Wellness Center USA, Inc. - Quarter Report: 2013 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

  X . QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013

      . TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

WELLNESS CENTER USA, INC.

(Name of small business issuer in its charter)

NEVADA		333-173216		27-2980395
(State or other jurisdiction of incorporation or organization)		Commission File Number		(IRS Employee Identification No.)

1014 E Algonquin Rd, Ste. 111, Schaumburg, IL, 60173

(Address of Principal Executive Offices)

(847) 925-1885

(Issuer Telephone number)

Not Applicable

(Former name or former address, if changed since last report)

Copies of communication to:

Ronald P.  Duplack, Esq.

Rieck and Crotty, P.C.

55 West Monroe Street, Suite 3625, Chicago, IL 60603

Telephone (312) 726-4646 Fax (312) 726-0647

Securities registered under Section 12(b) of the Exchange Act:
Title of each class registered:	Name of each exchange on which registered:
None	None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $0.001 (Title of class)

 

Indicate by check mark whether the issuer (1) 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  X . No      .

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  X . No      .

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer.  See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer	.	Accelerated filer	.
Non-accelerated filer	. (Do not check if a smaller reporting company)	Smaller reporting company	X .

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes      . No  X .

State the number of shares issued and outstanding of each of the issuer’s classes of common equity, as of August 16, 2013: 40,124,201 shares of issued common stock.

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WELLNESS CENTER USA, INC.

FORM 10-Q

June 30, 2013

INDEX

PART I-- FINANCIAL INFORMATION

Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	51
Item 3	Quantitative and Qualitative Disclosures About Market Risk	57
Item 4.	Control and Procedures	57

PART II-- OTHER INFORMATION

Item 1	Legal Proceedings	58
Item 1A	Risk Factors	58
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 3.	Defaults Upon Senior Securities	58
Item 4.	Mine Safety Disclosures.	58
Item 5.	Other Information	58
Item 6.	Exhibits	58

SIGNATURE

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PART I-- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Wellness Center USA, Inc.

June 30, 2013 and 2012

Index to the Consolidated Financial Statements

Contents

Page(s)

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Wellness Center USA, Inc.
Consolidated Balance Sheets
					June 30, 2013			September 30, 2012
					(Unaudited)
ASSETS
Current Assets
	Cash				$	46,937		$	116,204
	Accounts receivable					3,593			4,200
	Inventories					439,282			-
	Prepayments and other current assets					176,976			-
		Total Current Assets				666,788			120,404
Property and Equipment
	Property and equipment					117,805			101,207
	Accumulated depreciation					(33,414)			(9,933)
		Property and equipment, net				84,391			91,274
Exclusive Licenses
	Exclusive licenses					5,000			5,000
	Accumulated amortization					(625)			(438)
		Exclusive licenses, net				4,375			4,562
Acquired Technologies
	Acquired technologies					2,420,000			2,420,000
	Accumulated amortization					(102,184)			(11,437)
		Acquired technologies, net				2,317,816			2,408,563
Non-Compete Agreements
	Non-compete agreements					240,000			240,000
	Accumulated amortization					(61,663)			(9,166)
		Non-compete agreements, net				178,337			230,834
Trademarks
	Trademarks					740,000			740,000
	Accumulated amortization					(86,209)			(9,538)
		Trademarks, net				653,791			730,462
Website Development Cost
	Website development cost					22,809			17,809
	Accumulated amortization					(7,344)			(2,898)
		Website development cost, net				15,465			14,911
Other Assets
	Goodwill					4,584,648			4,584,648
	Security deposits					38,699			38,699
		Total other assets				4,623,347			4,623,347
			Total Assets		$	8,544,310		$	8,224,357

(Continued)

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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
	Accounts payable				$	557,579		$	293,721
	Accrued interest - related parties					8,585			4,617
	Accrued payroll - officers					148,019			53,825
	Accrued warranty					12,000			12,000
	Credit cards payable					91,437			105,322
	Current portion of deferred rent					11,363			11,363
	Advances from related parties					224,736			278,909
	Customer deposits					25,000			25,000
	Note payable					-			20,000
	Note payable - related party					37,139			37,139
	Convertible note payable - stockholder					136,000			58,000
	Sales tax payable					-			2,940
	Accrued expenses and other current liabilities					98,718			18,544
		Total Current Liabilities				1,350,576			921,380
Non-Current Liabilities
	Deferred rent, net of current portion					20,840			29,362
	Long-term notes payable - Officers					167,295			195,308
		Total Non-Current Liabilities				188,135			224,670
			Total Liabilities			1,538,711			1,146,050
Commitments and Contingencies
Stockholders' Equity
	Common stock par value $0.001: 75,000,000 shares authorized;  40,124,201 and 30,978,237 shares issued and outstanding, respectively
						40,124			30,978
	Additional paid-in capital					9,625,244			7,604,440
	Accumulated deficit					(2,659,769)			(557,111)
		Total Stockholders' Equity				7,005,599			7,078,307
		Total Liabilities and Stockholders' Equity			$	8,544,310		$	8,224,357
See accompanying notes to the consolidated financial statements.

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Wellness Center USA, Inc.
Consolidated Statements of Operations
					For the Nine Months			For the Three Months			For the Nine Months			For the Three Months
					Ended			Ended			Ended			Ended
					June 30, 2013			June 30, 2013			June 30, 2012			June 30, 2012
					(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
NET REVENUES					$	175,035		$	77,157		$	1,187		$	87
COST OF GOODS SOLD						1,770			1,770			837			-
GROSS MARGIN						173,265			75,387			350			87
OPERATING EXPENSES:
	Consulting fees					569,075			(38,220)			22,066			17,316
	Professional fees					213,045			52,693			59,181			16,954
	Rent expenses - related party					18,910			6,512			18,912			4,142
	Rent expense					130,113			40,605			-			-
	Research and development					6,394			3,475			-			-
	Salaries - officers					487,600			153,946			-			-
	Salaries - others					129,951			44,611			-			-
	Selling expenses					65,836			29,037			-			-
	General and administrative expenses					546,995			243,879			36,924			25,365
		Total operating expenses				2,167,919			536,538			137,083			63,777
LOSS FROM OPERATIONS						(1,994,654)			(461,151)			(136,733)			(63,690)
OTHER (INCOME) EXPENSE:
	Financing cost					91,630			91,630			-			-
	Interest expense					6,286			2,000			-			-
	Interest expense - related party					3,968			1,296			-			-
	Other (income) expense					6,120			2,016			-			-
		Other (income) expense, net				108,004			96,942			-			-
LOSS BEFORE INCOME TAX PROVISION						(2,102,658)			(558,093)			(136,733)			(63,690)
INCOME TAX PROVISION						-			-			-			-
NET LOSS					$	(2,102,658)		$	(558,093)		$	(136,733)		$	(63,690)
NET LOSS PER COMMON SHARE - BASIC AND DILUTED:
	Net loss per common share - basic and diluted				$	(0.06)		$	(0.01)		$	(0.01)		$	(0.00)
	Weighted Average Common Shares Outstanding - basic and diluted					35,786,670			39,867,487			15,122,726			15,035,821
See accompanying notes to the consolidated financial statements.

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(Continued)

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Wellness Center USA, Inc.
Consolidated Statements of Cash Flows
				For the Nine Months			For the Nine Months
				Ended			Ended
				June 30, 2013			June 30, 2012
				(Unaudited)			(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss				$	(2,102,658)		$	(136,733)
Adjustments to reconcile net loss to net cash used in operating activities
	Common shares issued for compensation and services				462,190			13,750
	Warrants and options issued for compensation and services				126,994			3,566
	Depreciation expense				23,481			309
	Amortization expense				224,548			1,402
	Changes in operating assets and liabilities:
		Inventories			(439,282)			-
		Prepayments and other current assets			(176,976)			-
		Accounts payable			274,358			180
		Accrued interest - related party			3,968			-
		Accrued salary - officers			94,194			-
		Credit cards payable			(13,885)			-
		Deferred rent			(8,522)			-
		Sales tax payable			(2,940)			-
		Accrued expenses and other current liabilities			75,174			(2,650)
Net cash used in operating activities					(1,458,749)			(120,176)
CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchases of property and equipment				(16,598)			(642)
	Investment in website development costs				(5,000)			(17,809)
Net cash used in investing activities					(21,598)			(18,451)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Advances from (repayment to) related parties				(54,173)			(98,500)
	Proceeds from convertible notes payable - stockholder				78,000			-
	Repayment of long-term notes payable				(33,513)			-
	Proceeds from sale of common stock and warrants				1,376,196			274,000
	Proceeds from exercise of warrants				64,570			-
Net cash provided by financing activities					1,411,080			175,500
NET CHANGE IN CASH					(69,267)			36,873
Cash at beginning of the period					116,204			175
Cash at end of the period				$	46,937		$	37,048
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
	Interest paid			$	-		$	-
	Income tax paid			$	-		$	-
See accompanying notes to the consolidated financial statements.

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Wellness Center USA, Inc.

June 30, 2013 and 2012

Notes to the Consolidated Financial Statements

(Unaudited)

Note 1 - Organization and Operations

Wellness Center USA, Inc.

Wellness Center USA, Inc. ("WCUI" or the “Company”) was incorporated on June 30, 2010 under the laws of the State of Nevada. The Company initially engages in online sports and nutrition supplements marketing and distribution. Upon consummation of the share exchange agreements with CNS-Wellness Florida, LLC and Psoria-Shield Inc. the Company currently operates in three (3) business segments (i) Nutritional supplement sales; (ii) treatment of brain-based behavioral health disorders; and (iii) distribution of targeted Ultra Violet ("UV") phototherapy devices for dermatology.

Acquisition of CNS-Wellness Florida, LLC

On May 30, 2012, the Company entered into an Exchange Agreement (“Exchange Agreement”) to acquire all of the limited liability company interests in CNS-Wellness Florida, LLC (“CNS”), a Tampa, Florida-based cognitive neuroscience company specializing in the treatment of brain-based behavioral health disorders including developmental, emotional and stress-related problems.

On August 2, 2012, the Company consummated the Exchange Agreement and acquired all of the issued and outstanding limited liability company interests in CNS for and in consideration of the issuance of 7.3 million shares of the Company’s common stock pursuant to the Exchange Agreement.   The 7.3 million common shares issued in connection with the share exchange represented 32.2% of the 22,704,773 shares of issued and outstanding common stock of the Company as of the closing date of the share exchange under the Exchange Agreement.  CNS is now operated as a wholly-owned subsidiary of the Company.

CNS Wellness Florida, LLC, the Successor of Cognitive Neuro Sciences, Inc.

Cognitive Neuro Sciences, Inc., (the ''CNS Predecessor") was incorporated on March 14, 2006 under the laws of the State of Florida. The CNS Predecessor specialized in the treatment of brain-based behavioral health disorders including developmental, emotional and stress-related problems. On May 26, 2009, the stockholders of CNS Predecessor decided to dissolve CNS Predecessor and form a Limited Liability Company (“LLC”) to carry on the business of CNS Predecessor.

CNS Wellness Florida, LLC (“CNS”) was formed on May 26, 2009 under the laws of the State of Florida. The sole purpose of CNS was to carry on the business of CNS Predecessor in the form of an LLC. The assets and liabilities of CNS Predecessor were carried forward to CNS and recorded at the historical cost on the date of conversion.

Acquisition of Psoria-Shield Inc.

On June 21, 2012, the Company entered into an Exchange Agreement (“Exchange Agreement”) to acquire all of the issued and outstanding shares of capital stock in Psoria-Shield Inc. (“PSI”), a Tampa, Florida-based developer and manufacturer of targeted Ultra Violet ("UV") phototherapy devices for the treatment of skin diseases, for and in consideration of the issuance of 7,686,797 shares of common stock in the Company.

On August 24, 2012, the Company consummated the share exchange and acquired all of the issued and outstanding shares of stock in PSI for and in consideration of the issuance of 7,686,797 shares of its common stock pursuant to the Exchange Agreement.  The 7,686,797 common shares issued in connection with the share exchange represented 25.3% of the 30,391,570 shares of issued and outstanding common stock of the Company as of the closing date of the share exchange under the Exchange Agreement. PSI is now operated as a wholly-owned subsidiary of the Company.

Psoria-Shield Inc.

Psoria-Shield Inc. (“PSI”) was incorporated on June 17, 2009 under the laws of the State of Florida. PSI engages in the business of research and development, manufacturing, and marketing and distribution of Ultra Violet ("UV") phototherapy devices for the treatment of skin diseases.

Note 2 - Summary of Significant Accounting Policies

Basis of Presentation - Unaudited Interim Financial Information

The accompanying unaudited interim consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.  The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented.  Interim results are not necessarily indicative of the results for the full year.  These unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the fiscal year ended September 30, 2012 and notes thereto contained in the Company’s Annual Report on Form 10-K filed with the SEC on January 15, 2013.

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Principles of Consolidation

The Company applies the guidance of Topic 810 “Consolidation” of the FASB Accounting Standards Codification ("ASC") to determine whether and how to consolidate another entity.  Pursuant to ASC Paragraph 810-10-15-10 all majority-owned subsidiaries—all entities in which a parent has a controlling financial interest—shall be consolidated except (1) when control does not rest with the parent, the majority owner; (2) if the parent is a broker-dealer within the scope of Topic 940 and control is likely to be temporary; (3) consolidation by an investment company within the scope of Topic 946 of a non-investment-company investee.  Pursuant to ASC Paragraph 810-10-15-8 the usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than 50 percent of the outstanding voting shares of another entity is a condition pointing toward consolidation.  The power to control may also exist with a lesser percentage of ownership, for example, by contract, lease, agreement with other stockholders, or by court decree. The Company consolidates all less-than-majority-owned subsidiaries, in which the parent’s power to control exists.

The Company's consolidated subsidiaries and/or entities are as follows:

Name of consolidated subsidiary or entity	State or other jurisdiction of incorporation or organization	Date of incorporation or formation (date of acquisition, if applicable)	Attributable interest
CNS Wellness Florida, LLC	The State of Florida	May 26, 2009 (August 2, 2012)	100%
Psoria-Shield Inc.	The State of Florida	June 17, 2009 (August 24, 2012)	100%

The consolidated financial statements include all accounts of the Company as of June 30, 2013 and 2012 and for the interim periods then ended, all accounts of CNS and PSI as of June 30, 2013 and for the interim period then ended.

All inter-company balances and transactions have been eliminated.

Reclassification

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation.   These reclassifications had no effect on reported losses.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The Company’s significant estimates and assumptions include the fair value of businesses acquired and the allocation of the purchase prices of acquired entities to the tangible and intangible assets acquired and liabilities assumed, and any non-controlling interest, based on their estimated fair values for each acquisition; the fair value of financial instruments; allowance for doubtful accounts; the carrying value, recoverability and impairment, if any, of long-lived assets, including the values assigned to and the estimated useful lives of property and equipment, intangible assets other than goodwill; expected term of share options and similar instruments, expected volatility of the entity’s common shares and the method used to estimate it, expected annual rate of quarterly dividends, and risk free rate(s); revenue recognized or recognizable, sales returns and allowances; income tax rate, income tax provision, deferred tax assets and the valuation allowance on deferred tax assets, and the assumption that the Company will continue as a going concern.  Those significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.

Actual results could differ from those estimates.

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Business Combinations

The Company applies Topic 805 “Business Combinations” of the FASB Accounting Standards Codification (formerly Statement of Financial Accounting Standards No. 141 (R) “Business Combinations” (“SFAS No. 141(R)”)) for transactions that represent business combinations to be accounted for under the acquisition method.  Pursuant to ASC Paragraph 805-10-25-1 in order for a transaction or other event to be considered as a business combination it is required that the assets acquired and liabilities assumed constitute a business. Upon determination of transactions representing business combinations the Company then (i) identifies the accounting acquirer; (ii) identifies and estimates the fair value of the identifiable tangible and intangible assets acquired, separately from goodwill; (iii) estimates the business enterprise value of the acquired entities; (iv) allocates the purchase price of acquired entities to the tangible and intangible assets acquired and liabilities assumed, based on their estimated fair values at the date of acquisition.  The excess of the liabilities assumed and the purchase price over the assets acquired was recorded as goodwill and the excess of the assets acquired over the liabilities assumed and the purchase price was recorded as a gain from bargain purchase.

Identification of the Accounting Acquirer

The Company used the existence of a controlling financial interest to identify the acquirer—the entity that obtains control of the acquiree in accordance with ASC paragraph 805-20-25-5 and identifies the acquisition date, which is the date on which it obtains control of the acquiree in accordance with ASC paragraph 805-20-25-6.  The date on which the acquirer obtains control of the acquiree generally is the date on which the acquirer legally transfers the consideration, acquires the assets, and assumes the liabilities of the acquiree—the closing date.

Intangible Assets Identification, Estimated Fair Value and Useful Lives

In accordance with ASC Section 805-20-25 as of the acquisition date, the acquirer shall recognize, separately from goodwill, the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. Recognition of identifiable assets acquired and liabilities assumed is subject to the conditions specified in ASC paragraphs 805-20-25-2 through 25-3.

The recognized intangible assets of the acquiree were valued through the use of the market, income and/or cost approach, as appropriate. The Company utilizes the income approach on a debt-free basis to estimate the fair value of the identifiable assets acquired in the acquiree at the date of acquisition with the assistance of the third party valuation firm.  This method eliminates the effect of how the business is presently financed and provides an indication of the value of the total invested capital of the Company or its business enterprise value.

Business Enterprise Valuation

The Company utilizes the income approach – discounted cash flows method to estimate the business enterprise value with the assistance of the third party valuation firm.  The income approach considers a given company's future sales, net cash flow and growth potential.  In valuing the business enterprise value of business acquired, the Company forecasted sales and net cash flow for the acquiree for five (5) years into the future and used a discounted net cash flow method to determine a value indication of the total invested capital of the acquiree.  The basic method of forecasting involves using past experience to forecast the future. The next step was to discount these projected net cash flows to their present values.  One of the key elements of the income approach is the discount rate used to discount the projected cash flows to their present values.  Determining an appropriate discount rate is one of the more difficult parts of the valuation process.  The applicable rate of return or discount rate, the rate investors in closely-held companies require as a condition of acquisition, varies from time to time, depending on economic and other conditions.  The discount rate is determined after considering the overall risk of the investment, which includes: (1) operating and financial risk in the business enterprise or asset; (2) current and projected profitability and growth; (3) risk of the respective industry; and (4) the equity risk premium relative to Treasury bonds.  The discount rate is also affected by an analyst's judgment regarding the credibility of the income projections.  The discount rate rises as the projections become increasingly optimistic, or falls as the degree of certainty increases.

Inherent Risk in the Estimates

Management makes estimates of fair values based upon assumptions believed to be reasonable.  These estimates are based on historical experience and information obtained from the management of the acquired companies. Critical estimates in valuing certain of the intangible assets include but are not limited to: future expected cash flows from revenues, customer relationships, key management and market positions, assumptions about the period of time the acquired trade names will continue to be used in the Company’s combined portfolio of products and/or services, and discount rates used to establish fair value.  These estimates are inherently uncertain and unpredictable.  Assumptions may be incomplete or inaccurate, and unanticipated events and circumstances may occur which may affect the accuracy or validity of such assumptions, estimates or actual results.

Pro Forma Financial Information (Unaudited)

The pro forma financial information presented in the relevant note combined the financial position or the results of operations of the Company and acquired entities as if the acquisition of the acquired entities had occurred as of the first date of the first period presented.

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The pro forma combined financial statements have been prepared and presented by management for illustrative purposes only and are not necessarily indicative of the combined financial position or combined results of operations in future periods or the results that actually would have been realized had the Company and acquired entities been a combined company during the specified periods.  The pro forma adjustments are based on the information available at the time of the preparation of this document and assumptions that management believe are reasonable.  The pro forma combined financial information, including the notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with the Company’s historical financial statements included in its Annual Report in Form 10-K for the fiscal year ended September 30, 2012 as filed with United States Securities and Exchange Commission (“SEC”) on January 15, 2013, CNS’s historical financial statements included in the Amendment No. 3 to the Current Report in Form 8-K/A3 as Exhibits in that Current Report as filed with the SEC on January 22, 2013, and PSI’s historical financial statements included in the Amendment No. 1 to the Current Report in Form 8-K/A1 as Exhibits in that Current Report as filed with the SEC on January 9, 2013.

Fair Value of Financial Instruments

The Company follows paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments and paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels.  The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

Level 1		Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2		Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3		Pricing inputs that are generally observable inputs and not corroborated by market data.

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.  If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts payable and accrued expenses approximate their fair values because of the short maturity of these instruments.

Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

Carrying Value, Recoverability and Impairment of Long-Lived Assets

The Company has adopted paragraph 360-10-35-17 of the FASB Accounting Standards Codification for its long-lived assets. The Company’s long-lived assets, which include property and equipment, intangible assets other than goodwill, goodwill, and website development costs, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets.  Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable.  If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives.

The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes.  The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.

The impairment charges, if any, is included in operating expenses in the accompanying statements of operations.

Fiscal Year End

The Company elected September 30^th as its fiscal year end date upon its formation.

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Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts. The Company follows paragraph 310-10-50-9 of the FASB Accounting Standards Codification to estimate the allowance for doubtful accounts. The Company performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information; and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and economic conditions.

Pursuant to paragraph 310-10-50-2 of the FASB Accounting Standards Codification account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.  The Company has adopted paragraph 310-10-50-6 of the FASB Accounting Standards Codification and determine when receivables are past due or delinquent based on how recently payments have been received.

Outstanding account balances are reviewed individually for collectability.  The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. Bad debt expense is included in general and administrative expenses, if any.

There was no bad debt expense for the interim period ended June 30, 2013 or 2012.

The Company does not have any off-balance-sheet credit exposure to its customers at June 30, 2013 or September 30, 2012.

Property and Equipment

Property and equipment is recorded at cost.  Expenditures for major additions and betterments are capitalized.  Maintenance and repairs are charged to operations as incurred.  Depreciation is computed by the straight-line method (after taking into account their respective estimated residual values) over the assets estimated useful lives.  Upon sale or retirement, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations.

Leasehold improvements

Leasehold improvements, if any, are amortized on a straight-line basis over the term of the lease or the estimated useful lives, whichever is shorter.  Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts.

Leases

Lease agreements are evaluated to determine whether they are capital leases or operating leases in accordance with paragraph 840-10-25-1 of the FASB Accounting Standards Codification (“Paragraph 840-10-25-1”).  When substantially all of the risks and benefits of property ownership have been transferred to the Company, as determined by the test criteria in Paragraph 840-10-25-1, the lease then qualifies as a capital lease.  Capital lease assets are depreciated on a straight line method, over the capital lease assets estimated useful lives consistent with the Company’s normal depreciation policy for tangible fixed assets.  Interest charges are expensed over the period of the lease in relation to the carrying value of the capital lease obligation.

Rent expense for operating leases, which may include free rent or fixed escalation amounts in addition to minimum lease payments, is recognized on a straight-line basis over the duration of each lease term.

Intangible Assets Other Than Goodwill

The Company has adopted Subtopic 350-30 of the FASB Accounting Standards Codification for intangible assets other than goodwill.  Under the requirements, the Company amortizes the acquisition costs of intangible assets other than goodwill on a straight-line basis over or their estimated useful lives, the terms of the exclusive licenses and/or agreements, or the terms of legal lives of the patents, whichever is shorter.  Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts..

Goodwill

The Company follows Subtopic 350-20 of the FASB Accounting Standards Codification for goodwill. Goodwill represents the excess of the cost of an acquired entity over the fair value of the net assets at the date of acquisition. Under paragraph 350-20-35-1 of the FASB Accounting Standards Codification, goodwill acquired in a business combination with indefinite useful lives are not amortized; rather, goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate the asset might be impaired.

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Website Development Costs

The Company has adopted Subtopic 350-50 of the FASB Accounting Standards Codification for website development costs.  Under the requirements of Sections 350-50-15 and 350-50-25, the Company capitalizes costs incurred to develop a website as website development costs, which are amortized on a straight-line basis over the estimated useful lives of three (3) years. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts.

Customer Deposits

Customer deposits primarily represent amounts received from customers for future delivery of products, which are fully or partially refundable depending upon the terms and conditions of the sales agreements.

Related Parties

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.

Pursuant to Section 850-10-20 the Related parties include a. affiliates of the Company; b. Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

Product Warranty

The Company estimates future costs of warranty obligations in accordance with ASC 460-10, which requires an entity to disclose and recognize a liability for the fair value of the obligation it assumes upon issuance of a warranty.  The Company warrants most of its products for a specific period of time, usually 12 months, against material defects.  The Company provides for the estimated future costs of warranty obligations in cost of revenues when the related revenues are recognized.  The accrued warranty costs represent the best estimate at the time of sale of the total costs that the Company will incur to repair or replace product parts that fail while still under warranty. The amount of the accrued estimated warranty costs obligation for established products is primarily based on historical experience as to product failures adjusted for current information on repair costs. For new products, estimates include the historical experience of similar products, as well as reasonable allowance for warranty expenses associated with new products. On a quarterly basis, the Company reviews the accrued warranty costs and updates the historical warranty cost trends, if required.

Commitment and Contingencies

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur.  The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.  In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements.  If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.  Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

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Revenue Recognition

The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition.  The Company will recognize revenue when it is realized or realizable and earned.  The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.  In addition to the aforementioned general policy, the following are the specific revenue recognition policies for each major category of revenue:

(i)

Sale of products:  The Company derives its revenues from sales contracts with customers with revenues being generated upon the shipment of merchandise.  Persuasive evidence of an arrangement is demonstrated via sales invoice or contract; product delivery is evidenced by warehouse shipping log as well as a signed bill of lading from the vessel or rail company and title transfers upon shipment, based on free on board (“FOB”) warehouse terms; the sales price to the customer is fixed upon acceptance of the signed purchase order or contract and there is no separate sales rebate, discount, or volume incentive.  When the Company recognizes revenue, no provisions are made for returns because, historically, there have been very few sales returns and adjustments that have impacted the ultimate collection of revenues.

(ii)

Patient Services:  The Company derives its revenues from the patient services it provides. Deferred revenues are recorded at the time patients pay prior to services being rendered. The Company recognizes revenues as services are provided, which typically is over a period of three (3) to five (5) months. The Company’s clients sign a contract prior to any service. Clients who wish to pay for the full package in advance receive a discount ranging from 10% to 15% depending on the package of the services chosen. In the majority of cases, payments are collected before all services are rendered. The client signs an agreement stating that they are required to complete treatment within one (1) year or remaining unused treatments are forfeited. In addition, the contract stipulates that if the client does not appear for treatment for a period of six (6) consecutive months, their package is placed into abandonment. In such a case the Company retains all payments and is able to pursue any balances.

Shipping and Handling Costs

The Company accounts for shipping and handling fees in accordance with paragraph 605-45-45-19 of the FASB Accounting Standards Codification.  While amounts charged to customers for shipping products are included in revenues, the related costs are classified in cost of goods sold as incurred.

Stock-Based Compensation for Obtaining Employee Services

The Company accounts for its stock based compensation in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition provisions of section 718-10-30 of the FASB Accounting Standards Codification. Pursuant to paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.  The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.  If shares of the Company are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model.  The ranges of assumptions for inputs are as follows:

·

Expected term of share options and similar instruments: The expected life of options and similar instruments represents the period of time the option and/or warrant are expected to be outstanding.  Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and employees’ expected exercise and post-vesting employment termination behavior into the fair value (or calculated value) of the instruments.  Pursuant to paragraph 718-10-S99-1, it may be appropriate to use the simplified method, i.e., expected term = ((vesting term + original contractual term) / 2), if (i) A company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.

·

Expected volatility of the entity’s shares and the method used to estimate it.  Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index.  The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility.  If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

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·

Expected annual rate of quarterly dividends.  An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends.  The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.

·	Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used.  The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments.

The Company’s policy is to recognize compensation cost for awards with only service conditions and a graded vesting schedule on a straight-line basis over the requisite service period for the entire award.

Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services

The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of Sub-topic 505-50 of the FASB Accounting Standards Codification (“Sub-topic 505-50”).

Pursuant to ASC Section 505-50-30, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.  The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. If shares of the Company are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model.  The ranges of assumptions for inputs are as follows:

·

Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments.  The Company uses historical data to estimate holder’s expected exercise behavior.  If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.

·

Expected volatility of the entity’s shares and the method used to estimate it.  Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index.  The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility.  If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

·

Expected annual rate of quarterly dividends.  An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends.  The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.

·	Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used.  The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments.

Pursuant to ASC paragraph 505-50-25-7, if fully vested, non-forfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Whether the corresponding cost is an immediate expense or a prepaid asset (or whether the debit should be characterized as contra-equity under the requirements of paragraph 505-50-45-1) depends on the specific facts and circumstances. Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, non-forfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services. Section 505-50-30 provides guidance on the determination of the measurement date for transactions that are within the scope of this Subtopic.

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Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9, an entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a stock option that the counterparty has the right to exercise expires unexercised.

Pursuant to ASC paragraph 505-50-30-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded.

Income Tax Provision

The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse.  Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Income and Comprehensive Income in the period that includes the enactment date.

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”) with regards to uncertainty income taxes.  Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.  Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.  The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary.

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

Uncertain Tax Positions

The Company did not take any uncertain tax positions and had no adjustments to unrecognized income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the interim period ended June 30, 2013 or 2012.

Pro Forma Income Tax Information (Unaudited)

The pro forma income tax information, inclusive of income tax rate, income tax provision (benefits), if any, deferred tax assets and valuation allowance on deferred tax assets, presented in the accompanying pro forma combined financial statements and the pro forma income tax note reflect the provision for income tax, based on the combined results of operations of the Company and the acquired entities for the periods presented, which would have been recorded as if the acquisition of the acquired entities had occurred as of the first date of the first period presented.

Net Income (Loss) per Common Share

Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification.  Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period.  Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through stock options and warrants.

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The following table shows the number of potentially outstanding dilutive common shares excluded from the diluted net income (loss) per common share calculation as they were anti-dilutive:

		Potentially Outstanding Dilutive Common Shares
		For the Interim Period Ended June 30, 2013						For the Interim Period Ended June 30, 2012
Convertible Notes Payable Shares and Related Warrant Shares
Convertible note payable of $58,000 issued on August 17, 2012 convertible to common shares at $0.30 per share			193,334							-
Warrants issuable contingent upon conversion of convertible note payable of $58,000 issued on August 17, 2012 with an exercise price of $0.45 per share			193,334							-
Convertible note payable of $50,000 issued on October,11, 2012 convertible to common shares at $0.30 per share			166,666							-
Warrants issuable contingent upon conversion of convertible note payable of $50,000 issued on October 11, 2012 with an exercise price of $0.45 per share			166,666							-
Convertible note payable of $8,000 issued on February 8, 2013 convertible to common shares at $0.30 per share			26,667							-
Warrants issuable contingent upon conversion of convertible note payable of $8,000 issued on February 8, 2013 with an exercise price of $0.45 per share			26,667							-
Convertible note payable of $20,000 issued on June 28, 2013 convertible to common shares at $0.30 per share			66,667							-
Warrants issuable contingent upon conversion of convertible note payable of $20,000 issued on June 28, 2013 with an exercise price of $0.45 per share			66,667							-
Sub-total: convertible notes payable shares and related warrant shares			906,668							-
Stock Option Shares
Stock options issued on June 30, 2010 to the founder of the Company upon formation with an exercise price of $0.01 per share expiring five (5) years from the date of issuance			1,600,000							1,600,000
Stock options issued on November 30, 2010 to the members of the board of directors of the Company with an exercise price of $0.01 per share expiring five (5) years from the date of issuance			200,000							200,000
Stock options issued on March 13, 2012  to a consultant with an exercise price of $0.44 per share expiring five (5) years from the date of issuance			50,000							50,000
Stock options issued on August 24, 2012 for conversion of PSI stock options originally issued on December 20, 2010 with an exercise price of $1.00 per share expiring ten (10) years from the date of original issuance upon acquisition of PSI			750,000							-
Stock options issued on August 24, 2012 for conversion of PSI stock options originally issued on February 22, 2012 with an exercise price of $2.00 per share expiring ten (10) years from the date of original issuance upon acquisition of PSI			650,000							-
Sub-total: Stock option shares			3,250,000							1,850,000
Warrant Shares
Warrants issued on November 10, 2010 to investors in connection with the Company’s November 10, 2010 equity financing with an exercise price of $0.01 per share expiring five (5) years from the date of issuance			1,600,000							1,600,000

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Remaining unexercised warrants originally issued on November 30, 2010 to investors with an exercise price of $0.01 per share expiring five (5) years from the date of issuance			2,521,334				4,718,334
Warrants issued on November 30 , 2010 for services with an exercise price of $0.01 per share expiring five (5) years from the date of issuance			375,000				375,000
Stock options issued on August 24, 2012 for conversion of PSI stock options originally issued on December 20, 2010 with an exercise price of $1.00 per share expiring ten (10) years from the date of original issuance upon acquisition of PSI			190,000				190,000
Warrants issued on March 15, 2012 to an investor with an exercise price of $0.75 per share expiring five (5) years from the date of issuance			75,000				75,000
Warrants issued on April 19, 2012 to an investor with an exercise price of $1.65 per share expiring five (5) years from the date of issuance			14,545				14,545
Warrants issued on May 9, 2012 to an investor with an exercise price of $2.16 per share expiring five (5) years from the date of issuance			9,091				9,091
Warrants issued on May 14, 2012 to investors with an exercise price of $2.25 per share expiring five (5) years from the date of issuance			18,182				18,182
Warrants issued between May 21 and 25, 2012 to investors with an exercise price of $2.31 per share expiring five (5) years from the date of issuance			112,955				112,955
Remaining unexercised warrants originally issued on September 25, 2012 to investors with an exercise price of $0.45 per share expiring five (5) years from the date of issuance			236,666				-
Warrants issued on December 19, 2012 to investors with an exercise price of $0.45 per share expiring five (5) years from the date of issuance			520,999				-
Warrants issued on February 27, 2013 and March 26, 2013 for services with an exercise price of $0.30 per share expiring five (5) years from the date of issuance			700,000				-
Warrants issued on March 18, 2013 to investors with an exercise price of $0.45 per share expiring five (5) years from the date of issuance			3,096,603				-
Warrants issued on April 18, 2013 to investors with an exercise price of $0.45 per share expiring five (5) years from the date of issuance			601,668				-
Warrants issued on May 9, 2013 to investors with an exercise price of $0.45 per share expiring five (5) years from the date of issuance			40,000				-
Sub-total: Warrant shares			10,112,043				7,113,107
Total potentially outstanding dilutive common shares			14,268,711				8,963,107

Cash Flows Reporting

 

The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments.  The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification.

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Segment Information

The Company follows Topic 280 of the FASB Accounting Standards Codification for segment reporting.  Pursuant to Paragraph 280-10-50-1 an operating segment is a component of a public entity that has all of the following characteristics: a. It engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same public entity). b. Its operating results are regularly reviewed by the public entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance. c. Its discrete financial information is available.  In accordance with Paragraph 280-10-50-5 the term chief operating decision maker identifies a function, not necessarily a manager with a specific title. That function is to allocate resources to and assess the performance of the segments of a public entity. Often the chief operating decision maker of a public entity is its chief executive officer or chief operating officer, but it may be a group consisting of, for example, the public entity's president, executive vice presidents, and others.  Pursuant to Paragraph 280-10-50-4 not every part of a public entity is necessarily an operating segment or part of an operating segment, such as, a corporate headquarters or certain functional departments may not earn revenues or may earn revenues that are only incidental to the activities of the public entity and would not be operating segments. In accordance with Paragraph 280-10-50-22, a public entity shall report a measure of profit or loss and total assets for each reportable segment.

Subsequent Events

The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued.  Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.

Recently Issued Accounting Pronouncements

In January 2013, the FASB issued ASU No. 2013-01, "Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities". This ASU clarifies that the scope of ASU No. 2011-11, "Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities." applies only to derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with specific criteria contained in FASB Accounting Standards Codification or subject to a master netting arrangement or similar agreement. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013.

In February 2013, the FASB issued ASU No. 2013-02, "Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income." The ASU adds new disclosure requirements for items reclassified out of accumulated other comprehensive income by component and their corresponding effect on net income. The ASU is effective for public entities for fiscal years beginning after December 15, 2013.

In February 2013, the Financial Accounting Standards Board, or FASB, issued ASU No. 2013-04, "Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for which the Total Amount of the Obligation Is Fixed at the Reporting Date."  This ASU addresses the recognition, measurement, and disclosure of certain obligations resulting from joint and several arrangements including debt arrangements, other contractual obligations, and settled litigation and judicial rulings. The ASU is effective for public entities for fiscal years, and interim periods within those years, beginning after December 15, 2013.

In March 2013, the FASB issued ASU No. 2013-05, "Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity." This ASU addresses the accounting for the cumulative translation adjustment when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. The guidance outlines the events when cumulative translation adjustments should be released into net income and is intended by FASB to eliminate some disparity in current accounting practice. This ASU is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013.

In March 2013, the FASB issued ASU 2013-07, “Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting.” The amendments require an entity to prepare its financial statements using the liquidation basis of accounting when liquidation is imminent. Liquidation is imminent when the likelihood is remote that the entity will return from liquidation and either (a) a plan for liquidation is approved by the person or persons with the authority to make such a plan effective and the likelihood is remote that the execution of the plan will be blocked by other parties or (b) a plan for liquidation is being imposed by other forces (for example, involuntary bankruptcy). If a plan for liquidation was specified in the entity’s governing documents from the entity’s inception (for example, limited-life entities), the entity should apply the liquidation basis of accounting only if the approved plan for liquidation differs from the plan for liquidation that was specified at the entity’s inception. The amendments require financial statements prepared using the liquidation basis of accounting to present relevant information about an entity’s expected resources in liquidation by measuring and presenting assets at the amount of the expected cash proceeds from liquidation. The entity should include in its presentation of assets any items it had not previously recognized under U.S. GAAP but that it expects to either sell in liquidation or use in settling liabilities (for example, trademarks). The amendments are effective for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. Entities should apply the requirements prospectively from the day that liquidation becomes imminent. Early adoption is permitted.

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.

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Note 3 – Going Concern

The consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

As reflected in the consolidated financial statements, the Company had an accumulated deficit at June 30, 2013, a net loss and net cash used in operating activities for the interim period then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

While the Company is attempting to further implement its business plan and generate sufficient revenues, the Company’s cash position may not be sufficient enough to support the Company’s daily operations.  Management intends to raise additional funds by way of a public or private offering.  Management believes that the actions presently being taken to further implement its business plan and generate sufficient revenues provide the opportunity for the Company to continue as a going concern.  While the Company believes in the viability of its strategy to further implement its business plan and generate sufficient revenues and in its ability to raise additional funds by way of a public or private offering, there can be no assurances to that effect.  The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenues and its ability to raise additional funds by way of a public or private offering.

The consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Note 4 - Business Acquisitions

(i)

Acquisition of CNS Wellness Florida, LLC

On August 2, 2012, the Company consummated the Exchange Agreement and acquired all of the issued and outstanding limited liability company interests in CNS for and in consideration of the issuance of 7.3 million shares of the Company’s common stock pursuant to the Exchange Agreement.   The 7.3 million common shares issued in connection with the share exchange represented 32.2% of the 22,704,773 shares of issued and outstanding common stock of the Company as of the closing date of the share exchange under the Exchange Agreement.  CNS is now operated as a wholly-owned subsidiary of the Company.

Identification of the Accounting Acquirer

The Company used the existence of a controlling financial interest to identify the acquirer—the entity that obtains control of the acquiree in accordance with ASC paragraph 805-20-25-5 and identifies the acquisition date, which is the date on which it obtains control of the acquiree in accordance with ASC paragraph 805-20-25-6.  The management of the Company specifically addressed (i) the ownership interest of each party after the acquisition; (ii) the members of the board of directors from both companies; and (iii) senior management from both companies and determined that Wellness Center USA, Inc. was the accounting acquirer for the merger between Wellness Center USA, Inc. and CNS Wellness Florida, LLC.

The specific control factors considered to determine which entity was the accounting acquirer are as follows:

(i) The ownership interest of each party after the acquisition
WCUI's common shares issued and outstanding prior to CNS acquisition			15,367,273				67.8	%
WCUI's common shares issued to the members of CNS for the acquisition of all of the issued and outstanding limited liability company interests in CNS upon acquisition of CNS			7,300,000				32.2	%
			22,667,273				100.0	%
(ii) The members of the board of directors from both companies
The members of the board of directors from WCUI prior to CNS acquisition			3				60.0	%
The members of the board of directors from CNS upon acquisition of CNS			2				40.0	%
			5				100.0	%
(iii) Senior management from both companies
Senior management from WCUI prior to CNS acquisition			1				100.0	%
Senior management from CNS upon acquisition of CNS			-				-	%
			1				100.0	%

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Intangible Assets Identification, Estimated Fair Value and Useful Lives

With the assistance of the third party valuation firm, the Company identified certain separate recognizable intangible assets that possessed economic value, estimated their fair values and related useful lives of CNS at the date of acquisition as follows:

	Estimated Useful Life (Years)						August 2, 2012
Trademark/Trade Name	9						$	110,000
Acquired Technology	20							325,000
Non-Competition Agreement	3							120,000
Total Recognized Intangible Assets							$	555,000

Business Enterprise Valuation

With the assistance of the third party valuation firm, the Company estimated the indicated value of the total invested operating capital of CNS at the date of acquisition utilizing the income approach – discounted cash flows method, was $3,100,000, as follows:

							August 2, 2012
Present Value of Debt-Free Net Cash Flow - Forecast Period							$	807,921
Present Value of Debt-Free Net Cash Flow - Residual Period								2,287,246
Present Value of Debt-Free Net Cash Flow – Total								3,095,167
Value Indication Income Approach - Discounted Net Cash Flow Method (Rounded)							$	3,100,000

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Allocation of Purchase Price

The purchase price of CNS has been allocated to the tangible and intangible assets acquired and liabilities assumed, and any non-controlling interest in CNS based on their estimated fair values at the date of acquisition as follows:

			Book Value				Fair Value  Adjustment				Fair Market Value
Cash			$	11,713			$	-			$	11,713
Property and equipment				18,459								18,459
Trademark				-				110,000				110,000
Acquired technology				-				325,000				325,000
Non-compete agreements				-				120,000				120,000
Goodwill				323,045				2,545,000				2,868,045
Security deposits				36,939								36,939
Accounts payable				(41,957)								(41,957)
Accrued interest - related party				(3,516)								(3,516)
Credit cards payable				(66,008)								(66,008)
Payroll liability				(2,709)								(2,709)
Current portion of deferred rent				(11,363)								(11,363)
Advances from related parties				(196,208)								(196,208)
Note payable - related party				(37,139)								(37,139)
Deferred rent, net of current portion				(31,256)								(31,256)
Total				-				3,100,000				3,100,000
Non-controlling interest				(-)				-				(-)
Purchase price			$	-			$	3,100,000			$	3,100,000

(ii)

Acquisition of Psoria-Shield Inc.

On August 24, 2012, the Company consummated the share exchange and acquired all of the issued and outstanding shares of stock in PSI for and in consideration of the issuance of 7,686,797 shares of its common stock pursuant to the Exchange Agreement.  The 7,686,797 common shares issued in connection with the share exchange represented 25.3% of the 30,354,570 shares of issued and outstanding common stock of the Company as of the closing date of the share exchange under the Exchange Agreement. PSI is now operated as a wholly-owned subsidiary of the Company.

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Identification of the Accounting Acquirer

The Company used the existence of a controlling financial interest to identify the acquirer—the entity that obtains control of the acquiree in accordance with ASC paragraph 805-20-25-5 and identifies the acquisition date, which is the date on which it obtains control of the acquiree in accordance with ASC paragraph 805-20-25-6.  The management of the Company specifically addressed (i) the ownership interest of each party after the acquisition; (ii) the members of the board of directors from both companies; and (iii) senior management from both companies and determined that Wellness Center USA, Inc. was the accounting acquirer for the merger between Wellness Center USA, Inc. and Psoria-Shield Inc.

The specific control factors considered to determine which entity was the accounting acquirer are as follows:

(i) The ownership interest of each party after the acquisition
WCUI's common shares issued and outstanding prior to PSI acquisition			22,667,273				74.7	%
WCUI's common shares issued to the stockholders of PSI for the acquisition of all of the issued and outstanding common stock of PSI upon acquisition of PSI			7,686,797				25.3	%
			30,354,070				100.0	%
(ii) The members of the board of directors from both companies
The members of the board of directors from WCUI prior to PSI acquisition			5				83.3	%
The members of the board of directors from PSI upon acquisition of PSI			1				16.7	%
			6				100.0	%
(iii) Senior management from both companies
Senior management from WCUI prior to PSI acquisition			1				100.0	%
Senior management from PSI upon acquisition of PSI			-				-	%
			1				100.0	%

Intangible Assets Identification, Estimated Fair Value and Useful Lives

With the assistance of the third party valuation firm, the Company identified certain separate recognizable intangible assets that possessed economic value, estimated their fair values and related useful lives of PSI at the date of acquisition as follows:

	Estimated Useful Life (Years)						August 24, 2012
Trademark - Psoria-Shield	7						$	210,000
Trademark - Psoria-Light	7							420,000
Acquired Technology	20							2,095,000
Non-Competition Agreement	4							120,000
Total Recognized Intangible Assets							$	2,845,000

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Business Enterprise Valuation

With the assistance of the third party valuation firm, the Company estimated the indicated value of the total invested operating capital of PSI at the date of acquisition utilizing the income approach – discounted cash flows method, was $4,105,000, as follows:

							August 24, 2012
Present Value of Debt-Free Net Cash Flow - Forecast Period							$	2,205,360
Present Value of Debt-Free Net Cash Flow - Residual Period								1,899,261
Present Value of Debt-Free Net Cash Flow – Total								4,104,622
Value Indication Income Approach - Discounted Net Cash Flow Method (Rounded)							$	4,105,000

Allocation of Purchase Price

The purchase price of PSI has been allocated to the tangible and intangible assets acquired and liabilities assumed, and any non-controlling interest in the PSI based on their estimated fair values at the date of acquisition as follows:

			Book Value				Fair Value  Adjustment				Fair Market Value
Cash			$	11,413			$	-			$	11,413
Inventories				12,694								12,694
Property and equipment				80,956								80,956
Exclusive licenses				4,562								4,562
Trademark - Psoria-Shield				-				210,000				210,000
Trademark - Psoria-light				-				420,000				420,000
Acquired technology				-				2,095,000				2,095,000
Non-compete agreement				-				120,000				120,000
Goodwill				456,603				1,260,000				1,716,603
Security deposits				1,760								1,760
Accounts payable				(161,821)								(161,821)
Credit cards payable				(42,198)								(42,198)
Customer deposits				(25,000)								(25,000)
Accrued warranty				(9,600)								(9,600)
Current portion of long-term payable				(72,653)								(72,653)
Loan payable				(20,000)								(20,000)
Advances from stockholders				(233,994)								(233,994)
Total				-				4,105,000				4,105,000
Non-controlling interest				(-)				-				(-)
Purchase price			$	-			$	4,105,000			$	4,105,000

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Note 5 – Property and Equipment

Property and equipment, stated at cost, less accumulated depreciation consisted of the following:

	Estimated Useful Life (Years)		June 30, 2013				September 30, 2012
Auto	3		$	15,000			$	-
Computer equipment	5			12,112				12,112
Furniture and fixture	7			26,808				26,808
Leasehold improvement	5			15,170				15,170
Medical and office equipment	5			16,239				14,841
Software	3			32,276				32,276
				117,805				101,207
Less accumulated depreciation and amortization				(33,414)				(9,933)
			$	84,391			$	91,274

(i)

Depreciation and Amortization Expense

Depreciation and amortization expenses for the interim period ended June 30, 2013 and 2012 was $23,481 and $309, respectively.

(ii)

Impairment

The Company completed the annual impairment test of property and equipment and determined that there was no impairment as the fair value of property and equipment, substantially exceeded their carrying values at September 30, 2012.

Note 6 – Intangible Assets Other Than Goodwill

Exclusive License Agreements

(i)

Exclusive License Agreement for Provisional Patent No. 1 Signed on August 25, 2009

Grant of License

An exclusive license agreement ("Exclusive License Agreement") was made and entered into on August 25, 2009, by and among Scot L. Johnson ("Johnson"), Edwin T. Longo ("Longo", and together with Johnson collectively referred to herein as "Licensors"), and Psoria-Shield Inc. (“PSI” or "Licensee").

Upon the execution of the Exclusive License Agreement, Licensee acquired, and Licensors granted to Licensee, for the duration of the License Term (as defined below), the sole and exclusive (including to the exclusion of Licensors), worldwide, paid-up, royalty-free right and license under the Licensed Patents, Know-how, Technical Data, and any Improvements as defined in the Exclusive License Agreement to develop, make, have made, use, sell, offer to sell, distribute, export, import, and otherwise commercialize the Licensed Product(s) in the Field. This license shall include the right of Licensee to grant sublicenses and distribution rights in the Field.

Consideration for License

As the sole and exclusive consideration for the rights and license granted in the Exclusive License Agreement, each of the Licensors received, on the date of signing, 3,000,000 shares of the common stock of the Licensee, or 6,000,000 shares of the Licensee in aggregate, which were valued at the stockholders’ cost basis of nil.

License Term

The term of the rights and license granted herein shall commence upon the date of signing of the Exclusive License Agreement and shall continue in effect in perpetuity unless and to the extent terminated as set forth in Sections 5.2 through 5.4 of the License Term of the Exclusive License Agreement.

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The License may be terminated at any time by the mutual written agreement of each of the Licensors and Licensee.

(ii)

Exclusive License Agreement for Provisional Patent No. 2 Signed on December 11, 2010

Grant of License

An exclusive license agreement ("Exclusive License Agreement") was made and entered into on December 11, 2010, by and between Scot L. Johnson ("Johnson" or referred to herein as "Licensor"), and Psoria-Shield Inc. (“PSI” or "Licensee").

Upon the execution of the Exclusive License Agreement, Licensee acquired, and Licensor granted to Licensee, for the duration of the License Term (as defined below), the sole and exclusive (including to the exclusion of Licensor), worldwide, paid-up, royalty-free right and license under the Licensed Patents, Know-how, Technical Data, and any Improvements as defined in the Exclusive License Agreement to develop, make, have made, use, sell, offer to sell, distribute, export, import, and otherwise commercialize the Licensed Product(s) in the Field. This license shall include the right of Licensee to grant sublicenses and distribution rights in the Field.

Consideration for License

As the sole and exclusive consideration for the rights and license granted in the Exclusive License Agreement, the Licensor received, on the date of signing, 5,000 shares of the common stock of the Licensee, which was valued at the stockholder’s cost basis of $5,000.

License Term

The term of the rights and licenses granted herein shall commence upon the date of signing of the Exclusive License Agreement and shall continue in effect in perpetuity unless and to the extent terminated as set forth in Sections 5.2 through 5.4 of the License Term of the Exclusive License Agreement.

The License may be terminated at any time by the mutual written agreement of each of the Licensors and Licensee.

Summary of Exclusive Licenses

Exclusive licenses, stated at cost, less accumulated amortization consisted of the following:

	Estimated Useful Life (Years)		June 30, 2013				September 30, 2012
Exclusive licenses	18		$	5,000			$	5,000
Less accumulated amortization				(625	)			(438	)
			$	4,375			$	4,562

Amortization Expense

Amortization expense for the interim period ended June 30, 2013 and 2012 was $187 and $0, respectively.

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Acquired Technologies

Acquired technologies, stated at cost, less accumulated amortization consisted of the following:

	Estimated Useful Life (Years)			June 30, 2013							September 30, 2012
CNS
Acquired technologies	20			$		325,000					$		325,000
Accumulated amortization						(14,894)							(2,708)
						310,106							322,292
PSI
Acquired technologies	20					2,095,000							2,095,000
Accumulated amortization						(87,290)							(8,729)
						2,007,710							2,086,271
Total
Acquired technologies						2,420,000							2,420,000
Accumulated amortization						(102,184)							(11,437)
				$		2,317,816					$		2,408,563

Amortization Expense

Amortization expense for the interim period ended June 30, 2013 was $90,747.

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Non-compete Agreements

Non-compete agreements, stated at cost, less accumulated amortization consisted of the following:

	Estimated Useful Life (Years)			June 30, 2013							September 30, 2012
CNS
Non-Compete agreements	3			$		120,000					$		120,000
Accumulated amortization						(36,663)							(6,666)
						83,337							113,334
PSI
Non-Compete agreement	4					120,000							120,000
Accumulated amortization						(25,000)							(2,500)
						95,000							117,500
Total
Non-Compete agreements						240,000							240,000
Accumulated amortization						(61,663)							(9,166)
				$		178,337					$		230,834

Amortization Expense

Amortization expense for the interim period ended June 30, 2013 was $52,497.

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Trademarks

Trademarks, stated at cost, less accumulated amortization consisted of the following:

	Estimated Useful Life (Years)			June 30, 2013							September 30, 2012
CNS
Trademark	9			$		110,000					$		110,000
Accumulated amortization						(11,209)							(2,038)
						98,701							107,962
PSI
Trademark - Psoria-Light	7					420,000							420,000
Accumulated amortization						(42,500)							(5,000)
						377,500							415,000
Trademark - Psoria-Shield	7					210,000							210,000
Accumulated amortization						(32,500)							(2,500)
						177,500							207,500
Total
Trademarks						740,000							740,000
Accumulated amortization						(86,209)							(9,538)
				$		653,791					$		730,462

Amortization Expense

Amortization expense for the interim period ended June 30, 2013 was $76,671.

Impairment

The Company completed the annual impairment test of intangible assets other than goodwill inclusive of acquired technologies, exclusive licenses, non-compete agreements and trademarks and determined that there was no impairment as the fair value of intangible assets other than goodwill inclusive of acquired technologies, exclusive licenses, non-compete agreements, and trademarks, substantially exceeded their carrying values at September 30, 2012.

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Note 7 – Goodwill

Goodwill, stated at cost, less accumulated impairment, if any, consisted of the following:

		June 30, 2013				September 30, 2012
Acquisition of CNS
Goodwill		$	2,868,045			$	2,868,045
Accumulated impairment			(-)				(-)
			2,868,045				2,868,045
Acquisition of PSI
Goodwill			1,716,603				1,716,603
Accumulated impairment			(-)				(-)
			1,716,603				1,716,603
Total
Goodwill			4,584,648				4,584,648
Accumulated impairment			(-)				(-)
		$	4,584,648			$	4,584,648

Impairment

The Company completed the annual impairment test of goodwill and determined that there was no impairment as the fair value of goodwill, substantially exceeded their carrying values at September 30, 2012.

Note 8 – Website Development Costs

Website development costs, stated at cost, less accumulated amortization consisted of the following:

	Estimated Useful Life (Years)		June 30, 2013				September 30, 2012
Website development costs	3		$	22,809			$	17,809
Less accumulated amortization				(7,344)				(2,898)
			$	15,465			$	14,911

(i)

Amortization Expense

Amortization expense for the interim period ended June 30, 2013 and 2012 was $4,446 and $0, respectively.

(ii)

Impairment

The Company completed the annual impairment test of website development costs and determined that there was no impairment as the fair value of website development costs, substantially exceeded their carrying values at September 30, 2012.

Note 9 – Note Payable

In January, 2012, PSI obtained a loan in the amount of $20,000, from a third party, with a simple interest at 10% per annum, with principal and interest originally due December 31, 2012 which was extended to June 30, 2013. The noted and related accrued interest was fully repaid on April 4, 2013.

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Note 10 – Related Party Transactions

Related Parties

Related parties with whom the Company had transactions are:

Related Parties		Relationship
Andrew J. Kandalepas		Chairman, CEO, significant stockholder and director of the Company
CADserv Corporation		An entity owned and controlled by significant stockholder of the Company
William A. Lambos, Ph.D.		Chief Cognitive Neuroscientist of CNS, significant stockholder and director of the Company
Peter A. Hannouche		CEO and COO of CNS, significant stockholder and director of the Company
Scot Johnson		President and Chief Executive Officer of PSI

Advances from Stockholders

From time to time, stockholders of the Company advance funds to the Company for working capital purpose. Those advances are unsecured, non-interest bearing and due on demand.

Note Payable – Related Party

Note payable – related party consisted of the following:

		June 30, 2013				September 30, 2012
On August 29, 2010 CNS issued a promissory note to a family member of a stockholder, then one of CNS' members to memorialize (i) the receipt of the funds in the amount of $37,139 and (ii) the terms of note. Pursuant to the terms, the note accrues simple interest of 5% per annum until the note is fully repaid. Interest has been computed as of the date of the receipt of the funds. The note is due on demand.		$	37,139			$	37,139
		$	37,139			$	37,139

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Convertible Notes Payable – Stockholder

Convertible notes payable – stockholder consisted of the following:

		June 30, 2013				September 30, 2012
On August 17, 2012 WCUI issued a promissory note to a stockholder, the note is non-interest bearing and due on demand. Pursuant to the terms of the note, the note holder has the option to convert all or any portion of the note amount to the Company’s common shares at $0.30 per share, the closing price of WCUI's common stock on the date of issuance, and a warrant to purchase the same number of shares of common stock with an exercise price of $0.45 per share expiring five (5) years from the date of issuance.		$	58,000			$	58,000
On October 11, 2012 WCUI issued a promissory note to a stockholder, the note is non-interest bearing and due on demand. Pursuant to the terms of the note, the note holder has the option to convert all or any portion of the note amount to the Company’s common shares at $0.30 per share, the closing price of WCUI's common stock on the date of issuance, and a warrant to purchase the same number of shares of common stock with an exercise price of $0.45 per share expiring five (5) years from the date of issuance.			50,000				-
On February 8, 2013 WCUI issued a promissory note to a stockholder, the note is non-interest bearing and due on demand. Pursuant to the terms of the note, the note holder has the option to convert all or any portion of the note into the Company’s common shares at $0.30 per share, the closing price of WCUI's common stock on the date of issuance, and a warrant to purchase the same number of shares of common stock with an exercise price of $0.45 per share expiring five (5) years from the date of issuance.			8,000				-
On June 28, 2013 WCUI issued a promissory note to a stockholder, the note is non-interest bearing and due on demand. Pursuant to the terms of the note, the note holder has the option to convert all or any portion of the note into the Company’s common shares at $0.30 per share, and a warrant to purchase the same number of shares of common stock with an exercise price of $0.45 per share expiring five (5) years from the date of issuance.			20,000				-
		$	136,000			$	58,000

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Long-Term Notes Payable – Officers

		June 30, 2013				September 30, 2012
On August 2, 2012, upon the acquisition of CNS by WCUI, CNS memorialized the advances from the former member as a promissory note to the officer. Pursuant to the terms and conditions of the note, CNS promises to pay the officer the principal sum of $120,886.30  and the note accrues simple interest at 2% per annum, payable annually on each anniversary date of the Note. The entire principal balance together with any accrued but unpaid interest thereon is due August 2, 2015.
Original amount		$	120,886			$	120,886
Repayments from inception to date			(20,307)				(-)
Remaining balance			100,579				120,886
On August 2, 2012, upon the acquisition of CNS by WCUI, CNS memorialized the advances from the former member as a promissory note to the officer. Pursuant to the terms and conditions of the note, CNS promises to pay the officer the principal sum of $75,322.14 and the note accrues simple interest of 2%, per annum ,payable annually on each anniversary date of the Note. The entire principal balance together with any accrued but unpaid interest thereon is due August 2, 2015.
Original amount			75,322				75,322
Repayments from inception to date			(8,606)				(900)
Remaining balance			66,716				74,422
		$	167,295			$	195,308

Note 11 – Commitments and Contingencies

Employment Agreements

Employment Agreement - William A. Lambos

On August 2, 2012, the Company entered into an employment agreement (the “Employment Agreement”) with William A. Lambos (the “Executive”). Under the Employment Agreement, the Company acquired from the Executive all of the Executive’s limited liability company membership interests in CNS-Wellness Florida, LLC, a Florida limited liability company, in exchange for 3,650,000 shares of $0.001 par value common stock of the Company, The Company hereby employs the Executive, and the Executive hereby accepts such employment, upon the terms and conditions stated herein (1) The Executive is engaged to serve as the Chief Executive Officer of the Company’s subsidiary CNS Wellness Florida, (2) The Executive’s employment under this Agreement shall commence on the date hereof and shall continue in effect until July 31, 2015. the Executive understands that he is an at-will Executive, and that the Company may terminate his employment at any time (3) The Company shall pay to the Executive a base annual salary of $150,000, subject to increase, but not decrease, from time to time by the Board of Directors of the Company, provided other benefits and retirement plans (4) If at any time on or before July 31, 2015 the employment of the Executive is terminated by the Executive other than for good reason, or by the Company for cause, then the Company shall pay to the Executive any compensation earned but not paid to the Executive prior to the effective date of such termination (5)The Executive covenants and agrees that during the term of the Executive's employment, whether pursuant to this Agreement, any renewal hereof, or otherwise, and for a period of two years (the “Restricted Period”) after the later of the expiration of this Agreement or the termination of his employment with the Company, in the State(s) in which the Company conducts business as of the Executive's termination of employment, he will not, directly or indirectly (through one or more intermediaries), whether individually, or as an officer, director, agent, shareholder of 5% or more of the applicable company’s outstanding equity shares, member, partner, joint venturer, investor (other than as a passive trader in publicly traded securities), consultant or otherwise, compete in whole or in part with the business then engaged in by the Company. This Section shall not apply in the event of a termination by the Executive for good reason or a termination by the Company without cause.

Employment Agreement - Peter A. Hannouche

On August 2, 2012, the Company entered into an employment agreement (the “Employment Agreement”) with Peter A. Hannouche (the “Executive”) with the same terms and conditions of the Employment Agreement with William A. Lambos.

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Employment Agreement - Scot L. Johnson

On August 24, 2012, the Company entered into an employment agreement (the “Employment Agreement”) with Scot Johnson (the “Executive”). Under the Employment Agreement, the Company acquired from the Executive all of the Executive’s shares of common stock in Psoria-Shield Inc., a Florida corporation, in exchange for 3,005,000 shares of $0.001 par value common stock of the Company, the Company hereby employs the Executive, and the Executive hereby accepts such employment, upon the terms and conditions stated herein (1) The Executive is engaged to serve as the Chief Executive Officer of the Company’s subsidiary Psoria-Shield Inc, (2) The Executive’s employment under this Agreement shall commence on the date hereof and shall continue in effect until July 31, 2015. the Executive understands that he is an at-will Executive, and that the Company may terminate his employment at any time (3) The Company shall pay to the Executive a base annual salary of $150,000, subject to increase, but not decrease, from time to time by the Board of Directors of the Company, provided other benefits and retirement plans (4) If at any time on or before August 31, 2015 the employment of the Executive is terminated by the Executive other than for good reason, or by the Company for cause, then the Company shall pay to the Executive any compensation earned but not paid to the Executive prior to the effective date of such termination (5) The Executive covenants and agrees that during the term of the Executive's employment, whether pursuant to this Agreement, any renewal hereof, or otherwise, and for a period of two years (the “Restricted Period”) after the later of the expiration of this Agreement or the termination of his employment with the Company, in the State(s) in which the Company conducts business as of the Executive's termination of employment, he will not, directly or indirectly (through one or more intermediaries), whether individually, or as an officer, director, agent, shareholder of 5% or more of the applicable company’s outstanding equity shares, member, partner, joint venturer, investor (other than as a passive trader in publicly traded securities), consultant or otherwise, compete in whole or in part with the business then engaged in by the Company. This Section shall not apply in the event of a termination by the Executive for good reason or a termination by the Company without cause.

Operating Lease with a Related Party - WCUI

On December 20, 2010 the Company entered into a non-cancellable sub-lease for office space in Illinois with CADserv Corporation for $1,909.50 per month for a period of 12 months from January 1, 2011 through December 31, 2011.

On January 10, 2012 the Company renewed the non-cancellable sub-lease for office space in Illinois with CADserv Corporation with the same terms and condition for a period of 12 months from January 1, 2012 through December 31, 2012.

On December 19, 2012 the Company renewed the non-cancellable sub-lease for office space in Illinois with CADserv Corporation with the same terms and condition for a period of 12 months from January 1, 2013 through December 31, 2013.

Future minimum lease payments required under the non-cancelable operating lease are as follows:

Fiscal year ending September 30:
2013 (remainder of the year)		$	5,728
2014			5,728
		$	11,456

Operating Lease - CNS

On August 10, 2010 CNS entered into a non-cancellable sub-lease for office space of approximate 4,552 square feet of rentable area in Tampa, Florida with Teachers Insurance and Annuity Association of America for the benefit of its Separate Real Estate Account, a New York corporation ("Landlord"), effective December 1, 2010, for a period of 65 months from December 1, 2010 through April 30, 2016.  On August 10, 2010, in conjunction with the signing of the lease, CNS deposited (i) $11,364.82 representing one (1) month of base rent for the sixth (6^th) month of the Initial Term) and (ii) $36,939 representing the security deposit into a certificate of deposit as a security deposit upon execution.  The certificate of deposit is forfeitable to the landlord of the facility upon any event of default by CNS.

Future minimum lease payments inclusive of related tax required under the non-cancelable operating lease are as follows:

Fiscal year ending September 30:
2013 (remainder of the year)		$	36,176
2014			147,958
2015			152,402
		$	336,536

Deferred Rent

To induce CNS to enter into the operating lease for a period of 65 months the Landlord granted free rent for the first five (5) months of the occupancy. The first five (5) month cumulative rent expense is recognized on a straight-line basis over the duration of the initial lease term of 65 months.

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Operating Lease - PSI

On January 4, 2011 the Company entered into a non-cancellable lease for office space of approximately 3,050 square feet of rentable area in aggregate in Tampa, Florida with a third party for a period of 12 months from the date of signing at $3,000 per month plus tax and common charges.

On January 4, 2012 the Company renewed the non-cancellable lease for an additional 12 months expiring January 3, 2013 with the same terms and conditions.

On January 4, 2013 the Company renewed the non-cancellable lease for an office space of approximately 2,000 square feet of rentable area for an additional 12 months expiring January 3, 2014 at $2,000 per month plus tax and common charges.

Future minimum lease payments inclusive of related tax required under the non-cancelable operating lease are as follows:

Fiscal year ending September 30:
2013 (remainder of the year)		$	6,420
2014			6,420
		$	12,840

Note 12 – Stockholders’ Equity (Deficit)

Shares Authorized

Upon formation the total number of shares of all classes of stock which the Company is authorized to issue is Seventy Five Million (75,000,000) shares of which Seventy Five Million (75,000,000) shares shall be Common Stock, par value $.001 per share.

Common Stock

Sale of Common Stock or Equity Units

On March 8, 2012 the Company issued (i) 95,000 shares of its common stock and (ii) warrants to purchase 190,000 shares of common stock with an exercise price of $0.50 per share expiring five (5) years from the date of issuance. The units were sold at $0.50 per unit consisting one common share and the warrant to purchase two (2) common shares for an aggregate of $47,500, $22,848 and $24,652 of which were allocated as the relative fair value of the common stock and warrants, respectively.

On March 15, 2012 the Company issued (i) 75,000 shares of its common stock and (ii) warrants to purchase 75,000 shares of common stock with an exercise price of $0.75 per share expiring five (5) years from the date of issuance. The units were sold at $0.75 per unit consisting of one common share and a warrant to purchase one (1) common share for an aggregate of $56,250, $36,450 and $19,800 of which were allocated as the relative fair value of the common stock and warrants, respectively.

On April 19, 2012 the Company issued (i) 14,545 shares of its common stock and (ii) warrants to purchase 14,545 shares of common stock with an exercise price of $1.65 per share expiring five (5) years from the date of issuance. The units were sold at $1.10 per unit consisting of one common share and a warrant to purchase one (1) common share for an aggregate of $16,000, $ 11,088 and $                            4,912 of which were allocated as the relative fair value of the common stock and warrants, respectively.

On May 9, 2012 the Company issued (i) 9,091 shares of its common stock and (ii) warrants to purchase 9,091 shares of common stock with an exercise price of $2.16 per share expiring five (5) years from the date of issuance. The units were sold at $1.10 per unit consisting of one common share and a warrant to purchase one (1) common share for an aggregate of $10,000, $ 7,250 and $2,750 of which were allocated as the relative fair value of the common stock and warrants, respectively.

On May 14, 2012 the Company issued (i) 18,182 shares of its common stock and (ii) warrants to purchase 18,182 shares of common stock with an exercise price of $2.25 per share expiring five (5) years from the date of issuance. The units were sold at $1.10 per unit consisting of one common share and a warrant to purchase one (1) common share for an aggregate of $20,000, $14,600 and $5,400 of which were allocated as the relative fair value of the common stock and warrants, respectively.

Between May 21, 2012 and May 25, 2012 the Company issued (i) 112,955 shares of its common stock and (ii) warrants to purchase 112,955 shares of common stock with an exercise price of $2.31 per share expiring five (5) years from the date of issuance. The units were sold at $1.10 per unit consisting of one common share and a warrant to purchase one (1) common share for an aggregate of $124,251, $ 91,200 ($0.81 per common share) and $ 33,051 ($0.29 per warrant share) of which were allocated as the relative fair value of the common stock and warrants, respectively.

On September 25, 2012 the Company issued (i) 336,667 shares of its common stock and (ii) warrants to purchase 336,667 shares of common stock with an exercise price of $0.45 per share expiring five (5) years from the date of issuance. The units were sold at $0.30 per unit consisting of one common share and a warrant to purchase one (1) common share for an aggregate of $101,000, $69,589 and $31,411 of which were allocated as the relative fair value of the common stock and warrants, respectively.

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On September 25, 2012, four (4) shareholders exercised warrants to purchase 240,000 share of common stock with exercise price $0.01 per share for an aggregate of $2,400.

On November 29, 2012 the Company issued a total of 1,447,550 shares of its common stock at $0.10 per share for an aggregate of $144,755 in cash.

Between December 4, 2012 and December 29, 2012 the Company sold a total of 520,999 equity units consisting of one (1) common share and a warrant to purchase one (1) common share with an exercise price of $0.45 per share expiring five (5) years from the date of issuance at $0.30 per unit or $156,300 in cash, $108,786 ($0.21 per common share) and $47,514 ($0.09 per warrant share) of which were allocated as the relative fair value of the common stock and warrants, respectively.

During the quarter ended December 31, 2012, warrants to purchase 1,777,000 shares with an exercise price of $0.01 per share were exercised by shareholders for an aggregate of $17,770 in cash.

During the quarter ended March 31, 2013 the Company sold 3,096,603 equity units consisting of one (1) common share and a warrant to purchase one (1) common share with an exercise price of $0.45 per share, expiring five (5) years from the date of issuance, at $0.30 per unit or $928,980; $651,216 ($0.21 per common share) and $277,764 ($0.09 per warrant share) were allocated as the relative fair value of the common stock and warrants, respectively.

During the quarter ended March 31, 2013, warrants to purchase 80,000 shares with an exercise price of $0.01 per share were exercised by shareholders for an aggregate of $800 in cash.

During the quarter ended June 30, 2013 the Company sold 601,668 equity units consisting of one (1) common share and a warrant to purchase one (1) common share with an exercise price of $0.45 per share, expiring five (5) years from the date of issuance, at $0.30 per unit or $180,500; $126,109 ($0.21 per common share) and $53,789 ($0.09 per warrant share) were allocated as the relative fair value of the common stock and warrants, respectively.

On May 9, 2013 the Company sold 40,000 equity units consisting of one (1) common share and a warrant to purchase one (1) common share with an exercise price of $1.00 per share, expiring five (5) years from the date of issuance, at $0.50 per unit or $20,000; $14,740 ($0.37 per common share) and $5,220 ($0.13 per warrant share) were allocated as the relative fair value of the common stock and warrants, respectively.

On April 19, 2013, the placement agent exercised its warrant to purchase 59,201 shares of the Company’s common stock with an exercise price of $0.30 per share, on a cashless basis, per the placement agent agreement, and the Company issued 44,643 shares of its common stock to the placement agent.

On May 7, 2013, warrants to purchase 100,000 shares with an exercise price of $0.01 per share were exercised by a shareholder for $1,000 in cash.

On May 29, 2013, warrants to purchase 100,001 shares with an exercise price of $0.45 per share were exercised by a shareholder for $45,000 in cash.

Issuance of Common Stock or Equity Units to Parties Other Than Employees for Acquiring Goods or Services

On March 13, 2012, the Company entered into a consulting agreement (the "Consulting Agreement") with a Consultant (the "Consultant”) for a period of one (1) year from the date of signing whereby the Company agreed to retain the Consultant and the Consultant agreed to identify possible sources of working capital for the Company.  As consideration for the services, the Company granted (i) 50,000 shares of its common stock and (ii) options to purchase 50,000 shares of common stock with an exercise price of $0.44 per share expiring five (5) years from the date of issuance to the Consultant.  The common shares and warrants are earned ratably over the term of the Consulting Agreement, every three (3) months, and the unearned shares are forfeitable in the event of nonperformance by the Consultant. Pursuant to Paragraph 505-50-30-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the date of issuance and no entry should be recorded.  12,500 common shares and an option to purchase 12,500 common shares with an exercise price of $0.44 per share each are to be earned on a quarterly basis. For the quarter ended June 30, 2012, 12,500 common shares were earned and valued at $1.10 per share, then PPM price, or $13,750 and the option to purchase 12,500 common shares was earned and valued at $3,565.  For the quarter ended September 30, 2012, 12,500 common shares were earned and valued at $0.30 per share, then PPM price, or $3,750 and option to purchase 12,500 common shares was earned and valued at $3,565.  For the quarter ended December 31, 2012, 12,500 common shares were earned and valued at $0.30 per share, then PPM price, or $3,750 and option to purchase 12,500 common shares was earned and valued at $3,565.  For the quarter ended March 31, 2013, 12,500 common shares were earned and valued at $0.30 per share, then PPM price, or $3,750 and option to purchase 12,500 common shares was earned and valued at $3,570.

On August 2, 2012, the Company consummated the Exchange Agreement and acquired all of the issued and outstanding limited liability company interests in CNS for and in consideration of the issuance of 7.3 million shares of the Company’s common stock pursuant to the Exchange Agreement.

On August 24, 2012, the Company consummated the share exchange and acquired all of the issued and outstanding shares of stock in PSI for and in consideration of the issuance of 7,686,797 shares of its common stock pursuant to the Exchange Agreement.

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On September 11, 2012, the Company entered into a consulting agreement (the "Consulting Agreement") with a consulting firm (the "Consultant”). Under the terms and conditions of the Consulting Agreement, the Company agreed to retain the Consultant and the Consultant agreed to identify possible sources of working capital for the Company for a period of one (1) year from the date of signing.  As consideration for the services, the Company would pay the consultant monthly for four (4) terms: (i) cash of $8,000 each month for the first term of three (3) months; grant 35,000 common shares monthly for the first term of three (3) months to the Consultant. (ii) cash of $10,000 each month for the second term of three (3) months; grant 30,000 common shares monthly for the second term of three (3) months. (iii) cash of $17,000 each month for the third term of three (3) months; grant 25,000 common shares monthly for the third term of three (3)  months. (iv) cash of $20,000 each month for the fourth term of three (3) months; grant 20,000 common shares monthly for the fourth term of three (3) months. For the quarter ended September 30, 2012, the Company paid $8,000 in cash and issued 35,000 common shares valued at $0.38 per share, or $13,300. On October 15, 2012 the Consultant and the Company agreed to terminate the Consulting Agreement. For the period from October 1, 2012 through October 15, 2012, the Company did not pay any cash to the Consultant and issued 70,000 common shares in aggregate which were valued at $0.43 per share, or $30,100.

On October 26, 2012, the Company entered into a Placement Agreement ("Placement Agreement") with Security Research Associates, Inc. ("SRA" or the "Placement Agent")) that SRA was engaged during the engagement period commencing on the date of this Placement Agreement and ending on the earlier to occur of May 31, 2013 or the termination of this Agreement (“Engagement Period”), as exclusive placement agent on a "best-efforts" basis in connection with a proposed private placement of securities to be issued by the Company in accordance with the proposed terms. The Company agrees to pay to SRA a transaction fee (the "Transaction Fee") consisting of (i) 8% (eight percent) of the gross proceeds from the Financing received by the Company from all investors (the "Investors"), and (ii) 5 year Warrants (the "Warrant") to acquire a number of shares of the Company's Common Shares equal to 8% (eight percent) of the aggregate gross proceeds from the Financing received by the Company divided by the effective price per share of the Company's common shares paid by all of the Investors in the Financing received by the Company at closing (the "SRA Warrants"). The Transaction Fee shall be payable with respect to any Financing consummated during the Engagement Period and also with respect to any similar financing consummated within 12 months of the end of the Engagement Period. The SRA Warrants issued by the Company pursuant to this Placement Agreement will have an exercise price which will be the same as the price of such warrants issued to the Investors in the Financing. SRA Warrants issued pursuant to the Placement Agreement shall have piggyback registration rights, will include customary adjustments in the event of stock dividends and/or stock splits, reclassifications, reorganizations and/or business combinations involving the Company, will have a "cashless exercise" provision and, in the event Investors receive warrants, will contain such additional rights as are contained in the warrants issued to the Investors. On April 19, 2013, the Company issued a warrant to purchase 59,201 shares of the Company’s common stock with an exercise price of $0.30 per share to the Placement Agent. The Company estimated the relative fair value of the warrant at $9,289 at the date of issuance using the Black-Scholes Option Pricing Model. The Placement Agent exercised its warrant to purchase 59,201 shares of the Company’s common stock, on a cashless basis, on April 19, 2013, and the Company issued 44,643 shares of its common stock to the Placement Agent pursuant to the Placement Agreement.

On February 26, 2013, the Company entered into a Consulting agreement (the "Consulting Agreement"), with a Consultant (the "Consultant”). Under the terms and conditions of the Consulting Agreement, the Company agreed to retain the Consultant and the Consultant agreed to identify possible sources of working capital for the Company for a period of one (1) year from the date of signing.  As consideration for services, the Company would (i) pay $20,000 in cash; and (ii) grant (a) 550,000 shares of its common stock and (b) an option to purchase 300,000 shares of common stock with an exercise price of $0.30 per share, expiring five (5) years from the date of issuance, to the Consultant. The Company ratably recognizes the $20,000 payment in cash over the term of the Consulting Agreement.  550,000 common shares were valued at $0.30 per share, the PPM price, or $165,000, and the option to purchase 300,000 shares of common stock were valued at $47,490, or $212,490 in aggregate, all of which were expensed as consulting fees upon signing of the agreement as these common shares and warrants were issued upon signing the agreement and are fully vested and non-forfeitable.

On March 17, 2013, the Company entered into a Financing Service agreement (the "Financing Service Agreement"), with a Consultant (the "Consultant”). Under the terms and conditions of the Financing Service Agreement, the Company agreed to retain the Consultant and the Consultant agreed to identify possible sources of working capital for the Company for a period of one (1) year from the date of signing.  As consideration for services, the Company would grant (i) 600,000 shares of its common stock and (ii) an option to purchase 400,000 shares of its common stock with an exercise price of $0.30 per share expiring five (5) years from the date of issuance to the Consultant.  600,000 common shares were valued at $0.30 per share, the PPM price, or $180,000 and the option to purchase 400,000 shares of common stock were valued at $63,080, or $243,080 in aggregate, all of which were expensed as consulting fees upon signing of the agreement as these common shares and warrants are issued upon signing the agreement and are fully vested and non-forfeitable.

On April 9, 2013, the Company issued 50,000 shares of its common stock to a consultant for consulting services. These fully vested and non-forfeitable shares were valued at $0.30 per share, the PPM price, or $15,000, all of which were expensed as consulting fees.

On April 9, 2013, the Company issued 30,000 shares of its common stock to a foundation. These fully vested and non-forfeitable shares were valued at $0.30 per share, the PPM price, or $9,000, which were recorded as charitable contribution.

Stock Options

2010 Non-Qualified Stock Option Plan (“2010 Option Plan”)

On December 22, 2010, effective retroactively as of June 30, 2010, the Company’s board of directors approved the adoption of the “2010 Non-Qualified Stock Option Plan” (“2010 Option Plan”) by unanimous consent.  The 2010 Option Plan was initiated to encourage and enable officers, directors, consultants, advisors and key employees of the Company to acquire and retain a proprietary interest in the Company by ownership of its common stock.  A total of 7,500,000 of the authorized shares of the Company’s common stock may be subject to, or issued pursuant to, the terms of the plan.

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Pursuant to Section 7 - Adjustments or Changes in Capitalization of the Stock Option Plan, the number of shares to be received upon the exercise of the option and the exercise price to be paid for a share hereinafter sometimes referred to as “Exercise Price” which may be adjusted from time to time as hereinafter as follows:

7.1

In the event that the outstanding Common Shares of the Company are hereafter changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of merger, consolidation, other reorganization, recapitalization, reclassification, combination of shares, stock split-up or stock dividend:

A.

Prompt, proportionate, equitable, lawful and adequate adjustment shall be made of the aggregate number and kind of shares subject to Stock Options which may be granted under the Plan, such that the Optionee shall have the right to purchase such Common Shares as may be issued in exchange for the Common Shares purchasable on exercise of the NQSO had such merger, consolidation, other reorganization, recapitalization, reclassification, combination of shares, stock split-up or stock dividend not taken place;

B.

Rights under unexercised Stock Options or portions thereof granted prior to any such change, both as to the number or kind of shares and the exercise price per share, shall be adjusted appropriately, provided that such adjustments shall be made without change in the total exercise price applicable to the unexercised portion of such NQSO’s but by an adjustment in the price for each share covered by such NQSO’s; or

C.

Upon any dissolution or liquidation of the Company or any merger or combination in which the Company is not a surviving corporation, each outstanding Stock Option granted hereunder shall terminate, but the Optionee shall have the right, immediately prior to such dissolution, liquidation, merger or combination, to exercise his NQSO in whole or in part, to the extent that it shall not have been exercised, without regard to any installment exercise provisions in such NQSO.

7.2

The foregoing adjustments and the manner of application of the foregoing provisions shall be determined solely by the Committee, whose determination as to what adjustments shall be made and the extent thereof, shall be final, binding and conclusive. No fractional Shares shall be issued under the Plan on account of any such adjustments.

The Company’s policy is to recognize compensation cost for awards with only service conditions and a graded vesting schedule on a straight-line basis over the requisite service period for the entire award.  Additionally, the Company’s policy is to issue new shares of common stock to satisfy stock option exercises.

March 13, 2012 Issuance

On March 13, 2012, the Company issued an option to purchase 50,000 shares of common stock to the consultant with an exercise price of $0.44 per share as part of the future professional services.

The Company estimated the fair value of the stock options on the date of grant using the Black-Scholes Option Pricing Model with the following weighted-average assumptions:

						March 13, 2012
Expected life (year)							5
Expected volatility (*)							64.53	%
Expected annual rate of quarterly dividends							0.00	%
Risk-free rate(s)							0.99	%

*

As a newly formed entity it is not practicable for the Company to estimate the expected volatility of its share price.  The Company selected five (5) comparable public companies listed on NYSE MKT and NASDAQ Capital Market within nutritional supplements industry which the Company plans to engage in to calculate the expected volatility.  The Company calculated those five (5) comparable companies’ historical volatility over the expected life and averaged them as its expected volatility.

The estimated fair value of the stock options was $14,265 on the date of grant, of which $3,566 were amortized on a quarterly basis over the term of the period of service.

August 24, 2012 Issuance of WCUI Stock Options for Conversion of PSI Stock Options

On August 24, 2012, the Company converted PSI stock options to WCUI stock options and issued certain options to purchase 1,400,000 shares of its common stock in aggregate with the original terms and conditions to PSI option holders upon the acquisition of PSI. The detailed PSI Stock Options Issuance history is as follows:

On December 22, 2010, PSI granted (i) options to purchase 450,000 shares of its common stock with an exercise price of $1.00 per share expiring ten (10) years from the date of grant to its employees for their services; and (ii) an option to purchase 300,000 shares of its common stock with an exercise price of $1.00 per share expiring ten (10) years from the date of grant to a consultant and a member of its Medical Advisory Board as part of his professional services.

40

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On February 22, 2012, PSI granted (i) options to purchase 410,000 shares of its common stock with an exercise price of $2.00 per share expiring ten (10) years from the date of grant to its employees for their services; and (ii) an option to purchase 240,000 shares of its common stock with an exercise price of $2.00 per share expiring ten (10) years from the date of grant to a consultant and a member of its Medical Advisory Board as part of his professional services.

Summary of the Company’s Stock Option Activities

The table below summarizes the Company’s stock option activities: