMPLOYEES

 

Currently the Company has 36 full time employees. The Company does not expect any significant additions to the number of employees.

 

RESULTS OF OPERATIONS

 

As discussed above, the Company did not engage in any significant business prior to April 17, 1995. During April 1995, the Company acquired Unified Technologies, Inc., a development stage business. Since that time, the Company had been developing various healthcare products until it discontinued operations in May of 2008 following the sale of all its assets. The following results are pre-merger and do not take into consideration any results from the acquired entity.

 

SIX-MONTH PERIOD ENDED DECEMBER 31, 2012 COMPARED TO THE CORRESPONDING PERIOD IN 2012

 

The Company experienced net income of $605 for the six-month period ended December 31, 2012, compared with a net loss of $111,624 for the same period ended December 31, 2011. This represents a decrease in net loss of $112,229 from the prior year. The decrease in net loss is primarily attributable to an increase in other income due to the elimination of a litigation reserve in the amount of $125,102. General and administrative expenses incurred by the Company were $3,250 for the six months ended December 31, 2012, compared with $4,350 for the same period ended December 31, 2011. This represents a decrease of $1,100 from the prior year or 25.3% due primarily to the fact that the payment of much of the costs related to the Company's SEC filings and audit work is paid by third-parties without a corresponding obligation for the Company to repay such costs.

 

 

SIX-MONTH PERIOD ENDED DECEMBER 31, 2012 COMPARED TO THE FISCAL YEAR ENDED JUNE 30, 2012

 

The Company experienced net income of $605 for the six-month period ended December 31, 2012, compared with a net loss of $228,204 for the year ended June 30, 2012. This represents a decrease in net loss of $228,809 from the prior fiscal year. The decrease in net loss is primarily attributable to an increase in other income due to the elimination of a litigation reserve in the amount of $125,102 and a decrease in interest expenses of 107,426 due to a duration difference between six months and one year. General and administrative expenses incurred by the Company were $3,250 for the six months ended December 31, 2012, compared with $4,350 for the year ended June 30, 2012. This represents a decrease of $1,100 from the prior year or 25.3% due primarily to the fact that the payment of much of the costs related to the Company's SEC filings and audit work is paid by third-parties without a corresponding obligation for the Company to repay such costs.

 

PROPERTY

 

Following the Merger Agreement, our principal executive offices will be at 151 W. Passaic Street, Rochelle Park, New Jersey 07662. Our principal offices and television studios in Brazil are located in the city of São Paulo, state of São Paulo, at Alameda Uapixana, 278 - Planalto Paulista, São Paulo, SP CEP: 04085-030, Brazil.  

 

Our telephone number in the United States is (201) 777-3395, and our facsimile number is (352)2600890. Our telephone number in Brazil is +55 (11) 5051-2240.

 

NAME CHANGE

 

On March 27, 2013, as provided for in the Merger Agreement, the Company filed a certificate of merger with the state of Delaware, causing the merger of the Company’s wholly-owned merger subsidiary into Brazil Interactive Media pursuant to Delaware Law. Brazil Interactive Media was the surviving company, and became a wholly-owned subsidiary of NatureWell. Once the required notice period is over, the Company’s name will be changed to Brazil Interactive Media, Inc., and the Company will perform a reverse merger, as contemplated by the Merger Agreement. The Merger Agreement and reverse merger are discussed in more detail in in the Company’s Current Report on Form 8-K filed March 21, 2013, and preliminary notice to shareholders on Form 14C filed April 2, 2013, which information is hereby incorporated by reference into this Item 7. 

 

 

 

Item 8.   FINANCIAL STATEMENTS

INDEX TO FINANCIAL STATEMENTS
     
     
REPORT OF INDEPENDENT ACCOUNTANT 11
     
FINANCIAL STATEMENTS:  
     
  Consolidated Balance Sheets as of December 31, 2012 and June 30, 2012. 12
     
Consolidated Statements of Operations for the six-months ending December 31, 2012 and the year ended June 30, 2012 and for the period from May 13, 2008 to December 31, 2012. 13
     
  Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the six-months ended December 31, 2012 and the year ended June 30, 2012 and for the period from May 13, 2008 to December 31, 2012. 14
     
  Consolidated Statements of Cash Flows for the six-months ended December 31, 2012and the year ended June 30, 2012 and for the period from May 13, 2008 to December 31, 2012. 15
     
  Notes to Consolidated Financial Statements 16-22

 

 

 

PART I

ITEM 1. FINANCIAL STATEMENTS

PLS CPA, A Professional Corp.

t 4725 MERCURY STREET SUITE 210 t SAN DIEGO t CALIFORNIA 92111 t

t TELEPHONE (858)722-5953 t FAX (858) 761-0341 t FAX (858) 764-5480

t E-MAIL changgpark@gmail.com t

 

____________________________________________________________________________________

 

Report of Independent Registered Public Accounting Firm

 

 

To the Board of Directors of

Naturewell, Incorporated and subsidiaries

(A Development Stage company)

 

We have audited the accompanying consolidated balance sheets of Naturewell, Incorporated and subsidiaries (the Development Statge "Company") as of December 31, and June 30, 2012 and the related consolidated statements of operations, changes in shareholders' equity and cash flows for the year ended June 30, 2012, for the six month ended December 31, 2012 and for the period of May 13, 2008 to December 31, 2012. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our ausit provides a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Naturewell, Incorporated and subsidiaries as of December 31, and June 30, 2012, and the consolidated results of its operations and its cash flows for the year ended June 30, 2012, for the six month ended December 31, 2012 and for the period of May 13, 2008 to December 31, 2012 in conformity with U.S. generally accepted accounting principles.

 

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

 

 

 

/s/ PLS CPA

____________________________

PLS CPA, A Professional Corp.

 

April 15, 2013

San Diego, CA 92111

 

 

NATUREWELL, INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
       
       
ASSETS
       
   As of  As of
   December 31,  June 30,
   2012  2011
   audited  audited
       
Current Assets          
Cash  $—     $—   
Notes Receivable   —      —   
Total Current Assets   —      —   
           
Other Assets          
Prepaid expenses   2,000    2,000 
           
      TOTAL ASSETS  $2,000   $2,000 
           
LIABILITIES & STOCKHOLDERS' DEFECIT
           
Current Liabilities          
Accounts payable  $78,558   $75,308 
Accrued litigation costs   —      125,102 
Loans payable   3,175,792    3,054,545 
           
Total Current Liabilities   3,254,350    3,254,955 
           
      TOTAL LIABILITIES  $3,254,350   $3,254,955 
           
Stockholders' Deficit          
           
Preferred stock, $0.01 par value          
   Series C; 75 shares issued and outstanding          
                 as of December 31, 2012 and June 30, 2012, respectively   1    1 
   Series E; 3,115 shares and issued and outstanding          
                 as of December 31, 2012 and June 30, 2012, respectively   32    32 
Common stock,  $0.00001 par value, (4,980,000,000          
   shares authorized; 2,448,665,750 and 2,448,665,750 shares          
   issued and outstanding as of December 31, 2012  and          
   June 30, 2012, respectively)   24,486    24,486 
Common stock series A,  $0.00001 par value, (20,000,000          
   shares authorized; 19,000,000 and 19,000,000 shares          
   issued and outstanding as of December 31, 2012  and          
   June 30, 2012, respectively)   190    190 
Additional paid-in capital   24,217,804    24,217,804 
Accumulated deficit   (24,812,340)   (24,812,340)
Accumulated deficit during the development stage   (2,682,523)   (2,683,128)
           
Total Stockholders' Deficit   (3,252,350)   (3,252,955)
           
       TOTAL LIABILITIES &          
             STOCKHOLDERS' DEFICIT  $2,000   $2,000 

 

See Notes to Consolidated Financial Statements.

 

 

 

NATUREWELL, INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Operations
For The Six Months Ended December 31, 2012 and for the Year Ended June 30, 2012
and for the period from May 13, 2008 to December 31, 2012
          
          
   For Six Month Ending  For Year Ending  Development Stage
   December 31,  June 30,  May 13, 2008 -
   2012  2012  December 31, 2012
          
Revenues               
                
Gross Sales  $—     $—     $—   
                
Net Sales   —      —      —   
                
Costs and Expenses               
Selling general & administrative   3,250    4,350    112,201 
Consulting services   —      —      56,611 
                
Total Costs and Expenses   3,250    4,350    168,812 
                
Loss From Operations   (3,250)   (4,350)   168,812 
                
Other Income & (Expenses)               
Other expense, bad debt   —      —      (1,783,470)
Other income   125,102    4,819    164,058 
Debt forgivness   —      —      410,303 
Interest income        —      9,890 
Interest expense   (121,247)   (228,673)   (1,314,492)
                
Total Other Income & (Expenses)   3,855    (223,854)   (2,513,711)
                
Net Income from continuing operations   605    (228,204)   (2,682,523)
                
Discontinued operation               
Net Income (Loss) from operations of discontinued business   —      —      —   
                
Loss before extraordinary item        —      —   
                
Extraordinary item   —      —      —   
                
Net Loss  $605   $(228,204)  $(2,682,523)
                
basic Earnings (Loss) per share  $0.00   $0.00      
                
Weighted average number of common shares outstanding   2,448,665,750    2,448,665,750      
                 
diluted Earnings (Loss) per share  $0.00   $0.00      
                
Weighted average number of               
  common shares outstanding   2,448,665,750    2,448,665,750      

 

See Notes to Consolidated Financial Statements.

 

NATUREWELL  INCORPORATED  AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholders' Equity
For the Years Ended  June  30, 2007 through  2012
                            
                            
               Unearned            
   Common  Common  Series A  Additional  Compensation  Preferred  Accumulated  Accumulated   
   Stock  Stock  Common  Paid-in  & Officers  Stock  Defecit During  Deficit  Total
      Amount  Stock  Capital  Notes     Development      
               Receivable     Stage      
                            
    136,165,952    1,362    190    20,191,300    (125,905)   1         (24,283,709)   (4,216,762)
                                              
Shares issued for conversion   8,920,533    89         22,162                        22,251 
                                              
Shares issued for cash   415,846,833    4,158         573,765                        577,924 
                                              
Shares issued for services   43,000,000    430         86,170                        86,600 
                                              
Cleared note receivable officer                       125,905                   125,905 
                                              
Net Loss June 30, 2007                                      (2,300,308)   (2,300,308)
                                              
Balance, June 30, 2007   603,933,318    6,039    190    20,873,397    —      1         (26,584,017)   (5,704,390)
                                              
Shares issued for cash   282,499,644    2,825         98,742                        101,567 
                                              
Shares issued for conversion   733,877,099    7,339         58,722                        66,061 
                                              
Shares issued for compensation   828,355,689    8,284         82,836                        91,120 
                                              
Net Income July 1, 2007 - May 12, 2008                                      1,771,677    1,771,677 
                                              
Net Loss from May 13, 2008 - June 30, 2008                                 (1,816,842)        (1,816,842)
                                              
Balance, June 30, 2008   2,448,665,750    24,486    190    21,113,697    —      1    (1,816,842)   (24,812,340)   (5,490,808)
                                              
Prefered Stock Series E                  3,104,107         32              3,104,139 
                                              
Net Loss June 30, 2009                                 (526,212)        (526,212)
                                              
Balance, June 30, 2009   2,448,665,750    24,486    190    24,217,804         33    (2,343,054)   (24,812,340)   (2,912,880)
                                              
Net Income June 30, 2010                                 102,718         102,718 
                                              
Balance, June 30, 2010   2,448,665,750    24,486    190    24,217,804         33    (2,240,336)   (24,812,340)   (2,810,163)
                                              
Net Loss June 30, 2011                                 (214,588)        (214,588)
                                              
Balance, June 30, 2011   2,448,665,750    24,486    190    24,217,804    —      33    (2,454,924)   (24,812,340)   (3,024,751)
                                              
Net Loss June 30, 2012                                 (228,204)        (228,204)
                                              
Balance, June 30, 2012   2,448,665,750    24,486    190    24,217,804    —      33    (2,683,128)   (24,812,340)   (3,252,955)
                                              
Net Loss December 31, 2012                                 605         605 
                                              
Balance, December 31, 2012   2,448,665,750    24,486    190    24,217,804    —      33    (2,682,523)   (24,812,340)   (3,252,350)

 

See Notes to Consolidated Financial Statements.

 

NATUREWELL, INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Six Months Ended December 31, 2012  and for the Year Ended June 30, 2012
and for the period from May 13, 2008 to December 31, 2012
             
      For Six Month Ended  For the Year Ended  Development Stage
      December 31,  June 30,  May 13, 2008 -
      2012  2012  December 31, 2012
             
CASH FLOWS FROM OPERATING ACTIVITIES                    
                     
Net income (loss)       $605   $(228,204)  $(2,682,523)
Adjustments to reconcile net loss to net cash                    
used in operating activities:                    
    Accrued interest income        —      —      (9,890)
     Debt forgivness income        —      —      (407,247)
     Amortization of debt discount        —      —      111,781 
    Accrued interest expense        121,247    228,673    1,204,130 
     Other expense / bad debt        —      —      1,783,470 
Changes in assets and liabilities:                    
   (Increase) decrease in prepaid expenses        —      (2,000)   (2,000)
   Increase (decrease) inaccured litigation costs        (125,102)   —      (126,352)
   Increase (decrease) in accounts payable        3,250    1,531    30,631 
                     
     Net cash provided by (used in) operating activities        —      —      (98,000)
                     
CASH FLOWS FROM INVESTING ACTIVITIES                    
                     
Proceed from fixed assets sales                    
Increase note receivalbe        —      —      (75,000)
                     
     Net cash provided by (used in) investing activities        —      —      (75,000)
                     
CASH FLOWS FROM FINANCING ACTIVITIES                    
                     
     Proceeds from loans payable        —      —      172,500 
                     
     Net cash provided by (used in) financing activities        —      —      172,500 
                     
    Net increase (decrease) in cash        —      —      (500)
                     
    Cash at beginning of period        —      —      500 
                     
    Cash at end of period       $—     $—     $—   
                     
SUPPLEMENTAL DISCLOSURES OF CASH FLOW                    
INFORMATION:                    
                     
Income taxes paid       $—     $—     $—   
                     
Interest paid       $—     $—     $—   
                     
NON-CASH ACTIVITIES                    
                     
Notes issued to officers       $—     $—     $—   
Retirement of debt        —      —      —   
Reclassified long-term loan to short-term loan        —      —      219,754 
Stock issued from conversion of convertible notes        —      —      —   
Notes payable for settlement of notes        —      —      2,183,000 
Stock issued for services        —      —      —   
Preferred stock issuance for settlement of notes payable        —      —      3,104,139 
Total non-cash activities       $—     $—     $5,506,893 

See Notes to Consolidated Financial Statements.

 

NATUREWELL, INCORPORATED AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX-MONTH PERIOD ENDING DECEMBER 31, 2012

AND

THE TWELVE-MONTH PERIOD ENDING DECEMBER 31, 2012

 

A.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

 

ORGANIZATION AND BASIS OF CONSOLIDATION:

 

NatureWell, Inc., a California corporation ("NWI-CA") was originally incorporated on April 26, 1983 (through an earlier predecessor corporation). In August 1998, NWI-CA acquired the assets and technology of Amtech Scientific, Inc. ("ATS") of which the assets were contributed to a newly formed subsidiary of NWI-CA, DiagnosTech, Inc, a California corporation ("DTI"). In September 2001, NWI-CA formed a wholly owned subsidiary in Delaware, NatureWell, Incorporated. This wholly owned subsidiary was established for the sole purpose of reincorporating NWI-CA in Delaware. In October 2001, NWI-CA obtained approval from a vote of a majority of its shareholders to reincorporate in Delaware. On October 25, 2001, the merger of NWI-CA into NatureWell, Incorporated, a Delaware corporation ("NatureWell", "NWI" or the "Company") was consummated. NWI-CA has been "merged-out" and dissolved as a result of the reincorporation. The Company has two wholly owned subsidiaries, Unified Technologies, Inc., a California corporation ("UTI") and Chemical Dependency Healthcare of California, Inc., a California corporation ("CDHC"). Both UTI and CDHC are dormant and not engaged in any operating activities and there are no plans to engage in any activities in the future. The Company as of December 31, 2012 also holds a 91.9 percent (91.9%) ownership interest in Nasal Mist, Inc., a California corporation ("NMI"). NMI is also dormant and not engaged in any operating activities and there are no plans to engage in any activities in the future.

 

CHANGE IN FISCAL YEAR:

 

By filing this Form 10K the Company is changing its fiscal year from the period ending on June 30 to the period ending on December 31. As such, this report is for the six-month period ending December 31, 2012 and the twelve-month period ending June 30, 2012. (See also Footnote O – “Subsequent Events”)

 

PRINCIPLES OF CONSOLIDATION:

 

The audited consolidated financial statements include the accounts of the Company and its subsidiaries and present them as one economic entity. All significant intercompany transactions and balances have been eliminated in consolidation as of December 31, 2012 and June 30, 2012.

 

BASIS OF ACCOUNTING:

 

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

 

RECENT ACCOUNTING PRONOUNCEMENTS:

 

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

INCOME TAXES:

 

Income taxes are provided in accordance with ASC 740, Income Taxes. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carry forwards. Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities.

 

 

 

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

USE OF ESTIMATES:

 

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

 

B.  FORMATION OF SUBSIDIARIES:

 

NASAL MIST, INC.

 

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

 

C.  INVENTORY:

 

As of December 31, 2012 and June 30, 2012 the Company has no inventory.

 

D.  BASIC EARNINGS (LOSS) PER SHARE:

 

The Company computes net income (loss) per share in accordance with ASC 260, Earnings per Share. ASC 260 specifies the computation, presentation and disclosure requirements for earnings (loss) per share for entities with publicly held common stock. Basic net earnings (loss) per share amounts are computed by dividing the net earnings (loss) by the weighted average number of common shares outstanding. Diluted earnings (loss) per share are the same as basic earnings (loss) per share due to the lack of dilutive items in the Company.

 

E.  WARRANTS, OPTIONS AND STOCK BASED COMPENSATION:

 

There are no warrants or options outstanding as of December 31, 2012 and June 30, 2012.

 

In May of 2004 the Company adopted its 2004 Incentive Stock Bonus and Option Plan (the "Plan"). The Plan is intended to advance the interests of the Company by affording to selected employees, directors and consultants, an opportunity for investment in the Company and the incentives inherent in stock ownership in the Company and to provide the Company with a means of attracting, compensating, and retaining the services of selected employees, directors and consultants. It initially allowed for the issuance of 10,000,000 shares of S-8 stock, subject to the board's authority to amend the Plan.

 

On December 21, 2005 the Plan was amended to allow for the issuance of up to 30,000,000 shares of S-8 stock. In addition to the shares authorized by the Plan, the Company may issue restricted shares, or securities that convert into restricted common stock (including convertible notes), to non-employees, employees, directors and consultants for services. Shares issued to non-employees, employees and directors in return for services are valued under the fair value method in accordance with SFAS 123. At December 31, 2012 18,642,742 shares were issued under the Plan.

 

Total compensation cost recognized in income for stock-based employee compensation was $0 and $0 (including officers) for the periods ending December 31, 2012 and June 30, 2012, respectively.

 

F.  PREFERRED STOCK:

 

 

The Company has outstanding 75 shares of Series C Convertible Preferred Stock (the "Series C Preferred"). Each share of Series C Preferred has a $1,000 liquidation preference, and all 75 shares are owned by Dutchess Advisors LLC ("Dutchess"), the Company's largest senior secured creditor (See also Note O – “Subsequent Events”). Pursuant to the terms of the Certificate of Designation for the Series C Preferred, Dutchess is allowed to cast a vote on all matters that the Company's shareholders are permitted to vote upon, equal to 0.7% of all outstanding securities that are eligible to vote at the time of such shareholder action for each share of Series C Convertible Preferred that it owns (0.7% X 75 shares = 52.5% of total vote). Each share of Series C Preferred is convertible into 25,000 shares of the Company's common stock (1,875,000 total).

 

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

 

G.  SERIES A COMMON STOCK

 

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

 

At December 31, 2012, the 19,000,000 shares of Series A Common Stock were eligible to cast a vote equal to 7.2% of the eligible votes possessed by the common stock as a class (190,000,000 votes of an eligible 2,638,665,750 votes) and 3.41% of the eligible votes possessed by the common stock and preferred stock voting together (190,000,000 votes of an eligible 5,563,770,621).

 

H.  LOANS PAYABLE:

 

Loans payable as of December 31, 2012 and June 30, 2012 are as follows:

 

   December 31,
2012
  June 30,
2012
       
Loans payable with annual interest of between 4% and 8%  $3,175,792   $3,054,545 
           
           
   $3,175,792   $3,054,545 
           

 

 

 

Loans payable as of December 31, 2012 consist of the following:

 

(1) A senior secured note issued to Dutchess, which matures on January 1, 2012, totaling $403,301 including interest accrued thereon of $103,301. The note pays interest of eight percent per annum, requires minimum monthly payments of $6,000 beginning on March 1, 2009, is secured by a lien on all of the Company's assets, and is equal in rank with all other senior secured debt of the Company. The Company did not make the required March 1, 2009 payment on the note or any required payments thereafter, however Dutchess has not initiated any collection action and has not given notice of any intent to exercise any remedies available under the terms of the note, (2) One unsecured note totaling $25,079, including interest thereon of $13,127 which accrues interest at the rate of 8% per annum, (3) One senior secured note issued to Dutchess totaling $2,584,955, including interest accrued thereon of $701,955, which accrues interest at the rate of 8% per annum, was scheduled to mature on January 1, 2011, and is secured by a first priority security interest in essentially all of the Company's assets, and is equal in rank with other senior debt. There have been no payments of principal or interest on this note as of the date of this report, however, Dutchess has not initiated any collection action and has not given notice of any intent to exercise any remedies available under the terms of the note, (4) Two senior secured notes issued to Dutchess totaling $54,084, including interest thereon of $14,084, which accrue interest at the rate of 8% per annum, were both scheduled to mature on January 1, 2012, and are secured by a first priority security interest in essentially all of the Company's assets, and are equal in rank with other senior debt. There have been no payments of principal or interest on these notes as of the date of this report, however, Dutchess has not initiated any collection action and has not given notice of any intent to exercise any remedies available under the terms of the notes, (5) a senior secured convertible note totaling $54,186, which includes interest accrued thereon of $9,186 that was issued to the Company’s Chief Executive Officer, James R. Arabia, secured by a first priority security interest in essentially all of the Company's assets and is equal in rank with other senior debt. The note accrues interest at the rate of 4% per annum until maturity on July 1, 2012 and is convertible into the Company’s common stock at a conversion price of $.01 at the option of the holder, however, after July 1, 2010 the Company shall have the right to force conversion of the note at the conversion price, and (6) a subordinated secured convertible note totaling $54,186 includes interest accrued thereon of $9,186 that was issued to the Company’s Chief Executive Officer, James R. Arabia, and is secured by a subordinate security interest (subordinated to senior debt) in essentially all of the Company's assets, is equal in rank with other subordinate secured debt, accrues interest at the rate of 4% per annum until maturity on July 1, 2012 and is convertible into the Company’s common stock at a conversion price of $.02 at the option of the holder, however, after July 1, 2010 the Company shall have the right to force conversion of the note at the conversion price. (See also Footnote O – “Subsequent Events”)

 

I.  LEASES:

 

The Company's corporate offices for mail and meeting space are located at 110 West "C" St, Suite 1300, San Diego, California 92101. The office services are made available to the Company by Naturewell, Incorporated (a Nevada corporation that is privately owned by the Company’s CEO, James R. Arabia) at no charge on a month to month basis. Office rent and incidental expense was $0 and $0 for the periods ending December 31, 2012 and June 30, 2012, respectively. 

 

J.  COMMITMENTS AND CONTINGENCIES

 

Unsecured Creditors of the Company

 

The Company is in payment default on an unsecured note totaling $25,079, including interest thereon of $13,127 which accrues interest at the rate of 8% per annum. Whenever feasible, the Company negotiates with these creditors to reach settlement agreements that are acceptable to the Company, including agreements to swap equity for debt owed to these creditors. However, if the Company is unable to reach acceptable settlement arrangements it may be subject to various collection actions.

 

 

K.  STOCK ISSUANCES:

 

For the year ended June 30, 2012 and 2011 the Company made no stock issuances.

 

L.  INCOME TAXES:

 

As of December 31, 2012, the Company had net operating loss carry-forwards totaling approximately $27 million, before any limitations. The carry-forwards expire through 2032.

 

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. (See also Footnote O – “Subsequent Events”)

 

M.  GOING CONCERN:

 

As of December 31, 2012 the Company was a shell company as defined under Rule 12b-2 of the Exchange Act and had no operating business. Without an operating business the Company has no revenue, cash flow or earnings available to meet its obligations. Consequently, the Company would need to raise additional capital to meet its reporting requirements and to defend, when necessary, against creditors that attempt to collect on their debt. These factors, as well as the risks associated with raising capital through the issuance of equity and/or debt securities created uncertainty as to the Company's ability to continue as a going concern.

 

The Company's plan to address its going concern issues is to locate a viable operating business to acquire or merge with. (See Footnote O – “Subsequent Events” for description of Merger with an operating company)

 

N.  OTHER INCOME/DEBT FORGIVENESS

 

Other income of $125, 102 is comprised of the elimination of a litigation reserve that the Company had previously maintained. The Company has not been involved in, or threatened with, litigation in several years and therefore determined that the reserve was no longer necessary.

 

O.  SUBSEQUENT EVENTS

 

On March 13, 2013 (the “Closing Date”), the Company entered into an Agreement and Plan of Merger Agreement (the “Merger Agreement”) with Brazil Interactive Media, Inc., a Delaware corporation (“Brazil Interactive Media”), and the Company’s wholly-owned subsidiary, BIMI Acquisition Corp., a Delaware corporation incorporated by the Company on February 20, 2013 specifically for the purpose of consummating the Merger Agreement (the “Merger Sub”), pursuant to which the Company acquired all of the issued and outstanding shares of Brazil Interactive Media (the “Brazil Interactive Media Shares”). Prior to entering into the Merger Agreement, there was no relationship between the Company or its affiliates and Brazil Interactive Media, other than in respect of the Merger Agreement and the transactions contemplated thereby.

 

In accordance with the Merger Agreement, the shareholders of Brazil Interactive Media (the “Brazil Interactive Media Shareholders”) were issued an aggregate of 3,740,000 shares of Series G Convertible Preferred Stock of the Company (the “Series G Convertible Preferred Stock”) in exchange for all of the issued and outstanding Brazil Interactive Media Shares, or approximately 4 shares of the Company’s Series G Convertible Preferred Stock for every Brazil Interactive Media share held by the Brazil Interactive Media Shareholders (the “Share Exchange”).

 

 

The Merger Agreement provided that after the Closing Date, the Company will perform a reverse merger at a ratio of 8,484 to one, and subsequently convert all issued and outstanding Series G Convertible Preferred Stock to Company common stock at a ratio of one to ten. Pursuant to the conversion ratios in the Merger Agreement, after the reverse merger and conversion of Series G Convertible Preferred Stock to common stock, the former Brazil Interactive Media Shareholders will hold approximately 93.5% of the issued and outstanding Common Stock of the Company and the remaining 6.5% will be owned by the Company's pre-merger shareholders. As a condition to closing of the Merger Agreement, the Company has requested that the Series G Convertible Preferred Stock issued pursuant to the Share Exchange, and the Common Stock to be newly issued upon its conversion, will be subject to a voluntary Lock Up and Leak Out Agreement between the Company and certain shareholders.

 

Prior to the Closing Date, the Company converted 3,115 shares of Series E Convertible Preferred Stock to common stock. As a result, on the Closing Date, 2,454,693,045 shares of the Company’s common stock were issued and outstanding, and 3,970,746 shares of the Company’s Series G Convertible Preferred Stock were issued in connection with the Merger Agreement. Our current authorized capitalization consists of 5,000,000,000 shares of common stock, par value $0.00001, and 15,000,000 shares of preferred stock, par value $0.01.  However, pursuant to the terms of the Merger Agreement, the Company will file a Certificate of Amendment to decrease our authorized capitalization to 100,000,000 shares of common stock, par value $0.00001, and 5,000,000 shares of preferred stock, par value $0.01.

 

On March 27, 2013, as provided for in the Merger Agreement, the Company filed a certificate of merger with the state of Delaware, causing the merger of the Company’s wholly-owned merger subsidiary into Brazil Interactive Media pursuant to Delaware Law. Brazil Interactive Media was the surviving company, and became a wholly-owned subsidiary of the Company. Once the required notice period is over, the Company’s name will be changed to Brazil Interactive Media, Inc., Brazil Interactive Media’s name will be changed to BIMI, Inc. and the Company will perform a reverse merger, as contemplated by the Merger Agreement.

 

As a result of the Merger Agreement, Mr. James R. Arabia resigned as Chief Executive Officer and director of the Company and Mr. Robert T. Malasek resigned as Chief Financial Officer. Also as a result of the Merger Agreement, Mr. Themistocles Psomiadis became the Chief Executive Officer and a director of the Company, and Mr. Jesus Quintero became the Chief Financial Officer of the Company.

 

For accounting purposes, the we account for the assets and liabilities of the Company and Brazil Interactive Media on a consolidated basis at their historical cost as presented in Exhibit 99.1.

 

We will begin to file annual and quarterly reports based upon the fiscal year-end of Brazil Interactive Media, which is December 31. 

 

As a result of the Merger Agreement, as of March 13, 2013, the Company, through its wholly-owned subsidiary, Brazil Interactive Media, commenced the business of producing live TV shows with an interactive telephone calling component using its own unique and proprietary programs that include quiz shows, games, and live chat formats. The Company’s program content reaches the nationwide Brazilian television audience via an in-studio satellite signal uplink to a variety of Brazilian TV broadcast networks.

 

At its facilities in São Paulo, Brazil, the Company operates modern television studios, producing and transmitting live television content via satellite to TV stations throughout Brazil. The Company has the capacity to broadcast the same signal throughout Latin America. Through the negotiation and purchase of block television time for strategic times and networks, the Company distributes its content directly to its target audience throughout Brazil. Brazil Interactive Media currently leases two satellite uplinks and produces three daily live shows, providing 13 hours of live television program content daily. Brazilian television viewers participate in the shows in real time through “pay-per-calls”. The Company’s Brazilian telecommunications partners charge audience participants various per-minute rates for the incoming calls and share a portion of the revenue with the Company.

 

 

On March 22, 2013, the Company entered into Stock Purchase Agreements (individually the “Purchase Agreement” and collectively the “Purchase Agreements”) with Dutchess Global Strategies Fund LLC, a New York limited liability company (“Dutchess Global”), and Dutchess Opportunity Fund II LP, a Delaware limited partnership (“Dutchess Opportunity”, and with Dutchess Global, collectively the “Dutchess Funds” or the “Purchasers”).  The Purchase Agreements provided for the purchase by the Dutchess Funds of an aggregate of 2,500 shares of the Company’s Series H Convertible Preferred Stock, par value $0.01 per share (the “Preferred Shares”), at a purchase price of $100.00 per share (the “Offering”). The Preferred Shares may be convertible into the Company’s Common Stock, at the sole option of the holder, at a conversion price of $0.30 per share.  In addition to the Preferred Shares, the Company also agreed to issue to the Dutchess Funds five-year warrants to purchase, in the aggregate, 208,334 shares of the Company’s Common Stock  at an exercise prices of $0.60 per share (the “Warrants”).

 

In connection with the Offering, the Company has also granted certain registration rights to the Purchasers requiring that the Company file a registration statement with the U.S. Securities and Exchange Statement covering the shares of Common Stock underlying the Preferred Shares and the Warrants.

 

In accordance with ASC 855, Subsequent Events, the Company has evaluated subsequent events through the date of issuance of the December 31, 2012 audited consolidated financial statements. During this period, the Company did not have any material recognizable subsequent events.

 

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

 

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

 

ITEM 9A(T).  CONTROLS AND PROCEDURES

 

(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

 

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

 

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

 

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

 

Our management with the participation of the Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our internal control over financial reporting as of December 31, 2012. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on this evaluation, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, concluded that, as of December 31, 2012 we did maintain effective internal controls over financial reporting.

 

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

 

 

 

LIMITATIONS ON THE EFFECTIVENESS OF INTERNAL CONTROLS

 

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

 

(C) CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING

 

There have been no significant changes in our internal controls over financial reporting during the quarter ended December 31, 2012 that have materially affected or are reasonably likely to materially affect such controls.

 

Item 9B.  OTHER INFORMATION

 

None.

 

PART III

 

Item 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

DIRECTORS AND EXECUTIVE OFFICERS

 

In conjunction with the Merger Agreement, James R. Arabia resigned from his positions as Chief Executive Officer and director, and Matthew Malesek resigned as director, effective as of the Closing Date.  Themistocles Psomiadis was appointed to serve as Chief Executive Officer, Jesus Quintero was appointed as the Chief Financial Officer and Alan T. Hawkins was appointed to serve as secretary. Mr. Arabia and Mr. Malesek have been be replaced on the Company’s board of directors by Messrs. Themistocles Psomiadis and Michael Novielli.

 

 

The following individuals serve as the executive officers and key employees of our Company as of the Closing Date of the Merger Agreement. The executive officers of our Company are appointed by our board of directors and hold office as set forth in their respective employment agreements or until their earlier death, resignation or removal from office.

 

Name   Position
     
Themistocles Psomiadis   Chief Executive Officer, Director
     
Jesus Quintero   Chief Financial Officer
     
Alan T. Hawkins   Secretary
     
Andrea Villas Boas   Key Employee
     
Michael Novielli   Director
     
Douglas H. Leighton   Director

 

Themistocles Psomiadis -  From December, 2012 to the present, Mr. Psomiadis has served as CEO and chairman of Brazil Interactive Media, Inc. Under the Merger Agreement, Mr. Psomiadis has also been appointed as CEO and director of the Company beginning on the Closing Date. From June, 2011 to September, 2012, Mr. Psomiadis was a consultant to Brazil Interactive Media’s Brazilian subsidiary EsoTV with Brazilian Investment Group, LLC. From 1970 to 2010, Mr. Psomiadis worked in the financial sector, serving as CFO of County Trust Company from 1970 to 1980 and from 2005 to 2010 with New York Life, where he was a partner. Also during that time, he started and developed several financial businesses. From 2009 to the present, he has served as executive director of Brazilian Investment Group, LLC. Mr. Psomiadis attended New York University and holds general securities Series 7, Series 63 and Series 66 licenses. He is fluent in English, Brazilian Portuguese, Spanish and Greek.

 

Jesus Quintero, CPA -  From January, 2013 to the present, Mr. Quintero has served as Brazil Interactive Media’s Chief Financial Officer. Under the Merger Agreement, Mr. Quintero has also been appointed as the CFO of the Company beginning on the Closing Date. From 2011 to the present, Mr. Quintero has served as a financial consultant to several multi-million dollar businesses in South Florida. He has extensive experience in public company reporting and SEC/SOX compliance, and held senior finance positions with Avnet, Inc. (NYSE:AVT), Latin Node, Inc., Globetel Communications Corp. (AMEX:GTE) and Telefonica of Spain. His prior experience also includes tenure with PriceWaterhouse and Deloitte & Touche. Mr. Quintero earned a B.S. in Accounting from St. John’s University and is a certified public accountant. He is fluent in English and Spanish, and conversant in Brazilian Portuguese.

 

Alan T. Hawkins - From September 2012 to the present, Mr. Hawkins has served as general counsel to Brazil Interactive Media, and under the Merger Agreement, has been appointed as the corporate secretary and general counsel of the Company beginning on the Closing Date. Mr. Hawkins is a practicing attorney representing venture capital funds in operational, corporate and tax law matters, and representing private companies in transactional, corporate finance, venture capital, and general corporate matters. From 2009 to the present, he has been a managing director at Brazilian Investment Group, LLC. Mr. Hawkins earned a JD from the University of Florida School of Law in Gainesville, where he also studied Latin American Business and Language. He received his BA in Language from Fort Lewis College. Mr. Hawkins is a member of the Florida Bar Association. He is fluent in English, Brazilian Portuguese and Spanish.

 

 

Andrea Villas Boas - From November 28, 2012 until the present, Ms. Villas Boas has served as a director and key employee of Brazil Interactive Media, Inc. and due to the Merger Agreement, became the majority beneficial shareholder of the Company. From 2011 to the present, she has served as a key employee, managing human resources for the Company’s Brazilian subsidiary. From 1994 to 2001, Ms. Villas Boas worked as human resources manager at Chase Manhattan Bank in São Paulo, Brazil. From 2001 to 2004, she served as director of human resources at ING Bank in São Paulo. From 2005 to the present, she has provided consulting services to Brazilian banks and businesses with Minds and Methods, a Brazilian human resources and management consulting firm she founded in 2005. From 2007 to 2009, she served as a director of the Brazilian Human Resources Association. Ms. Villas Boas earned her MBA in Human Resources from the University of São Paulo’s FIA Business School in 2000 and was awarded her undergraduate degree in psychology from the Catholic University of São Paulo in 1988.

 

Michael Novielli – Since 1996 to the present, Mr. Novielli has served as a Managing Partner of Dutchess Capital, where he co-managed an investment portfolio of $125 million in assets and has made over $200 million in principal investments in emerging growth companies, within the U.S. domestic as well as global markets. Mr. Novielli co-manages risk assessment, oversees investment opportunities and deal origination in Asia and Latin America, as well as the firm’s legal and compliance matters. He is also a member of Dutchess’s investment committee and has 21 years of experience in securities, investment banking and asset management. Prior to founding Dutchess, Mr. Novielli began his investment career with PaineWebber and Co., where he served from 1992 to 1995. He received a Bachelor of Science degree in Business from the University of South Florida.

 

Douglas H. Leighton - Since 1996 to the present, Mr. Leighton has served as a Managing Partner of Dutchess Capital, where he co-managed an investment portfolio of $125 million in assets and has made over $200 million in principal investments in emerging growth companies, within the U.S. domestic as well as global markets. Mr. Leighton co-manages risk assessment, oversees investment opportunities and deal origination in North America, Europe and Australia, as well as trading and investor relations. He is also a member of Dutchess’s investment committee and has 22 years of experience in trading, investment banking and asset management. Prior to founding Dutchess, from 1990 to 1996, Mr. Leighton was president of Beacon Capital, a Boston-based investment banking firm. He received a combined Bachelor of Arts and Bachelor of Science in Economics and Finance from the University of Hartford.

 

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

 

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

 

Item 11.  EXECUTIVE COMPENSATION

 

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

 

The following table shows, for the most recent three fiscal years, the cash compensation paid by the Company, as well as all other compensation paid or accrued for those years to the Chief Executive Officer and the Company's other executive officers as of December 31, 2012.

 

 

SUMMARY COMPENSATION TABLE

 

  Annual Compensation Long-term Compensation

Name and

Principal Position

Fiscal Year Salary Bonus Other Stock Awards Warrants

James R. Arabia

Former Chief Executive Officer

2012 - - - - -
2011 - - - - -
2010 - - - - -
             

Robert T. Malasek

Former Chief Financial Officer(current CFO as of August 15, 2006)

2012 - - - - -
2011 - - - - -
2010 - - - - -
             

  

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

 

OPTION GRANTS IN LAST FISCAL YEAR

 

 

      Realized
Assumed
Rates
of Stock
Appreciation
for
Term 10%($)
  Options
Granted(#)
  Number of
Securities
Underlying
in Fiscal
Year
  Individual
Grants
% if Total
Options
Granted to
Employees
Base
Price($/SH)
  Exercise
or
Expiration
Date
  Potential
Value of
Annual
Price
Option
5%($)
                      
James R. Arabia   (1)  $—      —      0.0%  $—     N/A  $—   
Robert T. Malasek   (1)  $—      —      0.0%  $—     N/A  $—   

  

(1) There were no option grants during the year ending December 31, 2011 or subsequent to year-end.

 

Option Holdings

 

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

 

 

FISCAL YEAR-END OPTION VALUES

      Number of Securities
Underlying Unexercised
Options at Fiscal Year-End (#)
  Value of Unexercised
In-the-Money Options
at Fiscal Year-End ($)
Name     Exercisable  Unexercisable  Exercisable  Unexercisable
                
James R. Arabia   (1)   —      —      —      —   
Robert T. Malasek   (1)   —      —      —      —   

 

(1) There were no options being held by any Named Executive Officer.

 

COMPENSATION OF DIRECTORS

 

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

 

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

 

The following table sets forth information with respect to the beneficial ownership of Common Stock, as of December 31, 2012 (assuming the exercise of options, issuance of stock grants, the conversion of convertible debt or preferred stock with underlying common stock conversion rights, and warrants that are exercisable within 60 days of the date hereof) by:

 

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

 

Name and Address  Common Stock beneficially owned (1)(6)  Percent of Common Stock beneficially owned (1)(6)
James R. Arabia (2)
c/o NatureWell, Incorporated
110 W C St. Suite 1300
San Diego, CA 92101
   360,862,743    4.6%
Financial Acquisition Partners, LP
c/o NatureWell, Incorporated
110 W C St. Suite 1300
San Diego, CA 92101
   194,585,739    7.9%
Douglas H. Leighton (3)
c/o Dutchess Advisors LLC.
50 Commonwealth Ave., Ste. 2
Boston, MA 02116
   422,027,295    17.1%

 

 

 

Michael A. Novielli (4)
c/o Dutchess Advisors LLC.
50 Commonwealth Ave., Ste 2
Boston, MA 02216
   422,027,295    17.1%
Dutchess Advisors LLC. (5)
50 Commonwealth Ave., Ste 2
Boston, MA 02216
   422,027,295    17.1%
Robert T Malasek
c/o NatureWell, Inc.
110 W C St. Suite 1300
San Diego, CA 92101
   6,348,533    0.3%
All directors and executive officers as a group (five individuals)   984,574,310    31.8%
           

 

1.Applicable percentage ownership is based on 2,467,665,750 shares of common stock outstanding as of December 31, 2012 (which includes 19,000,000 shares of Series A common stock), together with securities exercisable or convertible into shares of Common Stock within 60 days of December 31, 2012 for each stockholder. Includes shares of common stock underlying convertible securities. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities.
2.Includes the following securities; 6,000,000 shares of common stock underlying two convertible notes owned by Mr. Arabia with a face value of $90,000 and 354,862,743 shares of common stock owned by Mr. Arabia. Does not include 194,585,739 shares of common stock held by Financial Acquisition Partners, LP ("FALP"), a partnership for which Mr. Arabia was formerly the sole General Partner.
3.Includes the following shares all of which are owned by Dutchess Advisors LLC of which Mr. Leighton is a director and shares investment and voting power over the shares along with the co-director of the LLC, Michael A. Novielli (see below); 1,875,000 shares of common stock underlying the Series C convertible preferred stock, 4,152,295 underlying the Series E convertible preferred stock, 19,000,000 shares of Series A common stock and 397,000,000 shares of common stock.
4.Includes the following shares all of which are owned by Dutchess Advisors LLC of which Mr. Novielli is a director and shares investment and voting power over the shares along with the co-director of the LLC, Douglas H. Leighton (see above); 1,875,000 shares of common stock underlying the Series C convertible preferred stock, 4,152,295 underlying the Series E convertible preferred stock, 19,000,000 shares of Series A common stock and 397,000,000 shares of common stock.
5.Includes 1,875,000 shares of common stock underlying the Series C convertible preferred stock, 4,152,295 underlying the Series E convertible preferred stock, 19,000,000 shares of Series A common stock and 397,000,000 shares of common stock.
6.This Security Ownership table should be read in conjunction with Footnote O to the Financial Statements – “Subsequent Events”)

 

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

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

 

 

Transactions with Related Persons

 

The following includes a summary of transactions since the beginning of the 2012 fiscal year, or any currently proposed transaction, in which we were or are to be a participant and the amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed years, and in which any related person had or will have a direct or indirect material interest (other than compensation described under Item 11, “Executive Compensation”). We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm’s-length transactions.

 

On March 22, 2013, the Company entered into Stock Purchase Agreements (individually the “Purchase Agreement” and collectively the “Purchase Agreements”) with Dutchess Global Strategies Fund LLC, a New York limited liability company (“Dutchess Global”), and Dutchess Opportunity Fund II LP, a Delaware limited partnership (“Dutchess Opportunity”, and with Dutchess Global, collectively the “Dutchess Funds” or the “Purchasers”).  Two of the Company's directors, Douglas H. Leighton and Michael A. Novielli, are also directors and principals of the Dutchess Funds.

 

The Purchase Agreements provided for the purchase by the Dutchess Funds of an aggregate of 2,500 shares of the Company’s Series H Convertible Preferred Stock, par value $0.01 per share (the “Preferred Shares”), at a purchase price of $100.00 per share (the “Offering”). The Preferred Shares may be convertible into the Company’s Common Stock, at the sole option of the holder, at a conversion price of $0.30 per share.  In addition to the Preferred Shares, the Company also agreed to issue to the Dutchess Funds five-year warrants to purchase, in the aggregate, 208,334 shares of the Company’s Common Stock  at an exercise prices of $0.60 per share (the “Warrants”). The approximate dollar value of the amount involved in the transaction is $250,000. The approximate dollar value of the amount of the Company’s directors, Douglas H. Leighton and Michael A. Novielli, interest in the transaction, is $250,000.

 

In connection with the Offering, the Company also granted certain registration rights to the Purchasers requiring that the Company file a registration statement with the U.S. Securities and Exchange Statement covering the shares of Common Stock underlying the Preferred Shares and the Warrants.

 

Except as set forth in our discussion above, none of our Directors, director nominees or executive officers has been involved in any transactions with us or any of our Directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.

 

Item 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES

 

(1)  Audit Fees

 

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

 

For the six months ended December 31, 2012 - $0

For the year ended June 30, 2012 - $6,750

 

(2)  Audit-Related Fees

 

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

 

2012 - $0

2011 - $0

 

 

 

(3)  Tax Fees

 

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

 

2012 - $0

2011 -$ 0

 

(4)  All Other Fees

 

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

 

2012 - $0

2011 - $0

 

 

PART IV.

 

Item 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES 

 

(a) The following documents are filed as part of this report:

 

1. Financial Statements, as set forth on the attached index to Financial Statements.

 

2. Exhibits, as set forth on the attached Exhibit Index.

 

EXHIBIT INDEX

 

EXHIBIT

NUMBER

DESCRIPTION
  23.1 Auditor Consent Letter dated April 15, 2013
  31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a), filed herewith.
  31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a), filed herewith.
  32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith
  32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith. 

 

 

 

 

 

 

 

 

 

 

 

 

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: April 15, 2013

 

NATUREWELL, INCORPORATED

 

 

 

By:   /s/ Themistocles Psomiadis

Themistocles Psomiadis

Chief Executive Officer, Chairman

(Principal Executive Officer)

 

 

 

By:   /s/ Jesus Quintero

 

Jesus Quintero

Chief Financial Officer

(Principal Financial and Accounting Officer)

 

 

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

 

 

 

    Title Date
 

/ s /   Themistocles Psomiadis

Themistocles Psomiadis

Chief Executive Officer

and Chairman of the Board

April 15, 2013
       
    Title Date
 

/s/   Douglas H. Leighton

Douglas H. Leighton

Director April 15, 2013
       
    Title Date
 

/s/   Michael A. Novielli

Michael A. Novielli

Director April 15, 2013

 

 

 

 

 

 

 

 

 

 

 

 

INDEX TO FINANCIAL STATEMENTS

 

 

REPORT OF INDEPENDENT ACCOUNTANT

 

FINANCIAL STATEMENTS:

 

Consolidated Balance Sheets as of December 31, 2012 and 2011

 

Consolidated Statements of Operations for the years ended December 31, 2012 and 2011 and for the period from May 13, 2008 to December 31, 2012.

 

Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the years ended December 31, 2012 and 2011 and for the period from May 13, 2008 to December 31, 2012.

 

 

Consolidated Statements of Cash Flows for the years ended December 31, 2012 and 2011 and for the period from May 13, 2008 to December 31, 2012.

 

 

Notes to Consolidated Financial Statements