UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________

 

Amendment No. 3 to FORM 8-K (8-KA3)

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CURRENT REPORT

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

 

Date of Report (Date of earliest event reported):    August 2, 2012

 

WELLNESS CENTER USA, INC.

 (Exact name of registrant as specified 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)

_______________

 


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.below):


        .

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)


        .

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)


        .

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))


        .

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

  

  










Item 1.01 Entry into a Material Definitive Agreement.

On May 30, 2012, the Company entered into an Exchange Agreement (“CNS 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 CNS Exchange Agreement.

The CNS Exchange Agreement is included as Exhibit 2.1 to this Current Report and is the legal document that governs the terms of the share exchange described therein and the other actions contemplated by the CNS Exchange Agreement.   The discussion of the CNS Exchange Agreement set forth herein is qualified in its entirety by reference to Exhibit 2.1.

On June 21, 2012, the Company entered into an Exchange Agreement (“PSI Exchange Agreement”) to acquire all of the issued and outstanding shares of stock in Psoria-Shield Inc. (“PSI”), a Tampa, Florida-based developer and manufacturer of 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 pursuant to the PSI Exchange Agreement.

The PSI Exchange Agreement is included as Exhibit 2.2 to this Current Report and is the legal document that governs the terms of the share exchange described therein and the other actions contemplated by the PSI Exchange Agreement.   The discussion of the PSI Exchange Agreement set forth herein is qualified in its entirety by reference to Exhibit 2.2.

Item 2.01 Completion of Disposition or Acquisition of Assets.

On August 2, 2012, the Company consummated the CNS 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 its common stock pursuant to the CNS Exchange Agreement.   The 7.3 million common shares issued in connection with the share exchange represent 32.2% of the 22,704,773 shares of issued and outstanding common stock of the Company as of the closing of the share exchange under the CNS Exchange Agreement.   CNS is now operated as a wholly-owned subsidiary of 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 PSI Exchange Agreement.   The 7,686,797 common shares issued in connection with the share exchange represent 25.3% of the 30,391,570 shares of issued and outstanding common stock of the Company as of the closing of the share exchange under the PSI Exchange Agreement.    PSI is now operated as a wholly-owned subsidiary of the Company.

As noted in Item 3.02, the 7.3 million shares of common stock issued in connection with the CNS share exchange, as well as the 7,686,797 shares of common stock issued in connection with the PSI share exchange, were issued in reliance upon the exemption from registration requirements under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(2) thereof and Regulation D thereunder.   As such, the shares of our common stock issued in these share exchange transactions may not be offered or sold unless they are registered under the Securities Act or qualify for an exemption from the registration requirements under the Securities Act.    

Pursuant to Item 2.01(f) of Form 8-K, the information that would be required if we were filing a general form of registration of securities on Form 10 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) upon consummation of the transaction follows.   The information below corresponds to the item numbers of Form 10 under the Exchange Act.  

Certain statements contained in this Current Report that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Such statements include statements regarding the share exchange and anticipated future results following the closing of the share exchange.  Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts.  They often include words like “believe,” “expect,” “anticipate,” “estimate,” and “intend” or future or conditional verbs such as “will,” “would,” “should,” “could,” or “may.”  While it is not possible to identify all factors, risks and uncertainties that might relate to, affect or arise from the share exchange, and which might cause actual results to differ materially from expected results, such factors, risks and uncertainties include difficulties in integrating operations following the share exchange, difficulties in manufacturing and delivering products and services, potential market rejection of products or services, increased competitive pressures, changes in general economic conditions, legislative and regulatory changes that adversely affect the business in which the Company is engaged, changes in the securities markets and other factors, risks and uncertainties disclosed from time to time in documents that the Company files with the SEC.



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ITEM 1. BUSINESS.

Background.


Wellness Center USA, Inc. (the “Company”) was incorporated in the State of Nevada on June 30, 2010.  Since that date, we have been engaged in the development of an internet online store business to market customized vitamins and other nutritional supplement solutions and have expanded into additional businesses within the healthcare and medical sectors through two acquisitions, CNS-Wellness LLC, and Psoria-Shield Inc. Our online store business “aminofactory.com” is a web based online store designed to market nutritional supplements to the sports industry and health minded public. CNS-Wellness is a cognitive neuroscience company specializing in the treatment of brain-based behavioral health disorders including developmental, emotional and stress-related problems. Psoria-Shield is a developer and manufacturer of Ultra Violet (UV) phototherapy devices for the treatment of skin diseases such as; psoriasis, eczema, vitiligo, and others.


Aminofactory.com


Our intended products will be sold through our registered website www.aminofactory.com , presently under final development. Our planned product line shall consist of Amino acid and other nutritional supplements and our target market will be the sports industry and the general health minded public. Once our website is fully developed, our product portfolio shall be expanded to include a wider range of supplements, including customized formulas uniquely tailored to suite an individual’s needs. A customer logging into our www.aminofactory.com website will be able to select an Amino acid supplement and/or nutritious formula combination suitable to his/her needs. Once a suitable supplement solution has been chosen by the client, the order shall be automatically placed for processing in our supplier’s factory. Product will be shipped directly by our supplier to the client, within seven business days.


Our supplements will be produced by unaffiliated third party manufactures and/or product fulfillment suppliers, specializing in Amino nutritional supplement production. We have currently established a non-binding and non-exclusive Value Added (VAD) relationship with one such producer and product fulfillment provider, the New Jersey based Protein Factory, to support our initial offering. Supplements produced for us can be also provided to our competitors by Protein Factory or perhaps other manufacturers. However, as a VAD of Protein Factory, we are able to specifically select our product portfolio and market it through our website with our custom packaging and pricing; under the Protein Factory or our own amino factory label. Following successful conclusion of our website development, we will have the opportunity to execute a binding VAD agreement with Protein Factory.


The CNS Share Exchange.   

On May 30, 2012, we entered into an 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, we consummated the CNS share exchange 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 common stock in the Company pursuant to the CNS Exchange Agreement.  CNS is now operated as a wholly-owned subsidiary of the Company.

Description of CNS.

CNS was organized in the State of Florida on May 26, 2009. CNS provides alternative, scientific approaches to mental health and wellness. It assesses dis-regulations in brain function via EEG-based brain mapping along with other recognized behavioral health assessment tools, such as neuropsychological examinations. Its trained therapists then assist the client to restore brain function to within normative limits using leading–edge modalities, such as LENS, Neurofield EMS therapy, traditional neurofeedback, hemoencephalography, transcranial direct current stimulation, cranial alternating current stimulation, photonic stimulation and heart variability training. The client is periodically assessed throughout and following completion of the treatment program. This enables the clinical team to form treatment protocols as well as demonstrate the effectiveness of the treatment through a comparison of pre-vs. post-treatment assessments.

CNS treatment modalities, when combined in specific manners that are proprietary to CNS, contribute to restoring the brain’s ability to regulate itself within normative limits. CNS methods are noninvasive and safe, and achieve their goals without the use of prescription pharmaceuticals. This technology helps the client to overcome difficulties with mental health and/or developmental barriers to successful daily functioning, and thereby to experience a higher quality of life.

CNS services appear to have been beneficial to clients, without demonstrable harmful side effects or safety  issues.  CNS has serviced approximately 485 clients since commencement of operations in 2009.  There can be no assurance that the experience to date is indicative of results that might be expected from an expanded sample or base.  



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The PSI Share Exchange.   

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

On August 24, 2012, we consummated the PSI 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 common stock in the Company pursuant to the PSI Exchange Agreement.  PSI is now operated as a wholly-owned subsidiary of the Company.

Description of PSI.

PSI was incorporated under the laws of the State of Florida on June 17, 2009.  It is a medical device design and manufacturing company.  It designs, develops and markets a targeted ultraviolet (“UV”) phototherapy device called the Psoria-Light.   The Psoria-Light is designated for use in targeted PUVA photochemistry and UVB phototherapy and is designed to treat certain skin conditions including; psoriasis, vitiligo, atopic dermatitis (eczema), seborrheic dermatitis, and leukoderma.   PSI intends to enter into agreements with third parties, in the United States and internationally, for the manufacture of component parts that make up the Psoria-Light and to license its proprietary technology to third parties domestically and in selected foreign markets.  

The Psoria-Light consists of three components: a base console, a color display with touchscreen control, and a hand-held delivery device with a conduit (or tether) between the handheld device and the base console.  PSI requires clearance by the United States Food and Drug Administration (“FDA”) to market and sell the device in the United States as well as permission from TUV SUD America Inc., PSI’s Notified Body, to affix the CE mark to the Psoria-Light in order to market and sell the device in countries of the European Union.   PSI submitted a 510(k) application with the FDA for marketing clearance of the device in the United States (application number K103540).   To obtain FDA clearance and permission to affix the CE mark, PSI was required to conduct EMC and electrical safety testing, which it completed in the second quarter of 2011.  PSI also developed an ISO 13485 compliant quality system for the Psoria-Light which was audited in the fourth quarter of 2011.  PSI received FDA clearance on February 11, 2011 (no. K103540) and was granted permission to affix the CE mark on November 10, 2011.  

Psoria-Light treatment appears to have been beneficial to clients, without demonstrable harmful side effects or safety issues,  and PSI has serviced approximately 100 clients since PSI started to sell the device in January 2012.  There can be no assurance that the experience to date is indicative of results that might be expected from an expanded sample or base.  

ITEM 1A. RISK FACTORS.

An investment in our securities involves an exceptionally high degree of risk and is extremely speculative in nature.  The risks described below are the ones we believe are most important for you to consider. These risks are not the only ones that we face. If events anticipated by any of the following risks actually occur, our business, operating results or financial condition could suffer and the price of our common stock could decline.

Risks Relating To Our Business and Financial Condition.

WE ONLY COMMENCED OPERATIONS UPON ACQUISITIONS OF CNS AND PSI IN AUGUST WITH LIMITED OPERATING HISTORY, AND AN INVESTMENT IN US IS CONSIDERED A HIGH RISK INVESTMENT WHEREBY YOU COULD LOSE YOUR ENTIRE INVESTMENT.


The Company commenced operations in August 2012 upon acquisitions of CNS and PSI with limited operating history. The Company is currently operating at a loss, and there is no assurance that the Company will ever be able to operate profitably. If we cannot operate profitably, you could lose your entire investment. We may not generate sufficient revenues in the next twelve months to support our operations and therefore may operate solely on the cash we raise from investments.


WE HAVE RECEIVED A GOING CONCERN OPINION FROM OUR AUDITORS AND WE ARE CURRENTLY OPERATING AT A LOSS, WHICH RAISES SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.


We have received a “Going Concern” opinion from our auditors. As reflected in the accompanying consolidated financial statements, the Company had just begun operations in August 2012, had an accumulated deficit at September 30, 2012, a net loss and net cash used in operating activities for the fiscal year then ended, respectively. These factors raise substantial doubt about the Company’s ability to continue as a going concern.




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While the Company is attempting to 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 generate sufficient revenues and in its ability to raise additional funds, 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.


IT IS MOST LIKELY THAT WE WILL NEED TO SEEK ADDITIONAL FINANCING THROUGH SUBSEQUENT FUTURE PRIVATE OFFERING OF OUR SECURITIES.

Because the Company does not currently have any financing arrangements, and may not be able to secure favorable terms for future financing, the Company may need to raise capital through the sale of its common stock. The sale of additional equity securities will result in dilution to our stockholders.

WE DO NOT HAVE A MAJORITY OF INDEPENDENT DIRECTORS, WHICH LIMITS OUR ABILITY TO ESTABLISH EFFECTIVE INDEPENDENT CORPORATE GOVERNANCE PROCEDURES AND INCREASES THE CONTROL OF MANAGEMENT.   

  The Company has six directors, two (2) of whom are independent; accordingly, we cannot establish board committees with independent members to oversee certain functions such as compensation or audit issues. Until we have majority of our board of directors being independent members, if ever, there will be limited oversight of our management’s decisions and activities and little ability of stockholders to challenge or reverse those activities and decisions, even if they are not in the best interests of stockholders.

IN THE FUTURE WE MAY INCUR PRODUCT LIABILITY CLAIMS, WHICH COULD INCREASE OUR COSTS AND/OR ADVERSELY AFFECT OUR BUSINESS, REPUTATION, FINANCIAL CONDITION OR RESULTS OF OPERATIONS.

Currently we are a development stage company and have no products requiring liability insurance. However, in the future we intend to obtain insurance coverage because if we become a retailer, formulator and/or manufacturer of products designed for human consumption, we will be subject to product liability claims if the use of our products, whether manufactured by us or by our third-party manufacturer, were to be alleged to have resulted in illness or injury or if our products were to include inadequate instructions or warnings. Our products will consist of vitamins, minerals, herbs and other ingredients that are classified as foods or dietary supplements and generally are not subject to pre-market regulatory approval or clearance in the U.S. by the U.S. Food and Drug Administration (FDA) or other governmental authorities. Our products could contain spoiled or contaminated substances, and some of our products contain ingredients that do not have long histories of human consumption. Previously unknown adverse reactions resulting from human consumption of these ingredients could occur. In addition, some of our products may be produced by third-party manufacturers. If we were a distributor of products manufactured by third parties, we may also be liable for various product liability claims for products that we do not manufacture. We could be subject to product liability claims, including among others, that our products include insufficient instructions for use or inadequate warnings concerning possible side effects or interactions with other substances. Any product liability claim against us could result in increased costs and, therefore, adversely affect our reputation with our customers, which in turn could adversely affect our business, financial condition or results of operations.

UNFAVORABLE PUBLICITY OR CONSUMER ACCEPTANCE OF OUR PRODUCTS OR OF NUTRITIONAL SUPPLEMENTS GENERALLY COULD REDUCE OUR SALES.

We will be highly dependent upon consumer acceptance of the safety, efficacy and quality of our products, as well as similar products distributed by other companies. Consumer acceptance of products can be significantly influenced by scientific research or findings, national media attention and other publicity about product use. A product may be received favorably, resulting in high sales associated with that product that may not be sustainable as consumer preferences change. In addition, recent studies have challenged the safety or benefit of certain nutritional supplements and dietary ingredients. Future scientific research or publicity could be unfavorable to our industry or any of our particular products and may not be consistent with earlier favorable research or publicity. A future research report or publicity that is perceived by our consumers as less than favorable or that question earlier favorable research or publicity could have a material adverse effect on our ability to generate revenue. Adverse publicity in the form of published scientific research, statements by regulatory authorities or otherwise, whether or not accurate, that associates consumption of our products or any other similar products with illness or other adverse effects, or that questions the benefits of our or similar products, or that claims that such products are ineffective could have a material adverse effect on our business, reputation, financial condition or results of operations.



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IF WE LOSE OR ARE UNABLE TO OBTAIN KEY PERSONNEL, OUR BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS COULD BE MATERIALLY ADVERSELY AFFECTED.

Our success depends to a significant degree upon the continued contributions of our executive officers, Andrew J. Kandalepas, William A. Lambos, Peter A. Hannouche and Scot L. Johnson. Although we have employment agreements with Mr. Lambos, Mr. Hannouche and Mr. Johnson, we cannot guarantee that any of them will remain affiliated with us. If any of our key personnel were to cease their affiliation with us, our operating results could suffer. Further, we do not maintain key person life insurance on any executive officer. If we lose or are unable to obtain the services of key personnel, our business, financial condition or results of operations could be materially and adversely affected.

AN UNEXPECTED INTERRUPTION OR SHORTAGE IN THE SUPPLY OR SIGNIFICANT INCREASE IN THE COST OF RAW MATERIALS COULD LIMIT OUR ABILITY TO MANUFACTURE OUR PRODUCTS, WHICH COULD REDUCE OUR SALES AND MARGINS.

To the extent we engage in relationships with contract manufacturers in the future, an unexpected interruption of supply or a significant increase in the cost of raw materials, whether to us or to our contract manufacturers for any reason, such as regulatory requirements, import restrictions, loss of certifications, disruption of distribution channels as a result of weather, terrorism or acts of war, or other events, could result in significant cost increases and/or shortages of our products. Our inability to obtain a sufficient amount of products or to pass through higher cost of products we offer could have a material adverse effect on our business, financial condition or results of operations.

IF WE EXPERIENCE PRODUCT RECALLS, WE MAY INCUR SIGNIFICANT AND UNEXPECTED COSTS AND DAMAGE TO OUR REPUTATION AND, THEREFORE, COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS.

To the extent we engage in product sales in the future, we may be subject to product recalls, withdrawals or seizures if any of the products we formulate, manufacture or sell are believed to cause injury or illness or if we are alleged to have violated governmental regulations in the manufacture, labeling, promotion, sale or distribution of our products. A recall, withdrawal or seizure of any of our products could materially and adversely affect consumer confidence in our brands and lead to decreased demand for our products. In addition, a recall, withdrawal or seizure of any of our products would require significant management attention, would likely result in substantial and unexpected expenditures and could materially and adversely affect our business, financial condition or results of operations.

COMPLYING WITH NEW AND EXISTING GOVERNMENT REGULATION, BOTH IN THE U.S. AND ABROAD, COULD SIGNIFICANTLY INCREASE OUR COSTS AND LIMIT OUR ABILITY TO MANUFACTURE OUR PRODUCTS.

The processing, formulation, manufacturing, packaging, labeling, advertising, distribution and sale of our products are subject to regulation by several U.S. federal agencies, including the FDA, the Federal Trade Commission, or FTC, the Postal Service, the Consumer Product Safety Commission, the Department of Agriculture and the Environmental Protection Agency, as well as various state, local and international laws and agencies of the localities in which our products are sold. Government regulations may prevent or delay the introduction or require the reformulation of our products.

The FDA regulates, among other things, the manufacture, composition, safety, labeling, marketing and distribution of dietary supplements (including vitamins, minerals, herbs, and other dietary ingredients for human use). The FDA may not accept the evidence of safety we present for new dietary supplements we wish to market, or they may determine that a particular dietary supplement or ingredient that we currently market presents an unacceptable health risk. If that occurs, we could be required to cease distribution of and/or recall supplements or products containing that ingredient.

The FDA may also determine that certain advertising and promotional claims, statements or activities are not in compliance with applicable laws and regulations and may determine that a particular statement is an unacceptable drug claim or an unauthorized version of a food or dietary supplement “health claim.” Failure to comply with FDA or other regulatory requirements could prevent us from marketing particular dietary supplement products or subject us to administrative, civil or criminal penalties.

The FTC exercises jurisdiction over the advertising of dietary supplements and has instituted numerous enforcement actions against dietary supplement companies for failing to have adequate substantiation for claims made in advertising or for using false or misleading advertising claims. The FTC routinely polices the market for deceptive dietary supplement advertising and accepts and reviews complaints from the public concerning such advertising.



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The FTC also regulates deceptive advertising claims and promotional offers of savings compared to “regular” prices. The National Advertising Division, or NAD, of the Council of Better Business Bureaus oversees an industry-sponsored self-regulatory system that permits competitors to resolve disputes over advertising claims, including promotions for savings off of regular prices. The NAD has no enforcement authority of its own but may refer promotions to the FTC that the NAD views as violating FTC guides or rules. Violations of these orders could result in substantial monetary penalties.

Additional or more stringent regulations of dietary supplements and other products have been considered from time to time. We are not able to predict the nature of such future laws, regulations, repeals or interpretations or to predict the effect additional governmental regulation would have on our business in the future. These developments could require reformulation of certain products to meet new standards, product recalls, discontinuation of production of certain products not amenable to reformulation, additional record-keeping requirements, increased documentation of the properties of certain products, additional or different labeling, additional scientific substantiation, adverse event reporting or other new requirements. Any such developments could increase our costs significantly, restrict our ability to sell our products, delay our ability to deliver products on time, result in customer migration to other suppliers, or otherwise have a material adverse effect on our business, financial condition and results of operations. For example, the Dietary Supplement and Nonprescription Drug Consumer Protection Act, requiring mandatory adverse event reporting for all dietary supplements and over-the-counter drugs sold in the U.S., was recently signed into law. This law could materially increase our record keeping and documentation costs. In addition, the FDA has issued revised final rules on Good Manufacturing Practice (GMP), creating new requirements for manufacturing, packaging or holding of dietary ingredients and dietary supplements. These regulations require dietary supplements to be prepared, packaged and held in compliance with stricter rules, and require quality control provisions similar to those in the drug GMP regulations. We or our third-party manufacturers may not be able to comply with the new rules without incurring additional expenses, which could be significant.

WE WILL OPERATE IN A HIGHLY COMPETITIVE INDUSTRY, AND OUR FAILURE TO COMPETE EFFECTIVELY COULD ADVERSELY AFFECT OUR MARKET SHARE, FINANCIAL CONDITION AND GROWTH PROSPECTS.

The U.S. vitamins and dietary supplements industry is a large and highly fragmented industry. Our potential competitors include specialty retailers, supermarkets, drugstores, mass merchants, multi-level marketing organizations, online merchants, mail-order companies and a variety of other participants in the industry. The principle elements of competition in the industry are price, selection and distribution channel offerings. We believe that the market is also highly sensitive to the introduction of new products, including various prescription drugs, which may rapidly capture a significant share of the market. In the U.S., we shall also compete for sales with heavily advertised national brands manufactured by large pharmaceutical and food companies, as well as other retailers. In addition, as some products gain market acceptance, we may experience increased competition for those products as more participants enter the market. Currently, we are not a manufacturer. To the extent that we become a manufacturer or engage third party manufacturers to produce our products, our manufacturing capabilities may not be adequate or sufficient to compete with large scale, direct or third-party manufacturers of nutritional supplements. Certain of our potential competitors are larger than us and have longer operating histories, larger customer bases, greater brand recognition and greater resources for marketing, advertising and product promotion. They may be able to secure inventory from vendors on more favorable terms, operate with a lower cost structure or adopt more aggressive pricing policies. In addition, our potential competitors may be more effective and efficient in introducing new products. We may not be able to compete effectively, and our attempt to do so may require us to increase marketing and/or reduce our prices, which may result in lower margins. Failure to effectively compete could adversely affect our market share, financial condition and growth prospects.

OUR FAILURE TO EFFICIENTLY RESPOND TO CHANGING CONSUMER PREFERENCES AND DEMAND FOR NEW PRODUCTS AND SERVICES COULD SIGNIFICANTLY HARM OUR PRODUCT SALES, INVENTORY MANAGEMENT AND CUSTOMER RELATIONSHIPS AND OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION COULD BE MATERIALLY AND ADVERSELY AFFECTED.

If we become successful, our continued success will depend, in part, on our ability to anticipate and respond to changing consumer trends and preferences. We may not be able to respond in a timely or commercially appropriate manner to these changes. Our failure to accurately predict these trends could negatively impact our inventory levels, sales and consumer opinion of us as a source for the latest products. The success of our new product offerings depends upon a number of factors, including our ability to:

·

accurately anticipate customer needs;

·

innovate and develop new products;

·

successfully commercialize new products in a timely manner;

·

competitively price our products;

·

procure and maintain products in sufficient volumes and in a timely manner; and

·

differentiate our product offerings from those of our competitors.



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If we do not introduce new products, make enhancements to existing products or maintain the appropriate inventory levels to meet customers demand in a timely manner, our business, results of operations and financial condition could be materially and adversely affected.

THE CURRENT GLOBAL ECONOMIC DOWNTURN OR RECESSION COULD ADVERSELY AFFECT OUR INDUSTRY AND, THEREFORE, RESTRICT OUR FUTURE GROWTH.

The current global economic downturn or recession could negatively affect our sales because many consumers consider the purchase of our products discretionary. We cannot predict the timing or duration of the economic slowdown or recession or the timing or strength of a subsequent recovery, worldwide, or in the specific end markets we serve. If the markets for our products significantly deteriorate due to the economic environment, our business, financial condition or results of operations could be materially and adversely affected.

IT IS LIKELY THAT WE WILL NEED TO SEEK ADDITIONAL FINANCING THROUGH FUTURE PRIVATE OFFERING OF OUR SECURITIES.

Because the Company does not currently have any financing arrangements, and may not be able to secure favorable terms for future financing, the Company may need to raise capital through the sale of its common stock. The sale of additional equity securities will result in dilution to our stockholders.

Risks Relating To the Acquisitions of CNS and PSI.

OUR DECISIONS TO ACQUIRE CNS AND PSI WERE BASED UPON ASSUMPTIONS WHICH MAY PROVE TO BE ERRONEOUS.

Our decision to acquire CNS was based upon assumptions regarding CNS’ operations and services, the potential market for CNS’ services and our ability to integrate CNS operations in a manner that would enable us to expand operations of the current clinic and to identify and develop additional clinics at locations to be determined. Our decision was based in part upon National Institute of Mental Health (“NIMH”) data indicating that in any given year an estimated 26.2 percent of Americans ages 18 and older suffer from a diagnosable mental disorder.  We assumed that such data suggested a potential client population that might benefit from CNS services.  We further assumed that additional potential CNS client populations would derive from individuals suffering from acquired brain injuries and children with developmental conditions associated with dis-regulations of the brain such as AD/HD, learning disorders, autism and Asperger’s disorder.  We assumed that CNS services could address these populations in the Tampa Bay-area, as well as other locations and that such services would be favorably perceived and accepted by such potential populations.

Our decision to acquire PSI was based upon assumptions regarding PSI’s operations and services, the potential market for the Psoria-Light and our ability to integrate PSI operations in a manner that would enable us to launch the marketing and sale of the Psoria-Light. Our decision was based in part upon 2009 statistics indicating that more than $11.25 billion is spent annually in the United States to treat psoriasis and National Psoriasis Foundation data indicating that psoriasis is known to affect 2% to 3% of the human population.  Surveys conducted by the National Psoriasis Foundation from 2003 to 2005 indicated that at least 50% of sufferers were receiving no treatment, that prescriptions were widely utilized, and that UV therapy was under-utilized.  We assumed that such data suggested a potential client population that might benefit from Psoria-Light treatments.  We further assumed that additional potential client populations would derive from individuals suffering from certain skin conditions including psoriasis, vitiligo, atopic dermatitis (eczema), seborrheic dermatitis, and leukoderma. We assumed that Psoria-Light treatments could address such populations in the Tampa Bay-area, as well as other locations and that such treatments would be favorably perceived and accepted by such potential populations.

Our assumptions regarding CNS and PSI may prove to be erroneous.  Each company is a small development stage company with a limited operating history. Each is currently operating at a loss, and there is no assurance that its business development plans and strategies will ever be successful, or that their respective products and services will be favorably perceived and accepted by our assumed potential client populations in the Tampa Bay-area or anywhere else.  CNS’ services appear to have been beneficial to clients, without demonstrable harmful side effects or safety issues. CNS has serviced approximately 485 clients since commencement of operations in 2009.   PSI’s Psoria-Light treatment appears to have been beneficial to clients, without demonstrable harmful side effects or safety issues, and it has serviced approximately 100 clients since PSI started to sell the device in January 2012.  There can be no assurance that the experience to date is indicative of results that might be expected from an expanded sample or base.

CNS PROVIDES ALTERNATIVE SCIENTIFIC APPROACHES TO MENTAL HEALTH AND WELLNESS THAT ARE NOVEL.

CNS’ success depends upon the acceptance by healthcare providers and clients of CNS’ treatment modalities as a preferred method of treatment for brain-based behavioral health disorders including developmental, emotional and stress-related problems. There can be no assurance that we will be able to achieve and maintain such market acceptance by healthcare providers or clients. We believe that market acceptance of CNS’ modalities will depend on many factors, including:



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·

the perceived advantages or disadvantages of CNS treatments compared to other alternative treatments and devices;

·

the safety and efficacy of the treatments;

·

the availability and success of other alternative treatments and devices;

·

the price of the treatments relative to alternative treatments and devices; and

·

our success in building an effective sales and marketing team and the effectiveness of our marketing strategies.

CNS’ alternative scientific approaches are novel and not widely used.  They may be considered to have certain advantages, including the following:

·

treats brain-based disorders by treating the very root of the problem (poor brain function), not by alleviating symptoms:;  

·

non-invasive, safe, scientifically based and yet very highly effective for many conditions; and

·

treatment allow for documenting ongoing improvements in the client's condition using specific and measurable results.

However, they may be considered to have certain disadvantages, including the following:

·

neurotherapy takes at least 20 or more treatments. As such, it is not an instant gratification fix;

·

it is limited (at present) to emotional, developmental and traumatic conditions; not helpful for neurogedenerative or neuropsychiatric conditions; and

·

insurance reimbursement is variable and hard to predict, however this appears to be improving.

CNS’ services appear to have been beneficial to clients, without demonstrable harmful side effects or safety issues, and it has serviced approximately 485 clients since commencement of operations in 2009.  There can be no assurance that the experience to date is indicative of results that might be expected from an expanded sample or base. Consequently, there can be no assurance that CNS’ modalities will ever achieve and maintain market acceptance among healthcare providers and clients. Any failure to satisfy healthcare provider or client demands or to achieve meaningful market acceptance will seriously harm our business and our ability to generate revenues and may prevent us from ever becoming profitable.

PSI PROVIDES ALTERNATIVE SCIENTIFIC APPROACHES TO UV SKIN TREATMENT THAT ARE NOVEL.

PSI’s success depends upon the acceptance by healthcare providers and clients of Psoria-Light treatment as a preferred method of treatment for psoriasis and other UV-treatable skin conditions. There can be no assurance that we will be able to achieve and maintain such market acceptance by healthcare providers or clients.

Psoriasis, eczema, and vitiligo, are common skin conditions that can be challenging to treat, and often cause the patient significant psychosocial stress. Patients undergo a variety of treatments to address these skin conditions, including routine consumption of systemic and biologic drug therapies which are highly toxic, reduce systemic immune system function, and come with a host of chemotherapy-like side effects. Ultraviolet (UV) phototherapy is a clinically validated treatment modality for these disorders. ).   To obtain FDA clearance and permission to affix the CE mark, PSI was required to conduct EMC and electrical safety testing, which it completed in the second quarter of 2011.  PSI also developed an ISO 13485 compliant quality system for the Psoria-Light which was audited in the fourth quarter of 2011.  PSI received FDA clearance on February 11, 2011 (no. K103540) and was granted permission to affix the CE mark on November 10, 2011.  In its 510(k) application with the FDA (application number K103540), PSI asserted that the Psoria-Light was “substantially equivalent” in intended use and technology to two predicate devices, the X -Trac Excimer Laser, which has wide acceptance in the medical billing literature and has a large installed base in the U.S., and the Dualight, another competing targeted UV phototherapy device.       



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Traditionally, “non-targeted” therapy was administered by lamps that emitted either UVA or UVB light to both diseased and healthy skin. While sunblocks or other UV barriers may be used to protect healthy skin, the UV administered in this manner must be low dosage to avoid excessive exposure of healthy tissue. Today, “targeted” UV phototherapy devices administer much higher dosages of light only to affected tissue, resulting   in “clearance” in the case of psoriasis and eczema, and “repigmentation” in the case of vitiligo, at much faster rates than non-targeted (low dosage) UV treatments.

Targeted UV treatments are typically administered to smaller total body surface areas, and are therefore used to treat the most intense parts of a patient’s disease. Non-targeted UV treatment is typically used as a follow-up and for maintenance, capable of treating large surfaces of the body. Excimer laser devices (UVB at 308nm) are expensive and consume dangerous chemicals (Xenon and Chlorine). Mercury lamp devices (UVB and/or UVA) require expensive lamp replacements regularly and require special disposal (due to mercury content). Additionally, mercury lamp devices typically deliver wavelengths of light below 300nm. While within the UVB spectrum, it has been shown that wavelengths below 300nm produce significantly more “sunburn” type side effects than do wavelengths between 300 and 320nm without improvement in therapeutic benefit.

The Psoria-Light is a targeted UV phototherapy device which produces UVB light between 300 and 320 nm as well as UVA light between 350 and 395nm, does not consume dangerous chemicals or require special environmental disposal and is cost effective for clinicians, which will increase patient access to this type of treatment.  It has several unique and advanced features that we believe will distinguish it from the non-targeted and targeted UV phototherapy devices that are currently being used by dermatologists and other healthcare providers. These features include the following: the utilization of deep narrow-band UVB (“NB-UVB”) LEDs as light sources;  the ability to produce both UVA or NB-UVB therapeutic wavelengths;  an integrated high resolution digital camera and patient record integration capabilities;  the ability to export to an external USB memory device a PDF file of patient treatment information including a patent pending graph that includes digital images plotted against user tracked metrics which can be submitted to improve medical reimbursements;  an accessory port and ability to update software; ease of placement and portability;  advanced treatment site detection safety sensor; international language support; a warranty which includes the UV lamp(s); and  a non-changeable treatment log (that does not include HIPPA information).

Psoria-Light treatments appear to have been beneficial to clients, without demonstrable harmful side effects or safety issues, and PSI has serviced approximately 100 clients since PSI started to sell the device in January 2012.  There can be no assurance that the experience to date is indicative of results that might be expected from an expanded sample or base. Consequently, there can be no assurance that Psoria-Light treatments will ever achieve and maintain market acceptance among healthcare providers and clients. Any failure to satisfy healthcare provider or client demands or to achieve meaningful market acceptance will seriously harm our business and our ability to generate revenues and may prevent us from ever becoming profitable.

WE WILL RELY UPON CNS AND PSI PERSONNEL TO OPERATE THEIR RESPECTIVE BUSINESSES AND THE LOSS OF KEY PERSONNEL COULD HAVE A MATERIALLY ADVERSE AFFECT ON OUR BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS.

We will rely and be dependent upon CNS’s current executive management team to operate CNS’ business. The CNS management team currently includes William A. Lambos and Peter A. Hannouche. These two individuals founded CNS, developed its operation and business plans, serve as its principal executive officers, and manage all aspects of the business. Although we have employment agreements with Mr. Lambos and Mr. Hannouche, we cannot guarantee that either of them will remain affiliated with us.

We will rely and be dependent upon PSI’s current executive management to operate PSI’s business. PSI’s executive management currently consists of Scot L. Johnson.  Mr. Johnson founded PSI, developed its operation and business plans, and serves as its principal executive officer, and manages all aspects of the business. Although we have an employment agreement with Mr. Johnson, we cannot guarantee that he will remain affiliated with us.

If any of our key personnel were to cease their affiliation with us, our operating results could suffer. Further, we do not maintain key person life insurance on any executive officer. If we lose or are unable to obtain the services of key personnel, our business, financial condition or results of operations could be materially and adversely affected.

WE WILL NEED ADDITIONAL CAPITAL TO CONDUCT CNS AND PSI BUSINESS ACTIVITIES.

We will require additional capital to conduct CNS’ and PSI’s planned business activities, which includes, among other things, further development of their respective products and services, funding a sales force and marketing efforts to pursue sales, training and supporting employees and staff, paying any additional legal fees associated with the  businesses (including those relating to licensing, regulatory approvals, intellectual property registration or defense, and potential products’ liability or other claims defense), paying for office facilities and related overhead.  There can be no assurance that additional capital will be available or will be available on acceptable terms. If we cannot raise additional capital when needed, we may be forced to substantially curtail planned business activities which may adversely affect our ability to execute our business plan and develop our business as well as our results of operations and financial condition.



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A FAILURE TO MANAGE AND EXPAND CNS AND PSI BUSINESSES AND OPERATIONS MAY HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY AND ITS BUSINESS.

CNS and PSI each seeks, among other things, to continue development and expanded offering of their respective products and services and the implementation of an extensive marketing campaign to promote them. The successful implementation of CNS’ and PSI’s business plans may result in a rapid expansion of our business and operations which may place a significant strain on our management, financial, and other resources, especially in the event that such expansion diverts management’s attention and resources away from ongoing projects and/or involves unexpected expenditures of capital that exceed the financial resources available to our Company at that time. Our ability to manage any such growth will depend upon our ability to implement appropriate operational and financial systems and controls; to expand PSI’s manufacturing capacity; to develop sales and marketing infrastructure and capabilities; to identify, attract and retain qualified personnel (especially sales and marketing personnel); and to train, manage and supervise other personnel. Any failure to expand these areas, to meet these personnel-related needs, or to implement and develop such systems, infrastructure, capabilities, and controls in an efficient manner, at a pace consistent with any growth in CNS’ or PSI’s  business, could have a material adverse effect on the Company and its business.

CNS AND PSI OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY IN THE FUTURE, AND WE MAY NOT BE ABLE TO CORRECTLY ESTIMATE FUTURE OPERATING EXPENSES, WHICH COULD LEAD TO CASH SHORTFALLS.

CNS and PSI operating results may fluctuate significantly in the future (and from period to period) as a result of a variety of factors, many of which are outside our control. These factors may include:

·

the introduction of new technologies and competing products and services that may make their respective products and  services less attractive to healthcare providers and clients;

·

the demand for their respective products and services;

·

the purchasing patterns of their respective clients;

·

the implementation of competitive pricing strategies by competitors;

·

the ability to attract and retain personnel with the skills required for effective operations;

·

product liability and other litigation;

·

the amount and timing of Psoria-Light manufacturing expenditures;

·

government regulation and legal developments or actions regarding their respective products and services;

·

our ability to receive, and the timing in which we may receive, approval from various regulatory bodies to market and sell CNS and PSI products and services; and

·

general economic conditions affecting, among other things, the healthcare industry and related insurance providers.

Because CNS and PSI each has a limited operating history, we have limited historical financial data upon which we can base estimates regarding their future operating expenses.  Our ability to generate revenue from the CNS and PSI acquisitions will depend upon the successful commercial launch of their respective products and services.  The timing of revenue generation, if any, and increases in manufacturing, sales and marketing expenses may not coincide, resulting in operating cash shortfalls.  To the extent that expenses precede or are not followed by increased revenue, our business, results of operations and financial condition may be harmed.

CNS AND PSI HAVE LIMITED EXPERIENCE IN MARKETING THEIR RESPECTIVE PRODUCTS AND SERVICES.

CNS and PSI each has undertaken initial, limited marketing efforts for their respective products and services. Their   sales and marketing teams will compete against the experienced and well-funded sales organizations of competitors. Their revenues and ability to achieve profitability will depend largely on the effectiveness of their respective sales and marketing team. Each will face significant challenges and risks related to marketing its services, including, but not limited to, the following:



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·

the ability of sales representatives to obtain access to or persuade adequate numbers of healthcare providers to purchase and use their respective products and services;

·

the ability to recruit, properly motivate, retain, and train adequate numbers of qualified sales and marketing personnel;

·

the costs associated with hiring, training, maintaining, and expanding an effective sales and marketing team; and

·

assuring compliance with government regulatory requirements affecting the healthcare industry.

PSI plans to establish a network of distributors in selected foreign markets to market, sell and distribute the Psoria-Light device.   If PSI fails to select or use appropriate foreign distributors, or if the sales and marketing strategies of such distributors prove ineffective in generating sales of the device, our revenues would be adversely affected and we might never become profitable.

COMMERCIALIZATION OF CNS AND PSI PRODUCTS AND SERVICES WILL REQUIRE US TO BUILD AND MAINTAIN SOPHISTICATED SALES AND MARKETING TEAMS.

Neither CNS nor PSI has any prior experience with commercializing their respective products and services. To successfully commercialize their products and services we will need to establish and maintain sophisticated sales and marketing teams.   Experienced sales representatives may be difficult to locate and retain, and all new sales representatives will need to undergo extensive training. There is no assurance that we will be able to recruit and retain sufficiently skilled sales representatives, or that any new sales representatives will ultimately become productive. If we are unable to recruit and retain qualified and productive sales personnel, our ability to commercialize our product and to generate revenues will be impaired, and our business will be harmed.

CNS AND PSI EACH FACES SIGNIFICANT COMPETITION FROM COMPANIES WITH GREATER RESOURCES AND WELL-ESTABLISHED SALES CHANNELS, WHICH MAY MAKE IT DIFFICULT FOR US TO ACHIEVE MARKET PENETRATION.

The markets for CNS’ and PSI’s respective products and services are highly competitive and are significantly affected by new treatment and product introductions. Direct competitors may enjoy competitive advantages, including:

·

established service and product lines with proven results;

·

brand awareness;

·

name recognition;

·

established product acceptance by healthcare providers and clients;

·

established relationships with healthcare providers and clients;

·

integrated distribution networks; and

·

greater financial resources for product development, sales and marketing, and patent litigation.

Many competitors may have significantly greater funds to spend on the research, development, promotion and sale of new and existing services and products. These resources can enable them to respond more quickly to new or emerging technologies and changes in the market.



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CNS OR PSI MAY BECOME INVOLVED IN FUTURE LITIGATION OR CLAIMS THAT MAY NEGATIVELY AFFECT OUR RESULTS OF OPERATIONS.                                             

Healthcare providers and clients that use CNS or PSI products or services may bring product liability or other claims against us.  To limit such exposure, CNS and PSI each plans to develop a comprehensive training and education program for persons using their respective products and services.  There can be no assurance that such training and education programs will help avoid complications resulting from treatment. In addition, although they may provide such training and education, they may not be able to ensure proper treatment in each instance and may be unsuccessful at avoiding significant liability exposure as a result. While CNS and PSI each currently maintains and plans to continue to maintain liability insurance in amounts they consider sufficient, such insurance may prove insufficient to provide coverage against any or all asserted claims. In addition, experience ratings and general market conditions may change at any time so as to render them unable to obtain or maintain insurance on acceptable terms, or at all. In addition, regardless of merit or eventual outcome, product liability and other claims may result in:

·

the diversion of management’s time and attention from our business and operations;

·

the expenditure of large amounts of cash on legal fees, expenses and payment of settlements or damages;

·

decreased demand for CNS and PSI products and services; and

·

negative publicity and injury to our reputation.

Each and every one of above consequences of claims and litigation occur could have a material adverse effect on CNS,  PSI, the Company, and our business operations and financial condition.

HEALTHCARE PROVIDERS MAY BE UNABLE TO OBTAIN COVERAGE OR REIMBURSEMENT FROM THIRD-PARTY PAYORS FOR CNS OR PSORIA-LIGHT TREATMENTS, WHICH COULD LIMIT OUR ABILITY TO MARKET CNS AND PSI PRODUCTS AND SERVICES.

We expect that healthcare providers will bill various third-party payors, such as Medicare, Medicaid, other governmental programs, and private insurers, for CNS and Psoria-Light treatments. We believe that the cost of CNS and Psoria-Light treatments is generally already reimbursable under governmental programs and most private plans. Accordingly, we believe that healthcare providers will generally not require new billing authorizations or codes in order to be compensated for performing medically necessary procedures using CNS and Psoria-Light treatments. There can be no assurance, however, that coverage, coding and reimbursement policies of third-party payors will not change in the future.  PSI’s success in selected foreign markets will also depend upon the eligibility of the Psoria-Light device for coverage and reimbursement by government-sponsored healthcare payment systems and third-party payors. In both the United States and foreign markets, healthcare cost-containment efforts are prevalent and are expected to continue. Prospective clients’ failure to obtain sufficient reimbursement could limit our ability to market the CNS and PSI products and services and decrease our ability to generate revenue.

WE PLAN TO RELY ON THIRD PARTY DISTRIBUTORS FOR PSI SALES, MARKETING AND DISTRIBUTION ACTIVITIES IN FOREIGN COUNTRIES.

Although we plan to market and sell the Psoria-Light device directly through our own sales representatives in the domestic market, we plan to rely on third party distributors to sell, market, and distribute the device in selected international markets. Because we intend to rely on third party distributors for sales, marketing and distribution activities in international markets, we will be subject to a number of risks associated with our dependence on these third party distributors, including:

·

lack of day-to-day control over the activities of third-party distributors;

·

third-party distributors may not fulfill their obligations to us or otherwise meet our expectations;

·

third-party distributors may terminate their arrangements with us on limited or no notice or may change the terms of these arrangements in a manner unfavorable to us for reasons outside of our control; and

·

disagreements with our distributors could require or result in costly and time-consuming litigation or arbitration.



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If we fail to establish and maintain satisfactory relationships with third-party distributors, we may be unable to sell, market and distribute the Psoria-Light device in international markets, our revenues and market share may not grow as anticipated, and we could be subject to unexpected costs which would harm our results of operations and financial condition.

TO THE EXTENT WE ENGAGE IN MARKETING AND SALES ACTIVITIES OUTSIDE THE UNITED STATES, WE WILL BE EXPOSED TO RISKS ASSOCIATED WITH EXCHANGE RATE FLUCTUATIONS, TRADE RESTRICTIONS AND POLITICAL, ECONOMIC AND SOCIAL INSTABILITY.

If we follow through with our plans to sell the Psoria-Light device in foreign markets, we will be subject to various risks associated with conducting business abroad. A foreign government may require us to obtain export licenses or may impose trade barriers or tariffs that could limit our ability to build our international presence. Our operations in some markets also may be adversely affected by political, economic and social instability in foreign countries. We may also face difficulties in managing foreign operations, longer payment cycles, problems with collecting accounts receivable, and limits on our ability to enforce our intellectual property rights. In addition, for financial reporting purposes, our foreign sales will be translated from local currency into U.S. dollars based on exchange rates and, if we do not hedge our foreign currency transactions, we will be subject to the risk of changes in exchange rates. If we are unable to adequately address the risks of doing business abroad, our business may be harmed.

THE PSORIA-LIGHT AND ANY FUTURE MEDICAL DEVICE PRODUCTS ARE SUBJECT TO A LENGTHY AND UNCERTAIN DOMESTIC REGULATORY PROCESS.

PSI’s Psoria-Light device and future medical device products, if any, are subject to extensive regulation in the United States by the FDA. The FDA regulates the research, testing, manufacturing, safety, labeling, storage, record keeping, promotion, distribution and production of medical devices in the United States to ensure that medical products distributed domestically are safe and effective for their intended uses. In order for us to market the Psoria-Light for use in the United States, we were required to first obtain clearance from the FDA pursuant to Section 510(k) of the Federal Food, Drug, and Cosmetic Act (the “FFDCA”).

Clearance under Section 510(k) requires demonstration that a new device is substantially equivalent to another device with 510(k) clearance or grandfather status. If the FDA agrees that a device is substantially equivalent to a predicate device, it will grant clearance to commercially market the device. The FDA has a statutory 90-day period to respond to a 510(k) submission. As a practical matter, clearance often takes longer. The FDA may require further information, including clinical data, to make a determination regarding substantial equivalence. If the FDA determines that a device, or its intended use, is not “substantially equivalent,” the FDA will place the device, or the particular use of the device, into Class III, and the device sponsor must then fulfill much more rigorous pre-marketing requirements.

If the FDA does not act favorably or quickly in its review of a 501(k) submission, the submitting party may encounter significant difficulties and costs in its efforts to obtain FDA clearance or approval,  all of which could delay or preclude the sale of a device.  The FDA may request additional data or require the submitting party to conduct further testing or compile more data, including clinical data and clinical studies, in support of a 510(k) submission.  Instead of accepting a 510(k) submission, the FDA may require the submitting party to submit a pre-market approval application (“PMA”), which is typically a much more complex and burdensome application than a 510(k). To support a PMA, the FDA may require that the submitting party conduct one or more clinical studies to demonstrate that the device is safe and effective. In addition, the FDA may place significant limitations upon the intended use of a device as a condition to a 510(k) clearance or PMA approval. Product applications can also be denied or withdrawn due to failure to comply with regulatory requirements or the occurrence of unforeseen problems following clearance or approval. Any delays or failure to obtain FDA clearance or approvals of any  future medical device products we develop, any limitations imposed by the FDA on product use, or the costs of obtaining FDA clearance or approvals could have a material adverse effect on our business, financial condition and results of operations.

PSI submitted its 510(k) for the Psoria-Light to the FDA and on December 3, 2010 was assigned application number K103540. The 510(k) application for Psoria-Light was a traditional application and asserted that the Psoria-Light is “substantially equivalent” in intended use and technology to two predicate devices, the X-Trac Excimer Laser and the Dualight, which are competing targeted UV phototherapy devices.   PSI began regulatory testing of the Psoria-Light in December 2010 for EMC and electrical safety (required for FDA and CE mark sales), and completed that testing in the second quarter of 2011. PSI received FDA clearance of the Psoria-Light on February11, 2011 (no. K103540). If the Psoria-Light is significantly modified subsequent to its FDA clearance, the FDA may require submission of a separate 510(k) or PMA for the modified product before it may be marketed in the United States.

If we develop any future medical device products we will be required to seek and obtain FDA approval prior to any marketing or sales in the United States and in accordance with the 510(k) or PMA process.



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THE PSORIA-LIGHT WILL BE SUBJECT TO VARIOUS INTERNATIONAL REGULATORY PROCESSES AND APPROVAL REQUIREMENTS. IF WE DO NOT OBTAIN AND MAINTAIN THE NECESSARY INTERNATIONAL REGULATORY APPROVALS, WE WILL NOT BE ABLE TO MARKET AND SELL OUR PRODUCTS IN FOREIGN COUNTRIES.

To be able to market and sell PSI’s Psoria-Light device in other countries, we must obtain regulatory approvals and comply with the regulations of those countries. These regulations, including the requirements for approvals and the time required for regulatory review, vary from country to country. Obtaining and maintaining foreign regulatory approvals are expensive, and we cannot be certain that we will receive regulatory approvals in any foreign country in which we plan to market our product. If we fail to obtain or maintain regulatory approval in any foreign country in which we plan to market our product, our ability to generate revenue will be harmed.

The European Union requires that manufacturers of medical products obtain the right to affix the CE mark to their products before selling them in member countries of the European Union. The CE mark is an international symbol of adherence to quality assurance standards and compliance with applicable European medical device directives. In order to obtain the right to affix the CE mark to products, a manufacturer must obtain certification that its processes meet certain European quality standards.

PSI began regulatory testing of the Psoria-Light in December 2010 for EMC and electrical safety (required for FDA and CE mark sales), and completed that testing in the second quarter of 2011.   PSI was granted permission to affix the CE mark to the Psoria-Light in the fourth quarter of 2011.  If we modify the Psoria-Light product or develop other new products in the future, we would expect to apply for permission to affix the CE mark to such products. In addition, we would be subject to annual regulatory audits in order to maintain any CE mark permissions we may obtain. We do not know whether we will be able to obtain permission to affix the CE mark to our initial, future or modified products or that we will continue to meet the quality and safety standards required to maintain any permission we may receive. If we are unable to obtain permission to affix the CE mark to any of our products, we will not be permitted to sell our products in member countries of the European Union, which will have a material adverse effect on our business, financial condition and results of operations. In addition, if after receiving permission to affix the CE mark to our products, we are unable to maintain such permission, we will no longer be able to sell our products in member countries of the European Union.

WE WILL RELY ON TWO LICENSE AGREEMENTS THAT GIVE PSI RIGHTS UNDER TWO PROVISIONAL PATENT APPLICATIONS, ANY NON-PROVISIONAL PATENT APPLICATIONS COVERING THE TECHNOLOGY DESCRIBED IN THE PROVISIONAL PATENT APPLICATIONS, AND ASSOCIATED KNOW-HOW, TECHNICAL DATA, AND IMPROVEMENTS TO DEVELOP AND COMMERCIALIZE THE PSORIA-LIGHT, AND ANY LOSS OF THESE RIGHTS WOULD ADVERSELY AFFECT OUR ABILITY TO DEVELOP AND MARKET THE PSORIA-LIGHT.

PSI has an exclusive license agreement with its CEO, Mr.  Johnson, which provides PSI the sole and exclusive, worldwide, paid-up, royalty-free, perpetual license under an initial provisional patent application, any non-provisional patent applications filed by Mr. Johnson covering the technology described in the initial provisional patent application, and associated know-how, technical data, and improvements to develop and commercialize the Psoria­-Light. The initial provisional application covered the Psoria-Light design concepts including handheld ergonomics, emitter platform and LED arrangements, methods for treatment site detection, cooling methods, useful information displays, collection of digital images and graphical correlation to quantitative metrics, and base console designs. Two non-provisional patent applications were submitted by Mr. Johnson, claiming the prior filing date of the initial provisional application. The first non-provisional application describes a unique distance sensor located at the tip of the Psoria-Light hand-piece, which detects the treatment site based on a projected field. The sensor can detect electrolytic/conductive surfaces, such as human skin, without requiring any physical or direct electrical contact. Further, the unique sensor can sense the treatment site at any point about the tip of the hand-piece without causing any attenuation of the therapeutic UV light output. The second non-provisional application describes the integration and use of a digital camera in the Psoria-Light, including the location of the digital camera and how and when it is used to correspond to real-life treatment routines, how images are displayed and captured to memory, and how the images are arranged and illustrated in patient records. Additionally, the second non-provisional application describes the inclusion of clinician defined variables, such as health-related quality of life scores, and their placement into a graphical arrangement relative to treatment site images.

PSI  has a second exclusive license agreement with Mr. Johnson which provides PSI the sole and exclusive, worldwide, paid-up, royalty-free, perpetual license under a second provisional patent application, any non-provisional patent applications filed by Mr. Johnson covering the technology described in the second provisional patent application, and associated know-how, technical data, and improvements to develop and commercialize the Psoria-Light. The second provisional patent application contains concepts for the improvement of microelectronics packages and thermal management solutions, the improvement of handheld phototherapy devices in general (either used on humans, animals, or plants, or used on inanimate objects), and replacement of laser therapy devices with LED devices.



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Our right to develop and commercialize the Psoria-Light is derived solely from PSI’s rights under these exclusive license agreements. Both exclusive license agreements provide that either party may terminate the exclusive license agreement by reason of an uncured material breach of the other party. If either of the exclusive license agreements is terminated, we will not have a right or license under the provisional patent applications, the non-provisional patent applications covering the technology described in the provisional patent applications, and associated know-how, technical data, and improvements to develop and commercialize the Psoria-Light, and other related intellectual property to develop and commercialize the Psoria-Light covered by such exclusive license agreement. Additionally, we may be unable to re­acquire the necessary license on satisfactory terms, if at all. The failure to maintain these licenses could prevent or delay the development and commercialization of the Psoria-Light. Because the development and commercialization of the Psoria-Light is a significant focus of our business plan, any failure to develop or commercialize, or any delay in the development or commercialization of, the Psoria-Light will have a material adverse effect on our business and our ability to generate revenues and may prevent us from ever becoming profitable.

The first and second exclusive license agreements are included as Exhibits 10.4 and 10.5, respectively, to this Current Report.  These licenses are the legal documents which govern the terms of PSI’s authority to develop and commercialize the Psoria-Light technology described therein and the other actions contemplated thereby.   The discussion of the licenses set forth herein is qualified in its entirety by reference to Exhibits 10.4 and 10.5.

OUR ABILITY TO ACHIEVE COMMERCIAL SUCCESS WILL DEPEND IN PART ON OBTAINING AND MAINTAINING PATENT PROTECTION (IF ANY) AND TRADE SECRET PROTECTION RELATING TO THE PSORIA-LIGHT, THE TECHNOLOGY ASSOCIATED WITH THE PSORIA-LIGHT, AND ANY OTHER PRODUCTS AND TECHNOLOGY WE MAY DEVELOP, AS WELL AS SUCCESSFULLY DEFENDING OUR PATENT(S) (IF ANY) AND LICENSED PATENTS (IF ISSUED) AGAINST THIRD PARTY CHALLENGES. IF WE ARE UNABLE TO OBTAIN AND MAINTAIN PROTECTION FOR OUR INTELLECTUAL PROPERTY AND PROPRIETARY TECHNOLOGY, THE VALUE OF OUR PRODUCTS WILL BE ADVERSELY AFFECTED, AND WE WILL NOT BE ABLE TO PROTECT SUCH TECHNOLOGY FROM UNAUTHORIZED USE BY THIRD PARTIES.

Our commercial success will depend largely on our ability to obtain and maintain patent protection and intellectual property protection covering certain aspects of the technology that we intend to utilize in the development and commercialization of PSI’s initial medical device product, the Psoria-Light, and to obtain and maintain patent and intellectual property protection for any other products that we may develop and seek to market. In order to protect our competitive position for the Psoria-Light and any other products that we may develop and seek to market, we, or our executive officers, as the case may be, will have to:

·

prevent others from successfully challenging the validity or enforceability of our issued, pending, or licensed patents (if any);

·

prevent others from infringing upon, our issued, pending, or licensed patents (if any) and our other proprietary rights;

·

operate our business, including the manufacture, sale and use of the Psoria-Light and any other products, without infringing upon the proprietary rights of others;

·

successfully enforce our rights to issued, pending, or licensed patents (if any) against third parties when necessary and appropriate; and

·

obtain and protect commercially valuable patents or the rights to patents both domestically and abroad.

No patents have been issued for any CNS or PSI products or any of the technology associated with such products, and we can not guarantee that any patents will be issued for such products or any of the technology associated with such products.



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Mr. Johnson has filed a provisional patent application covering certain aspects of the technology that we intend to utilize in the development and commercialization of the Psoria-Light, including handheld ergonomics, emitter platform and LED arrangements, methods for treatment site detection, cooling methods, useful information displays, collection of digital images and graphical correlation to quantitative metrics, and base console designs. Two non-provisional patent applications were submitted by Mr. Johnson claiming the prior filing date of the initial provisional application. The first non-provisional application describes a unique distance sensor located at the tip of the Psoria-Light hand-piece, which detects the treatment site based on a projected field. The sensor can detect electrolytic/conductive surfaces, such as human skin, without requiring any physical or direct electrical contact. Further, the unique sensor can sense the treatment site at any point about the tip of the hand-piece and without causing any attenuation of the therapeutic UV light output. The second non-provisional application describes the integration and use of a digital camera in the Psoria-Light, including the location of the digital camera and how and when it is used to conveniently correspond to real-life treatment routines, how images are displayed and captured to memory, and how the images are arranged in patient records are illustrated. Additionally, the second non-provisional application describes the inclusion of clinician defined variables, such as health-related quality of life scores, and their placement into a graphical arrangement relative to treatment site images. Both the initial provisional patent application and the two non-provisional patent applications are owned by Mr. Johnson, who have granted PSI the  sole and exclusive, worldwide, paid-up, royalty-free, perpetual license under the initial provisional patent application, any non-provisional patent applications filed by Mr. Johnson covering the technology described in the initial provisional patent application, and associated know-how, technical data, and improvements to develop and commercialize the Psoria-Light.

Mr. Johnson filed a second provisional patent application containing concepts for the improvement of microelectronics packages and thermal management solutions, the improvement of handheld phototherapy devices in general (either used on humans, animals, or plants, or used on inanimate objects), and replacement of laser therapy devices with LED devices. This second provisional patent application is owned by Mr. Johnson who has granted PSI the sole and exclusive, worldwide, paid-up, royalty-free, perpetual license under this second provisional patent application, any non-provisional patent applications filed by Mr. Johnson covering the technology described in the second provisional patent application, and associated know-how, technical data, and improvements to develop and commercialize the Psoria-Light.

Neither the Company nor any of our officers or directors has filed (nor does the Company or any of our officers or directors currently have an intention to file) for any international patent protection for any of our products or any of the technology associated with our products.

In the event that a patent is not (or patents are not, as the case may be) issued, it will be difficult (or impossible) for us to protect the Psoria-Light and the technologies associated therewith. In the event that patents are issued to us or our executive officers in the future (for the technology associated with the Psoria-Light or for other products or technologies), our competitors or other patent holders may challenge the validity of such patents or assert that our products and the technologies and methods we employ are covered by their patent(s). If the validity or enforceability of any of our patents or licensed patents are challenged, or others assert their patent rights against us, we may incur significant expenses in defending against such actions, and if any such challenge is successful, our business may be harmed.

Protection of intellectual property in the markets in which we compete is highly uncertain and involves complex legal and scientific questions. It may be difficult to obtain patents relating to our products or technology. Furthermore, any changes in, or unexpected interpretations of, the patent laws may adversely affect our ability to enforce our patent position.

Other risks and uncertainties that we face with respect to our licensed patents (if any), our pending patents (if any), our patents (if any), and our other proprietary rights include the following:

·

our licensed, issued, and pending patents (if any) may not be valid or enforceable or may not provide adequate coverage for our products;

·

the claims of any licensed, issued, and pending patents may not provide meaningful protection;

·

our licensed, issued and pending patents (if any) may expire before we are able to successfully commercialize the Psoria-Light or any other product candidates or before we receive sufficient revenues in return;

·

patents pending, issued to us, or licensed to us (if any) may be successfully challenged, circumvented, invalidated or rendered unenforceable by third parties;

·

the patents issued, pending or licensed to us (if any) may not provide a competitive advantage;

·

patents pending or issued to other companies, universities or research institutions may harm our ability to do business;



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·

other companies, universities or research institutions may independently develop similar or alternative technologies or duplicate our technologies and commercialize discoveries that we or our executive officers attempt to patent;

·

other companies, universities or research institutions may design around technologies we license, patent or develop;

·

because the information contained in patent applications is generally not publicly available until published (usually 18 months after filing), we cannot assure you that we or our executive officers will be the first to file patent applications for inventions or similar technology or that we or our executive officers will have priority of ownership;

·

the future and pending applications we will file or have filed, or to which we will or do have exclusive rights, may not result in issued patents or may take longer than we expect to result in issued patents; and

·

we may be unable to develop additional proprietary technologies that are patentable.

WE EXPECT TO RELY ON TRADEMARKS, TRADE SECRET PROTECTIONS, KNOW-HOW AND CONTRACTUAL SAFEGUARDS TO PROTECT CNS AND PSI NON-PATENTED INTELLECTUAL PROPERTY AND PROPRIETARY TECHNOLOGY.

We expect to rely on trademarks, trade secret protections, know-how and contractual safeguards to protect CNS and PSI non-patented intellectual property and proprietary technology. Current CNS and PSI employees, consultants and advisors have entered into, and future employees, consultants and advisors will be required to enter into, confidentiality agreements that prohibit the disclosure or use of confidential information. We also intend to enter into confidentiality agreements to protect our confidential information delivered to third parties for research and other purposes. There can be no assurance that we will be able to effectively enforce these agreements or that the subject confidential information will not be disclosed, that others will not independently develop substantially equivalent confidential information and techniques or otherwise gain access to our confidential information or that we can meaningfully protect our confidential information.

Costly and time-consuming litigation could be necessary to enforce and determine the scope and protectability of confidential information, and failure to maintain the confidentiality of confidential information could adversely affect our business by causing us to lose any competitive advantage maintained through such confidential information.

The protection of proprietary technology through claims of trade secret status has been the subject of increasing claims and litigation by various companies both to protect proprietary rights and for competitive reasons even where proprietary claims are unsubstantiated. The prosecution of proprietary claims or the defense of such claims is costly and uncertain given the uncertainty and rapid development of the principles of law pertaining to this area.

Disputes may arise in the future with respect to the ownership of rights to any technology developed with consultants, advisors or collaborators. These and other possible disagreements could lead to delays in the collaborative research, development or commercialization of our products, or could require or result in costly and time-consuming litigation that may not be decided in our favor. Any such event could have a material adverse effect on our business, financial condition and results of operations by delaying or preventing our commercialization of innovations or by diverting our resources away from revenue-generating projects.

OUR BUSINESS MAY BE HARMED, AND WE MAY INCUR SUBSTANTIAL COSTS AS A RESULT OF LITIGATION OR OTHER PROCEEDINGS RELATING TO PATENT AND OTHER INTELLECTUAL PROPERTY RIGHTS.

A third party may assert that we have infringed his, her or its patents and proprietary rights or challenge the validity or enforceability of our patents (if any) and proprietary rights. Our competitors, many of which have substantially greater resources than us and have made significant investments in competing technologies or products, may seek to apply for and obtain patents that will prevent, limit or interfere with our ability to make, use and sell our products either in the United States or in international markets. Further, we may not be aware of all of the patents and other intellectual property rights owned by third parties that may be potentially adverse to our interests. Intellectual property litigation in the medical device industry is common, and we expect this trend to continue. We may need to resort to litigation to enforce our patent rights (if any) or to determine the scope and validity of a third party’s patents or other proprietary rights. The outcome of any such proceedings is uncertain and, if unfavorable, could significantly harm our business. If we do not prevail in this type of litigation, we or our distributors or strategic collaborators may be required to:



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·

pay actual monetary damages, royalties, lost profits and/or increased damages and the third party’s attorneys’ fees, which may be substantial;

·

expend significant time and resources to modify or redesign the affected products or procedures so that they do not infringe on a third party’s patents or other intellectual property rights; further, there can be no assurance that we will be successful in modifying or redesigning the affected products or procedures;

·

obtain a license in order to continue manufacturing or marketing the affected products or services, and pay license fees and royalties; if we are able to obtain such a license, it may be non-exclusive, giving our competitors access to the same intellectual property, or the patent owner may require that we grant a cross-license to our patented technology (if any); or

·

stop the development, manufacture, use, marketing or sale of the affected products through a court-ordered sanction called an injunction, if a license is not available on acceptable terms, or not available at all, or our attempts to redesign the affected products are unsuccessful.

Any of these events could adversely affect our business strategy and the potential value of our business. In addition, the defense and prosecution of intellectual property suits, interferences, oppositions and related legal and administrative proceedings in the United States and elsewhere, even if resolved in our favor, could be expensive and time consuming, could generate negative publicity and could divert financial and managerial resources. Some of our competitors may be able to sustain the costs of complex intellectual property litigation more effectively than we can because they have substantially greater financial resources.

OUR ABILITY TO MARKET PSI PRODUCTS IN SOME FOREIGN COUNTRIES MAY BE IMPAIRED BY THE ACTIVITIES AND INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

We plan to market and sell PSI products in select international markets. Neither the Company nor any of our officers or directors has filed (nor does the Company or any of our officers or directors currently have an intention to file) for any international patent protection for any of our products or any of the technology associated with our products. However, to successfully enter into these international markets and achieve desired revenues internationally, we may need to enforce our patent and trademark rights (if any) against third parties that we believe may be infringing on our rights. The laws of some foreign countries do not protect intellectual property, including patents, to as great an extent as do the laws of the United States. Policing unauthorized use of our intellectual property is difficult, and there is a risk that despite the expenditure of significant financial resources and the diversion of management attention, any measures that we take to protect our intellectual property may prove inadequate in these countries. Our competitors in these countries may independently develop similar technology or duplicate our products, thus likely reducing our potential sales in these countries. Furthermore, our future patent rights (if any) may be limited in enforceability to the United States or certain other select countries, which may limit our intellectual property rights abroad.

Risks Related to Our Securities.

NO MARKET CURRENTLY EXISTS FOR OUR SECURITIES AND WE CANNOT ASSURE YOU THAT SUCH A MARKET WILL EVER DEVELOP, OR IF DEVELOPED, WILL BE SUSTAINED.

Our common stock is not currently eligible for trading on any stock exchange and there can be no assurance that our common stock will be listed on any stock exchange in the future. We presently are listed on the NASD OTCQB Bulletin Board trading system pursuant to Rule 15c2-11 of the Securities Exchange Act of 1934, but there can be no assurance we will maintain such a listing. The bulletin board tends to be highly illiquid, in part because there is no national quotation system by which potential investors can track the market price of shares except through information received or generated by a limited number of broker-dealers that make a market in particular stocks. There is a greater chance of market volatility for securities that trade on the bulletin board as opposed to a national exchange or quotation system. This volatility may be caused by a variety of factors, including: the lack of readily available price quotations; the absence of consistent administrative supervision of "bid" and "ask" quotations; lower trading volume; and general market conditions. If no market for our shares materializes, you may not be able to sell your shares or may have to sell your shares at a significantly reduced price.



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IF OUR SHARES OF COMMON STOCK ARE ACTIVELY TRADED ON A PUBLIC MARKET, THEY WILL IN ALL LIKELIHOOD BE PENNY STOCKS.

Broker-dealer practices in connection with transactions in “penny stocks” are regulated by certain penny stock rules adopted by the SEC. Penny stocks generally are equity securities with a price per share of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ Stock Market, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules.

WE WILL INCUR ONGOING COSTS AND EXPENSES FOR SEC REPORTING AND COMPLIANCE WITHOUT REVENUE WE MAY NOT BE ABLE TO REMAIN IN COMPLIANCE, MAKING IT DIFFICULT FOR INVESTORS TO SELL THEIR SHARES, IF AT ALL.

We have a very limited number of market makers and are quoted on the OTC Electronic Bulletin Board. To be eligible for quotation, issuers must remain current in their filings with the SEC. In order for us to remain in compliance we will require future revenues to cover the cost of these filings, which could comprise a substantial portion of our available cash resources. If we are unable to generate sufficient revenues to remain in compliance it may be difficult for you to resell any shares you may purchase, if at all.

THE MARKET PRICE FOR OUR COMMON SHARES IS PARTICULARLY VOLATILE GIVEN OUR STATUS AS A RELATIVELY UNKNOWN COMPANY WITH A SMALL AND THINLY TRADED PUBLIC FLOAT, LIMITED OPERATING HISTORY AND LACK OF PROFITS WHICH COULD LEAD TO WIDE FLUCTUATIONS IN OUR SHARE PRICE. YOU MAY BE UNABLE TO SELL YOUR COMMON SHARES AT OR ABOVE YOUR PURCHASE PRICE, WHICH MAY RESULT IN SUBSTANTIAL LOSSES TO YOU.

The market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. The volatility in our share price is attributable to a number of factors. First, as noted above, our common shares are sporadically and thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer which could better absorb those sales without adverse impact on its share price. Secondly, we are a speculative or “risky” investment due to our limited operating history and lack of profits to date, and uncertainty of future market acceptance for our potential products and services. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer. Many of these factors are beyond our control and may decrease the market price of our common shares, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common shares will be at any time, including as to whether our common shares will sustain their current market prices, or as to what effect that the sale of shares or the availability of common shares for sale at any time will have on the prevailing market price.

WE DO NOT PAY DIVIDENDS ON OUR COMMON STOCK.

We have not paid any dividends on our common stock and do not anticipate paying dividends in the foreseeable future. We plan to retain earnings, if any, to finance the development and expansion of our business.

FAILURE TO ACHIEVE AND MAINTAIN EFFECTIVE INTERNAL CONTROLS IN ACCORDANCE WITH SECTION 404 OF THE SARBANES-OXLEY ACT OF 2002 COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND STOCK PRICE.

Section 404 of the Sarbanes-Oxley Act of 2002 (“the Sarbanes-Oxley Act”) requires that we establish and maintain an adequate internal control structure and procedures for financial reporting and include a report of management on our internal control over financial reporting in our annual report on Form 10-K. That report must contain an assessment by management of the effectiveness of our internal control over financial reporting and must include disclosure of any material weaknesses in internal control over financial reporting that we have identified.



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RULE 144 RELATED RISK.

The SEC adopted amendments to Rule 144 which became effective on February 15, 2008 that apply to securities acquired both before and after that date. Under these amendments, a person who has beneficially owned restricted shares of our common stock for at least six months would be entitled to sell their securities provided that: (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the three months preceding a sale, (ii) we are subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale and (iii) if the sale occurs prior to satisfaction of a one-year holding period, we provide current information at the time of sale.

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

·

1% of the total number of securities of the same class then outstanding; or

·

the average weekly trading volume of such securities during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale;

provided, in each case, that we are subject to the Exchange Act periodic reporting requirements for at least three months before the sale. Such sales by affiliates must also comply with the manner of sale, current public information and notice provisions of Rule 144.

RESTRICTIONS ON THE RELIANCE OF RULE 144 BY SHELL COMPANIES OR FORMER SHELL COMPANIES.

Historically, the SEC staff has taken the position that Rule 144 is not available for the resale of securities initially issued by companies that are, or previously were, blank check companies. The SEC has codified and expanded this position in the amendments discussed above by prohibiting the use of Rule 144 for resale of securities issued by any shell companies (other than business-combination related shell companies) or any issuer that has been at any time previously a shell company. The SEC has provided an important exception to this prohibition, however, if the following conditions are met:

·

The issuer of the securities that was formerly a shell company has ceased to be a shell company,

·

The issuer of the securities is subject to the reporting requirements of Section 14 or 15(d) of the Exchange Act,

·

The issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials), other than Current Reports on Form 8-K; and

·

At least one year has elapsed from the time that the issuer filed current comprehensive disclosure with the SEC reflecting its status as an entity that is not a shell company.

As a result, it is likely that pursuant to Rule 144, stockholders who receive our restricted securities in a business combination will not be able to sell our shares without registration until one year after we have completed our initial business combination.

ITEM 2. FINANCIAL INFORMATION.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions. 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 Ultra Violet ("UV") phototherapy devices upon acquisition of CNS and PSI.



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Nutritional Supplement Plan of Operations - WCUI

Our intended products will be sold through our registered website www.aminofactory.com , presently under final development. Our planned product line shall consist of Amino acid and other nutritional supplements and our target market will be the sports industry and the general health minded public. Once our website is fully developed, our product portfolio shall be expanded to include a wider range of supplements, including customized formulas uniquely tailored to suite an individual’s needs. A customer logging into our www.aminofactory.com website will be able to select an Amino acid supplement and/or nutritious formula combination suitable to his/her needs. Once a suitable supplement solution has been chosen by the client, the order shall be automatically placed for processing in our supplier’s factory. Product will be shipped directly by our supplier to the client, within seven business days.


Our supplements will be produced by unaffiliated third party manufactures and/or product fulfillment suppliers, specializing in Amino nutritional supplement production. We have currently established a non-binding and non-exclusive Value Added (VAD) relationship with one such producer and product fulfillment provider, the New Jersey based Protein Factory, to support our initial offering. Supplements produced for us can be also provided to our competitors by Protein Factory or perhaps other manufacturers. However, as a VAD of Protein Factory, we are able to specifically select our product portfolio and market it through our website with our custom packaging and pricing; under the Protein Factory or our own amino factory label. Following successful conclusion of our website development, we will have the opportunity to execute a binding VAD agreement with Protein Factory.

Treatment of Brain-Based Behavioral Health Disorders - CNS

On August 2, 2012, we consummated the acquisition of all of the issued and outstanding limited liability membership interests in CNS. CNS is now operated as a wholly-owned subsidiary of the Company, with four full-time and eleven part-time employees.   We believe that CNS’ operations and services will provide an attractive complement to the Company’s operations and products and represent a viable alternative to current approaches to mental health and well-being.

Current approaches primarily consist of “talk therapy” and prescription medications.  These are often combined, but they each retain their individual shortcomings in combination. The former – so-called psychotherapy or mental health counseling – can take years to achieve results and is often completely ineffective.   The latter – known as psychopharmacology – relies in many cases on dangerous drugs with severe and unpredictable side effects, many of which are irreversible. Many also have strong and severe addictive properties that result in substance abuse and dependency, which leaves the client worse.  Neither of the current approaches is, in daily application to client care, subject to objective evidence of success or failure, because the only indicator of treatment outcome is the subjective report of clients.  In addition, these approaches to treatment have not been updated to take advantage of recent discoveries and knowledge of brain function that has emerged in the past two decades.

CNS provides alternative, scientific approaches to mental health and wellness. It assesses dis-regulations in brain function via EEG-based brain mapping along with other recognized behavioral health assessment tools, such as neuropsychological examinations. Its trained therapists then assist the client to restore brain function to within normative limits using leading–edge modalities, such as LENS, Neurofield EMS therapy, traditional neurofeedback, hemoencephalography, transcranial direct current stimulation, cranial alternating current stimulation, photonic stimulation and heart variability training. The client is periodically assessed throughout and following completion of the treatment program. This enables the clinical team to form treatment protocols as well as demonstrate the effectiveness of the treatment through a comparison of pre- vs. post-treatment assessments.

CNS treatment modalities, when combined in specific manners that are proprietary to CNS, contribute to restoring the brain’s ability to regulate itself within normative limits. CNS methods are noninvasive and safe, and achieve their goals without the use of prescription pharmaceuticals. This technology helps the client to overcome difficulties with mental health and/or developmental barriers to successful daily functioning, and thereby to experience a higher quality of life.

CNS clients have reported very favorable rates of improvement – in many cases two to three (or more) times what is seen in traditional approaches.  Such improvement has been achieved in a matter of weeks or months – a fraction of the time required by existing approaches. These results have been observed without demonstrable harmful side effects or safety issues.  CNS has serviced approximately 485 clients since commencement of operations in 2009, but there can be no assurance that the experience to date is indicative of results that might be expected from an expanded sample or base.

We acquired CNS based in part upon NIMH data indicating that in any given year an estimated 26.2 percent of Americans ages 18 and older suffer from a diagnosable mental disorder.  We assumed that such data suggested a potential client population that might benefit from CNS services.  We further assumed that additional potential CNS client populations would derive from individuals suffering from acquired brain injuries and children with developmental conditions associated with dis-regulations of the brain such as AD/HD, learning disorders, autism and Asperger’s disorder.  We assumed that CNS services could address these populations in the Tampa Bay-area, as well as other locations and that such services would be favorably perceived and accepted by such potential populations.



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We are aware of only a handful of clinics competing with CNS in the Tampa Bay-area, and believe that these clinics offer only a small fraction of the alternative treatments offered by CNS. Indirect competitors may include pharmaceutical companies and traditional psychotherapy methods.  We expect to build upon CNS’ current marketing plan which has emphasized use of print media, particularly health-oriented magazines, billboard and radio advertisements, and “grass-roots” networking, to drive potential clients to CNS’ state-of-the-art website.  Nevertheless, our acquisition assumptions may prove to be erroneous. CNS is a small development stage company with a limited operating history.

CNS is currently operating at a loss, and there is no assurance that its business development plans and strategies will ever be successful, or that its services will be favorably perceived and accepted by our assumed potential client populations in the Tampa-bay area or anywhere else.  Although its services appear to have been beneficial to clients, there can be no assurance that the experience to date is indicative of results that might be expected from an expanded sample or base. In order for the Company to continue CNS operations it will need additional capital and it will have to successfully coordinate integration of CNS operations without materially and adversely affecting continuation and development of other Company operations.     

Distribution of Ultra Violet ("UV") Phototherapy Devices - PSI

On August 24, 2012, we consummated the acquisition of all of the issued and outstanding shares of stock in PSI. PSI is now operated as a wholly-owned subsidiary of the Company, with three full-time employees and several independent contractors.   We believe that PSI’s operations and services will provide an attractive complement to the Company’s operations and products and represent a viable alternative to current approaches to Ultra Violet (UV) phototherapy treatment of skin diseases.   

PSI is a medical device design and manufacturing company.  It designs, develops and markets a targeted ultraviolet (“UV”) phototherapy device called the Psoria-Light. The Psoria-Light is designated for use in targeted PUVA photochemistry and UVB phototherapy and is designed to treat certain skin conditions including psoriasis, vitiligo, atopic dermatitis (eczema), seborrheic dermatitis, and leukoderma.   PSI intends to enter into agreements with third parties, in the United States and internationally, for the manufacture of component parts that make up the Psoria-Light and to license its proprietary technology to third parties domestically and in selected foreign markets.  

The Psoria-Light consists of three components: a base console, a color display with touchscreen control, and a hand-held delivery device with a conduit (or tether) between the handheld device and the base console.  PSI requires clearance by the United States Food and Drug Administration (“FDA”) to market and sell the device in the United States as well as permission from TUV SUD America Inc., PSI’s Notified Body, to affix the CE mark to the Psoria-Light in order to market and sell the device in countries of the European Union. To obtain FDA clearance and permission to affix the CE mark, PSI was required to conduct EMC and electrical safety testing, which it completed in the second quarter of 2011.  PSI received FDA clearance on February 11, 2011 (no. K103540) and was granted permission to affix the CE mark on November 10, 2011.  In its 510(k) application with the FDA (application number K103540), PSI asserted that the Psoria-Light was “substantially equivalent” in intended use and technology to two predicate devices, the X -Trac Excimer Laser, which has wide acceptance in the medical billing literature and has a large installed base in the U.S., and the Dualight, another competing targeted UV phototherapy device.    

Psoriasis, eczema, and vitiligo, are common skin conditions that can be challenging to treat, and often cause the patient significant psychosocial stress. Patients undergo a variety of treatments to address these skin conditions, including routine consumption of systemic and biologic drug therapies which are highly toxic, reduce systemic immune system function, and come with a host of chemotherapy-like side effects. Ultraviolet (UV) phototherapy is a clinically validated treatment modality for these disorders.

Traditionally, “non-targeted” therapy was administered by lamps that emitted either UVA or UVB light to both diseased and healthy skin. While sunblocks or other UV barriers may be used to protect healthy skin, the UV administered in this manner must be low dosage to avoid excessive exposure of healthy tissue. Today, “targeted” UV phototherapy devices administer much higher dosages of light only to affected tissue, resulting   in “clearance” in the case of psoriasis and eczema, and “repigmentation” in the case of vitiligo, at much faster rates than non-targeted (low dosage) UV treatments.

Targeted UV treatments are typically administered to smaller total body surface areas, and are therefore used to treat the most intense parts of a patient’s disease. Non-targeted UV treatment is typically used as a follow-up and for maintenance, capable of treating large surfaces of the body. Excimer laser devices (UVB at 308nm) are expensive and consume dangerous chemicals (Xenon and Chlorine). Mercury lamp devices (UVB and/or UVA) require expensive lamp replacements regularly and require special disposal (due to mercury content). Additionally, mercury lamp devices typically deliver wavelengths of light below 300nm. While within the UVB spectrum, it has been shown that wavelengths below 300nm produce significantly more “sunburn” type side effects than do wavelengths between 300 and 320nm without improvement in therapeutic benefit.



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The Psoria-Light is a targeted UV phototherapy device which produces UVB light between 300 and 320 nm as well as UVA light between 350 and 395nm, does not consume dangerous chemicals or require special environmental disposal and is cost effective for clinicians, which will increase patient access to this type of treatment.  It has several unique and advanced features that we believe will distinguish it from the non-targeted and targeted UV phototherapy devices that are currently being used by dermatologists and other healthcare providers. These features include the following: the utilization of deep narrow-band UVB (“NB-UVB”) LEDs as light sources; the ability to produce both UVA or NB-UVB therapeutic wavelengths; an integrated high resolution digital camera and patient record integration capabilities; the ability to export to an external USB memory device a PDF file of patient treatment information including a patent pending graph that includes digital images plotted against user tracked metrics which can be submitted to improve medical reimbursements; an accessory port and ability to update software; ease of placement and portability;    advanced treatment site detection safety sensor;  international language support;  a warranty which includes the UV lamp(s); and  a non-changeable treatment log (that does not include HIPPA information).

Mr. Johnson has led initial steps to develop and market the Psoria-Light device. He has substantial experience in promoting difficult-to-sell medical devices (i.e., medical devices that are expensive and that do not have an established billing code for reimbursement) in difficult-to-penetrate and non-traditional markets (i.e., military and space markets).  He also has a solid track record of working together to develop space technology partnerships and technical product marketing programs.  Mr. Johnson has extensive experience in medical device and LED-based optics design, manufacturing and sales.   Mr. Johnson has begun assembling a sales and marketing team, which consists of their U.S. Sales Manager, a group of experienced independent  sales representatives, and an experienced marketing consultant, as well as a quality and regulatory team, which consists of Mr. Johnson and a group of experienced independent quality and regulatory consultants, with substantial experience in submitting 510(k) applications, receiving and maintaining FDA approval, and setting up and maintaining certified quality systems which are subject to scrutiny by domestic and international regulatory authorities.  

PSI has established an ISO 13485 compliant quality system for the Psoria-Light, which was first audited in the third quarter of 2011.   This system is intended to ensure PSI devices will be manufactured in a controlled and reliable environment and that its resources follow similar practices and is required for sales in countries requiring a CE mark.  PSI has also received Certified Space Technology designation from the Space Foundation, based on PSI’s incorporation of established NASA-funded LED technology.   

PSI has registered a variety of domain names and established an initial website to include in depth information regarding psoriasis, eczema, vitiligo, and the Psoria-Light device. It has developed informational videos, flyers, booklets and tradeshow materials, as well as a database of U.S. dermatologists that can be used to assist sales personnel in contacting dermatologists that might be interested in the Psoria-Light device.

We expect to build upon PSI’s current development and marketing efforts, however, PSI only started to sell the devices since January 2012 with a limited operating history. It is currently operating at a loss, and there is no assurance that its business development plans and strategies will ever be successful. PSI’s success depends upon the acceptance by healthcare providers and clients of Psoria-Light treatment as a preferred method of treatment for psoriasis and other UV-treatable skin conditions.   Psoria-Light treatment appears to have been beneficial to clients, without demonstrable harmful side effects or safety issues, and PSI has serviced approximately 100 clients since PSI started to sell the device in January 2012.   In order for the Company to continue PSI operations it will need additional capital and it will have to successfully coordinate integration of PSI operations without materially and adversely affecting continuation and development of other Company operations.  

Management

Presently, all business functions of the Company are managed by our CEO/director and founder, Andrew J. Kandalepas. He is responsible for developing and planning our business units, including product development, organizational structure, financing and administrational functions. His services shall be utilized until the Company is financially capable to engage additional staffing. Mr. Kandalepas has elected not to receive any compensation for his services, until the Company is financially capable to compensate him. He also serves on the Company’s board of directors, supported by five other directors.

We will rely upon CNS’s current executive management team to operate CNS’ business. The CNS management team currently includes William A. Lambos and Peter A. Hannouche. These two individuals founded CNS, developed its operation and business plans, serve as its principal executive officers, and manage all aspects of the business. Although we have employment agreements with Mr. Lambos and Mr. Hannouche, we cannot guarantee that either of them will remain affiliated with us.

We will rely upon PSI’s current executive management, Mr. Scot L. Johnson, to operate PSI’s business. Mr. Johnson founded PSI, developed its operation and business plans, serves as its principal executive officer, and manages all aspects of the business. Although we have an employment agreement with Mr. Johnson, we cannot guarantee that he will remain affiliated with us.



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Results of Operations - CNS

For the Fiscal Year Ended September 30, 2011 and 2010

For the fiscal year ended September 30, 2011 and 2010, we had $277,670 and $552,511 in revenue, respectively. Total operating expenses for the twelve months ended September 30, 2011 amounted $522,482, total other (income) expenses for the twelve months ended September 30, 2011 amounted 9,805, resulting in a net loss of $244,812, as compared to total operating expenses of $489,379, other (income) expenses of $421, and a net loss of $62,711 for the twelve months ended September 30, 2010. Total operating costs for the twelve months ended September 30, 2011 included $198,804 in payroll and contract labor, $99,829 in marketing expenses, $114,448 in rent expense, and $109,401 in general and administrative expenses.

For the Nine Months Ended June 30, 2012 and 2011

For the nine months ended June 30, 2012 and 2011, we had $223,540 and $171,570 in revenue, respectively. Total operating expenses for the nine months ended June 30, 2012 totaled $297,684, total other (income) expenses for the nine months ended June 30, 2012 amounted 8,377, resulting in a loss of $82,521, as compared with total operating expenses of $404,103, other (income) expenses of $7,144, and a net loss of $239,677 for the nine month period ended June 30, 2011. Total operating costs for the nine months ended June 30, 2012 included $109,275 in payroll and contract labor expenses, $13,526 in marketing expenses, $101,213 in rent expense, and $73,670 in general and administrative expenses.

Liquidity and Capital Resources

As of September 30, 2012, our cash balance was $112,494 inclusive $86,141 held by WCUI, $8,798 held by CNS and $17,555 held by PSI. The management estimated that our current monthly burn rate to be approximate $107,000 inclusive of $15,000 for WCUI, $34,000 for CNS and $58,000 for PSI, respectively. Our current cash on hand is not sufficient to maintain our daily operations for the next 12 months. The management of the Company intends to raise additional capital through private equity transactions or debt financing to fund our daily operations through next 12 months, however no assurance can be given that we will be successful in raising additional capital through private equity transactions or debt financing during the period.  For the Period from October 1, 2012 through December 31, 2012, the Company has raised approximately $300,000 through the sale of certain equity units inclusive of one (1) share of our common stock and a warrant to purchase one (1) share of our common stock.  In the event that we are unable to raise sufficient capital through private equity transactions or debt financing we may have to reduce our operating expenses and maintain minimum level of operations.

Our independent registered public accounting firm issued a going concern opinion. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Patents, Trademarks, Franchises, Concessions, Royalty Agreements, or Labor Contracts

PSI received FDA clearance for the Psoria-Light on February 11, 2011 (no. K103540) and was granted permission to affix the CE mark for the Psoria-Light in the fourth quarter of 2011.     



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Mr. Johnson filed a provisional patent application covering certain aspects of the technology that we intend to utilize in the development and commercialization of the Psoria-Light, including handheld ergonomics, emitter platform and LED arrangements, methods for treatment site detection, cooling methods, useful information displays, collection of digital images and graphical correlation to quantitative metrics, and base console designs. Two non-provisional patent applications were submitted by Mr. Johnson claiming the prior filing date of the initial provisional application. The first non-provisional application describes a unique distance sensor located at the tip of the Psoria-Light hand-piece, which detects the treatment site based on a projected field. The sensor can detect electrolytic/conductive surfaces, such as human skin, without requiring any physical or direct electrical contact. Further, the unique sensor can sense the treatment site at any point about the tip of the hand-piece and without causing any attenuation of the therapeutic UV light output. The second non-provisional application describes the integration and use of a digital camera in the Psoria-Light, including the location of the digital camera and how and when it is used to conveniently correspond to real-life treatment routines, how images are displayed and captured to memory, and how the images are arranged in patient records are illustrated. Additionally, the second non-provisional application describes the inclusion of clinician defined variables, such as health-related quality of life scores, and their placement into a graphical arrangement relative to treatment site images. Both the initial provisional patent application and the two non-provisional patent applications are owned by Mr. Johnson, who  has granted PSI the  sole and exclusive, worldwide, paid-up, royalty-free, perpetual license under the initial provisional patent application, any non-provisional patent applications filed by Mr. Johnson covering the technology described in the initial provisional patent application, and associated know-how, technical data, and improvements to develop and commercialize the Psoria-Light.

Mr. Johnson filed a second provisional patent application containing concepts for the improvement of microelectronics packages and thermal management solutions, the improvement of handheld phototherapy devices in general (either used on humans, animals, or plants, or used on inanimate objects), and replacement of laser therapy devices with LED devices. This second provisional patent application is owned by Mr. Johnson who has granted PSI the sole and exclusive, worldwide, paid-up, royalty-free, perpetual license under this second provisional patent application, any non-provisional patent applications filed by Mr. Johnson covering the technology described in the second provisional patent application, and associated know-how, technical data, and improvements to develop and commercialize the Psoria-Light.

The first and second exclusive license agreements are included as Exhibits 10.4 and 10.5, respectively, to this Current Report.  These licenses are the legal documents which govern the terms of PSI’s authority to develop and commercialize the Psoria-Light technology described therein and the other actions contemplated thereby.   The discussion of the licenses set forth herein is qualified in its entirety by reference to Exhibits 10.4 and 10.5.

We will assess the need for any additional patent, trademark or copyright applications, franchises, concessions royalty agreements or labor contracts on an ongoing basis.

Employees

We currently employ our executive officers, four (4) full-time and eleven (11) part-time employees within CNS, three (3) full-time employees and five (5) part time employees within PSI.  We have employment agreements with Mr. Lambos, Mr. Hannouche, Mr. Johnson, but none with Mr. Kandalepas, who currently serves as our Chairman, President, CEO and CFO .  

Summary of Significant Accounting Policies.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with generally accepted accounting principles 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 financial instruments; the carrying value, recoverability and impairment, if any, of long-lived assets, including the values assigned to and the estimated useful life of office equipment; 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); income tax rate, income tax provision, deferred tax assets, deferred tax assets and the valuation allowance of 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.



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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.

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.

It is not, however, practical to determine the fair value of advances from stockholders, if any, due to their related party nature.

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 office equipment and website development cost, 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.



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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.

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. amounts 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.

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.

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 718-50-S99-1, it may be appropriate to use the simplified method , 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.




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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.

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.

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.

Recently Issued Accounting Pronouncements

FASB Accounting Standards Update No. 2011-08

In September 2011, the FASB issued the FASB Accounting Standards Update No. 2011-08 “ Intangibles—Goodwill and Other: Testing Goodwill for Impairment” (“ASU 2011-08”). This Update is to simplify how public and nonpublic entities test goodwill for impairment. The amendments permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount.

The guidance is effective for interim and annual periods beginning on or after December 15, 2011. Early adoption is permitted.

FASB Accounting Standards Update No. 2011-11

In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-11 “Balance Sheet: Disclosures about Offsetting Assets and Liabilities” (“ASU 2011-11”). This Update requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The objective of this disclosure is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of IFRS.



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The amended guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods.

FASB Accounting Standards Update No. 2012-02

In July 2012, the FASB issued the FASB Accounting Standards Update No. 2012-02 “ Intangibles—Goodwill and Other (Topic 350) Testing Indefinite-Lived Intangible Assets for Impairment” (“ASU 2012-02”).

This Update is intended to reduce the cost and complexity of testing indefinite-lived intangible assets other than goodwill for impairment. This guidance builds upon the guidance in ASU 2011-08, entitled  Testing Goodwill for Impairment . ASU 2011-08 was issued on September 15, 2011, and feedback from stakeholders during the exposure period related to the goodwill impairment testing guidance was that the guidance also would be helpful in impairment testing for intangible assets other than goodwill. 

The revised standard allows an entity the option to first assess qualitatively whether it is more likely than not (that is, a likelihood of more than 50 percent) that an indefinite-lived intangible asset is impaired, thus necessitating that it perform the quantitative impairment test. An entity is not required to calculate the fair value of an indefinite-lived intangible asset and perform the quantitative impairment test unless the entity determines that it is more likely than not that the asset is impaired.

This Update is effective for annual and interim impairment tests performed in fiscal years beginning after September 15, 2012.  Earlier implementation is permitted.

Other Recently Issued, but not yet Effective Accounting Pronouncements

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.

Going Concern

As reflected in the financial statements, the Company had a deficit accumulated during the development stage at June 30, 2012, a net loss and net cash used in operating activities for the interim period then ended, respectively.

While the Company is attempting to commence operations 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 generate sufficient revenues and in its ability to raise additional funds, 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.

The 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.

Controls and Procedures

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are not effective as of July 30, 2012 because we do not have sufficient staff to segregate responsibilities and no written documentation of internal control policies. We plan to seek to correct these deficiencies during the current fiscal year or the next.

There have been no changes in our internal control over financial reporting that occurred through the date of this Current Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



32



ITEM 3. PROPERTIES.

Our principal executive offices are located at 1014 E. Algonquin Road, Suite 111, Schaumburg, Illinois 60173. Our telephone number is (847)-925-1885.  We occupy the office space pursuant to a sub-lease executed as of December 20, 2010 for a period of one year expiring December 31, 2011, with the base rent of $1,909.50 per month, which has been subsequently extended through December 31, 2013 with the same terms and conditions.   The sub-lease is with a related party.   See Item 7.

CNS offices are located at Two Urban Centre, 4890 West Kennedy Boulevard, Suite 295, Tampa, Florida 33609.   CNS’ telephone number is (813) 235-4270.  CNS occupies the location pursuant to a lease executed by CNS as of August 11, 2010 which extends through February 28, 2016, with initial monthly base rent of $10,621.33, which is subject to annual increases at the rate of 3%, and additional rent in the form of a pro-rata share of common area maintenance operating and maintenance expenses.   

PSI offices are located at 6408 West Linebaugh Avenue, Suites 103 and 104, Tampa, Florida 33625.   PSI’s telephone number is (866) 725-0969.  In January, 2011 PSI occupies both Suites 103 and 104 pursuant to a lease executed by PSI which was extended through January, 2013, with monthly base rent of $3,000.00, which was subject to additional rent in the form of a pro-rata share of common area maintenance operating and maintenance expenses.  The combined suites comprised a total of approximately 3,050 square feet and included office space, a sales area, space for inventory, manufacturing and receiving operations, as well as an engineering lab and video conferencing room. In January 2013 PSI renewed the lease to only occupy Suite 103, with monthly base rent of $2,000.00, which was subject to additional rent in the form of a pro-rata share of common area maintenance operating and maintenance expenses.  The Suite 103 comprised approximately 2,000 square feet and included office space, a sales area, space for inventory, manufacturing and receiving operations, as well as an engineering lab and video conferencing room.

ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

Principal Stockholders.

The following table presents certain information regarding the beneficial ownership of all shares of common stock at the date of this Current Report, for each executive officer and director of our Company and for each person known to us who owns beneficially more than five percent (5%) of the outstanding shares of our common stock. The percentage ownership shown in such table is based upon the 30,391,570 common shares issued and outstanding, following consummation of the CNS and PSI share exchange transactions.

Name and Address of Beneficial Owner (1)

No. Of

Shares

 

Percentage

 


ANDREW J. KANDALEPAS (*)

1527 LEXINGTON CIRCLE

SCHAUMBURG, IL 60173

3,665,000

 

12.1%

 


WILLIAM A. LAMBOS, Ph.D.(*)

16115 CRAIGEND PLACE,

ODESSA, FL   33556

3,650,000

 

12.0%

 


PETER A. HANNOUCHE(*)

920 WEEDON DRIVE NE

ST. PETERSBURG, FL  33702

3,650,000

 

12.0%

 


SCOT L. JOHNSON (*)

12743 COUNTRY BROOK LN

TAMPA, FL  33702

3,005,000

 

9.8%

 


EVAN T. MANOLIS (*)

11311 POPLAR CREEK

ORLAND PARK, IL 60467

225,000

 

0.7%

 


PERIKLIS PAPADOPOULOS (*)

2155 FRANCIS AVE.

SANTA CLARA, CA  95051

225,000

 

0.7%

 


Officers and directors as a group (*)

14,420,000

 

47.3%

 


(*)

Each of the persons named above may be deemed to be a "parent" and “promoter" of the Company, within the meaning of such terms under the Securities Act of 1933, as amended, by virtue of his direct holdings in the Company.



33




ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS.

Directors, Executive Officers and Control Persons.


The following table sets forth the names and ages of our current directors and executive officers. Also the principal offices and positions with us held by each person and the date such person became a director or executive officer. Each executive officer was appointed by our Board of Directors. Our directors serve until the earlier occurrence of the election of his or her successor at the next meeting of stockholders, death, resignation or removal by the Board of Directors. There are no family relationships among our directors, and executive officers.


 

 

 

 

Name

Age

Position

Date

Andrew J. Kandalepas

60

Chairman, President, Chief Executive Officer and Chief Financial Officer

June 2010

Periklis Papadopoulos

49

Director

Nov. 2010

Evan T. Manolis

54

Director, Secretary

Nov. 2010

William A. Lambos, Ph.D.

55

President, Chief Scientific Officer, CNS Director

August 2012

Peter A. Hannouche

47

Chief Executive Officer, CNS Director

August 2012

Scot L. Johnson

37

President, Chief Executive Officer, PSI Director

August 2012


Andrew J. Kandalepas - Chairman, President, Chief Executive Officer and Chief Financial Officer


Recent and Present Professional History:


·

Senior Vice President and Director GeoVax Labs, Inc. / Atlanta, GA

·

President, CEO and Chairman Dauphin Technology, Inc. / Palatine, IL


Mr. Kandalepas has a varied 30+ year s career as an entrepreneur and executive manager in private and publicly traded companies, particularly in the high-tech and biomedical sectors. His involvement in the public sectors started following 10 successful years with Motorola and the establishment of CadServ Corporation, a privately owned Engineering Solutions boutique service provider to major electronic OEM’s. He earned his BA degree from DeVry University in 1974.


From 1995 to 2006, he served as the Chief Executive Officer and Chairman of the Board of Dauphin Technology, Inc., a leading developer of mobile hand writing recognition tablets and Broad Band Set Top Boxes. As a major stockholder in the corporation, he accepted the position as CEO/COB in 1995, at a time when Dauphin Technology Inc. was in the midst of bankruptcy proceedings and needed someone capable to lead the company out of bankruptcy. Indeed, Mr. Kandalepas spearheaded the challenge and was successful in resolving the Company’s $52 Million bankruptcy debt. He then developed business plans which carried Dauphin Technology through several acquisitions and partnerships to the benefit of the corporation’s shareholders.


In 2006, Mr. Kandalepas designed and executed a successful reverse merger between Dauphin Technology and GeoVax, Inc., creating GeoVax LABS Inc., an HIV/AIDS vaccine research and development firm located in Atlanta, Georgia. GeoVax’s preventive as well as its therapeutic vaccines are presently undergoing human trials testing, sponsored by the National Institutes of Health (NIH) and AIDS Research Consortium of Atlanta (ARCA), respectively. Until his resignation in July of 2009, Mr. Kandalepas was a member of GeoVax’s Board of Directors and served as the Company’s Senior Vice President. During his combined tenure at Dauphin Technology, Inc. and GeoVax Labs, Inc., he was successful in achieving more than $60 million in capital raisings, through various private placements.


Following a brief career break, from July 2009 to May 2010, Mr. Kandalepas founded Wellness Center USA, Inc., in June of 2010. Wellness Center USA, Inc., is a start-up firm engaged in developing an internet store business to market customized nutritional supplement solutions. From inception to present, Mr. Kandalepas has assumed several leading roles, including President and Chief Executive Officer, to organize, finance and execute the company’s business plan which this Current Report is a part of. He is also serving as a director on the Company’s Board.


Mr. Kandalepas’s extensive entrepreneurial experience combined with his strong knowledge of the financial sectors through his 15 years executive roles in running public companies; brings strong credibility to the Company’s executive team. His proven ability to lead and help finance development stage companies, will be key in executing the company’s business plan and building a successful enterprise in the health care sector and potentially public arena.



34




Mr. Kandalepas is an active participant in the local Greek community and was instrumental in the establishment of St. Athanasios Greek Orthodox Greek Seminary, located in McHenry County, Illinois. Mr. Kandalepas is a proud husband to Cynthia and father of two.


Periklis Papadopoulos, Ph.D. - Director


Recent and Present Professional History:


·

President and CEO Space Systems Corp. / Atherton, CA.

·

Full Time Professor San Jose State University / San Jose CA.

·

Senior Staff - Aeronautical Engineer / Sunnyvale, CA.


Dr. Papadopoulos earned his Bachelor s degree in Mechanical and Aerospace Engineering from Illinois institute of Technology and Master’s and Doctorate Degrees from Stanford University. During his education he was honors listed. Dr. Papadopoulos is a graduate of the Aeronautics and Astronautics department at Stanford, class of ’92 where he was recognized with the best thesis award. He is also a member of the honors societies TAU-BETA-PI National Engineering Honorary Society and PI-TAU-SIGMA National Mechanical Engineering Honorary Fraternity.


He served as senior research scientist at NASA-ARC / ELORET – Thermosciences Institute for over 15 years where he participated and project lead planetary mission studies, space transportation and re-entry programs. Programs that he was involved include the reusable launch vehicles X-33, X-34, X-38 and XCRV, space shuttle contingency abort, Space Launch initiative (SLI), Mars Science Laboratory, Mars Pathfinder, Galileo probe, and Venus Composition Probe, amongst others. He also served as a member of the NASA-ARC COBRA team for designing a next generation Mars Entry vehicle able to land heavy payload delivery systems. His scientific contributions to the space program have been published in over 60 conference and journal publications. In his tenure at NASA, he was recognized with several spotlight awards for his outstanding contributions, public service award to the space program, including NASA’s prestigious Turning Goals Into Reality (TGIR) award. He has also been invited speaker at the JANNAF Interagency Propulsion Committee, AIAA Thermophysics conference, and International Conference on Numerical Grid Generation in Computational Field Simulations,


Dr. Papadopoulos is the founder and CEO of Space Systems, LLC, founded in 2003. He lead a team of researchers that successfully completed and awarded several contracts from the US Department of the Air Force, Headquarters Flight Test Center (AFMC), the Air Force Research Laboratory (AFRL) Advanced Vehicles Concepts branch of the Propulsion Directorate at Edwards Air Force Base, ERC and NASA ARC.


The goals of the organization are focused in developing and participating with technology innovation and commercialization, which addresses specific and detailed governmental agency needs within NASA, DoD, DoE, DARPA and similar branches. He has established partnership and teaming agreement with Lockheed Martin Technical Operations (LMTO). The AFRL, AFMC, ERC, NASA awarded contract topics include:


·

Novel Analysis Tools for Rapid Evaluation of Advanced Propulsion Systems (REAPS), AFRL Contract Number FA9300-04-C-0047 (Phase I and Phase II awards.)

·

Advanced Modeling & Simulation (M&S) of Complex Non-Equilibrium Plasma Flows for Micro-satellite Propulsion, AFRL contract number F04611-03-M-3035, (Phase I award.)

·

Combustion chamber Ablation Modeling CCAM (Phase II enhancement contract award), AFMC Contract Number F04611-03-M-3038

·

High Altitude Access to Space Feasibility Study (Phase II enhancement contract award), AFRL Contract Number FA9300-04-C-0047 Enhancement.

·

Launch Vehicle Power Trajectory Modeling and Co-Optimization Code (Phase II enhancement contract award), AFRL Contract Number FA9300-04-C-0047 Enhancement.

·

Two NASA contract were awarded to provide Three-Dimensional CFD Modeling of the ATROMOS Mars Entry Architecture under Purchase Order NNA08CG19P with NASA Ames Research Center.

·

GPU Implementation of Large-Scale Simulations For Non-Equilibrium Fluid and Plasma Dynamics. AFRL subcontract with Air Force on site contractor ERC.



35




·

Dr. Papadopoulos, currently holds a tenure, full professor, position at California s San Jose State University. He is the director/founder of the Center of Excellence for Space Transportation and Exploration. He was the co-investigator and probe developer for the ATROMOS/NASA Mars Polar Lander. He directed the microsatellite and cube-sat program and laboratory at SJSU. He established a high performance computing cluster sponsored by the INTEL Corporation. He established a memorandum of understanding between the SJSU/MAE department and the Lockheed Martin Co. (LMCO and LMTO) for development of business opportunities in the areas of space transportation, propulsion, and engineering and technology services and to jointly submit proposals to government agencies. He coordinated the SJSU/LMCO on sight cohort graduate Aerospace Engineering Program. He supervised student’s publication that obtained best paper awards at the AIAA Atmospheric Flight Mechanics Conference in San Francisco, Ca. August 2005, 3rd place at the International Planetary Probe Workshop III in Athens, Greece, 3rd place at the AIAA western regional student conference in the graduate division, and best student award at the International Planetary Probe Workshop VI in Atlanta, Georgia, 2008. Dr. Papadopoulos, has served as member of the International Steering committees of the International Planetary Probe Workshop (IPPW) and the International Society of Grid Generation (ISGG) in numerical field simulations. Organized the 9th International conference on Numerical Grid Generation in Computational Field Simulations at San Jose State University, the 2 nd , 3 rd , 4 th , 5 th and 6 th conferences on planetary probes and the Thermal and Fluids Analysis Workshop (TFAWS).


Dr. Papadopoulos’s vast academic career and strong entrepreneurial experience in the aeronautical field shall be of great value and benefit to Wellness Center USA, Inc. His scholar, research and strong development experience, bring invaluable diversity to the company’s board and management in introducing new applications in generally untapped markets.


Evan T. Manolis, MD - Director, Secretary


Recent and Present Professional History:


·

Practicing Physician in Plastic and Reconstructive Surgery Self Employed / Orland Park, IL

·

President Evan Manolis & Associates / Orland Park, IL

·

President MIA Medical Spa / Orland Park, IL

·

Director Acron Genomics / London, England


Dr. Manolis is a veteran plastics and reconstructive surgeon in the Chicago-land area, with extensive personal experience in medical spa establishment, management and marketing. He has served in advisory roles to local hospitals for practice developments. Further, Dr. Manolis presently serves as chairman of an international biotech company involved in point of care diagnostics technology development in association with Imperial College, in London.


Education: He earned his B.S. in Biology at the University of Illinois, in Chicago (1976-1981). From 1987-1991 he attended school of medicine at Southern Illinois University, where he earned his M.D. Post graduate training and residency were conducted at the Medical College of Ohio, 1991-1996, followed by Reconstructive and Plastic Surgery Residency at the school of medicine at Southern Illinois University, 1996-1998. His microsurgery and hand fellowship were completed at the school of medicine, University of Nevada, 1998-1999.


Dr. Manolis’s medical and health care knowledge adds invaluable expertise to the Board of Directors of Wellness Center, USA. Further, his business experience and public market knowledge extend additional contributions to the company’s executive team.


William A. Lambos, Ph.D. Director, President, Chief Scientific Officer, CNS


Recent and Present Professional History:


William A. Lambos, Ph.D., is a licensed Psychologist and the President and Chief Cognitive Neuroscientist CNS Wellness, Florida, LLC.  He is an experienced psychologist with a postdoctoral certification in clinical neuropsychology, and is licensed to practice in the States of in Florida (PY8140) and California (PSY21786).  He is Board Certified in Neurofeedback Therapy by the Biofeedback Certification International Alliance (BCIA), Certified in qEEG Analysis by the Society for Advancement of Brain Analysis (SABA), Certified in Advanced Rational Emotive Therapy by the Albert Ellis Institute & The Rational Living Foundation.  Dr. Lambos is a Supreme Court Certified Family and County Mediator in the State of Florida.



36




Dr. Lambos possesses a strong background in experimental and clinical psychology, neuropsychology, broad neuroscience, EEG-based approaches to brain analysis and treatment, cognitive science, quantitative & multivariate statistical analysis, and information technologies.  He was the owner and president of a technical consultancy firm with over 10 employees and annual revenues exceeding $1 million for over 15 years.  The firm, WAL Consulting, Inc., specialized in custom database application program development for the insurance and shipping industries, as well as developing, reselling and configuring high-end solutions in paperless technologies and distributed information systems design, coding and implementation.  Dr. Lambos has himself written over three million lines of commercially used computer code in languages from assembly code to high-level coding languages such as C++, Pascal and Delphi, and thin client platforms using PERL, JavaScript and HTML.


Dr. Lambos has been a faculty member at McMaster University, St. Petersburg College and the University of South Florida.  He has taught undergraduate and graduate level courses in psychology, neuroscience and computer science.


Dr. Lambos received his Masters and Doctorate degrees in Psychology from McMaster University.  He holds a Master’s degree in Rehabilitation and Mental Health Counseling from the University of South Florida, and received a postgraduate Certificate in Clinical Neuropsychology from Fielding Graduate University.


Dr. Lambos is the author or co-author of three books on marriage and family counseling, and a variety of other publications in both peer-reviewed journals, magazines and book chapters.


Peter A. Hannouche Director, Chief Executive Officer, CNS


Recent and Present Professional History:


Peter A. Hannouche is the Chief Executive Officer and a 50% Equity Owner of CNS Wellness Florida LLC.  He made his investment in CNS Wellness in 2009 after receiving services himself.  He was so impressed with the approach, technology and results of his experience that he convinced Dr. Lambos to form a joint venture company to expand and develop the vision and possibilities of CNS Wellness.


Mr. Hannouche has extensive experience in the Hospitality, Food Service and Property Development Industries.  Prior to his investment in, and full-time employment by, CNS Wellness, Mr. Hannouche was an owner and operator of group of companies in Tampa, including Tampa Concessions, Inc., 720 South Howard, LLC, Hyde Park Properties, LLC, PTC Investments LLC, and the well known Tampa “Whiskey” Brand (Whiskey Soho, Whiskey North, etc.).  He also owned and operated a large number of commercial real estate properties.  Collectively, his business assets attained a market value in excess of $25 million, and revenues in excess of $10 million per year.


Mr. Hannouche has managed over 300 employees concurrently in his combined portfolio of properties.  By age 28, he operated five business locations with annual sales of over $22 million.  At age 33, he relocated to Tampa, FL and, with partners, opened seven locations that dominated the Tampa market in late night entertainment and dining.


Mr. Hannouche sold his equity in most of his interests and properties in 2008 at the height of the real estate boom.  Looking for an opportunity to use his skills and vision to help others, he adopted a personal and professional mission to bring CNS Wellness to as many other individuals as possible and remains tenaciously committed to ensuring that clients achieve wellness and inner peace through CNS methods.


Scot L. Johnson Director, President and Chief Executive Officer, PSI


Mr. Johnson has served as the President, Secretary and as a member of the Board of Directors of PSI since June 2009.   He previously served as PSI’s Chief Technology Officer. He has more than 15 years of biomedical engineering and manufacturing experience. His accomplishments include development and life-cycle management of over 30 FDA-cleared, CE marked Class II medical devices (diagnostic and therapeutic). He has also monitored and participated in more than 40 clinical studies, written more than 14 patent applications (five currently published), and has experience managing teams of up to 11 full-time engineers (reporting directly). Before joining PSI, Mr. Johnson served in clinical design engineering and contract manufacturing for Dolphin Medical, developing and manufacturing LED based medical devices.  Mr. Johnson has served as a technical consultant and Engineering Director for Axiom Worldwide, LLC, a company that designed, manufactured, and marketed spinal decompression equipment. While working with Axiom Worldwide, LLC, he designed automated chiropractic equipment and electrical stimulation devices, initiated and developed a strategic partnership program, co-developed a certified space technology partnership, authored technical specifications for eight patent applications, and co-developed a successful military sales expansion effort.  Mr. Johnson graduated from the University of South Florida in 2000 with a Bachelor of Science in Electrical Engineering and successfully completed his professional project management coursework in Spring 2004 through the Villanova Project Management Institute.  



37




Audit Committee.


We do not have a standing audit committee of the Board of Directors. The Board of Directors determined not to establish an audit committee at present because of our limited resources and limited operating activities do not warrant the formation of an audit committee or the expense of doing so. We do not have a financial expert serving on the Board of Directors or employed as an officer based on management’s belief that the cost of obtaining the services of a person who meets the criteria for a financial expert under Item 401(e) of Regulation S-B is beyond its limited financial resources and the financial skills of such an expert are simply not required or necessary for us to maintain effective internal controls and procedures for financial reporting in light of the limited scope and simplicity of accounting issues raised in its financial statements at this stage of its development.


Certain Legal Proceedings.


No director, nominee for director, or executive officer of the Company has appeared as a party in any legal proceeding material to an evaluation of his ability or integrity during the past five years.


Compliance With Section 16(A) Of The Exchange Act.


Section 16(a) of the Exchange Act requires the Company’s officers and directors, and persons who beneficially own more than 10% of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and are required to furnish copies to the Company.


ITEM 6. EXECUTIVE COMPENSATION.

Summary Compensation.            


Our CEO currently receives no compensation. The current Board of Directors is comprised of Mr. Kandalepas, Mr. Manolis, Mr. Papadopoulos, Mr. Lambos, Mr. Hannouche and Mr. Johnson.


Summary Compensation Table – for the period from June 30, 2010 (inception) through September 30, 2012:


 

 

 

 

 

 

 

 

 

Name & Principle Position


Year

($)


Salary

($)

Other Annual

Compensation

Bonus ($)

Restricted

Stock

(Shares)

Options

Awards

(Shares)

LTIP

SARs ($)


Payouts

($)

All Other

Compensation

($)

Andrew J. Kandalepas,

President and CEO

2012

0

0

0

0

0

0

0

 

2011

0

0

0

0

0

0

0

(1)

2010

0

0

3,665,000

1,600,000

0

0

0

 

 

 

 

 

 

 

 

 

Periklis Papadopoulos, Ph.D.,

Director

2012

0

0

0

0

0

0

0

(2)

2011

0

0

225,000

100,000

0

0

0

 

 

 

 

 

 

 

 

 

Evan T. Manolis, MD,

Director, Secretary

2012

0

0

0

0

0

0

0

(2)

2011

0

0

225,000

100,000

0

0

0

 

 

 

 

 

 

 

 

 

William A. Lambos, Pres. CNS, Director(3)

2012

0

0

3,650,000

0

0

0

0

 

 

 

 

 

 

 

 

 

Peter A. Hannouche,

CEO, CNS, Director (3)

2012

0

0

3,650,000

0

0

0

0

 

 

 

 

 

 

 

 

 

Scot L. Johnson, Pres. PSI, Director (4)

2012

0

0

3,005,000

0

0

0

0




38




(1)

Upon formation the Company issued to the Company’s founder (i) 3,665,000 shares of its common stock valued at par, or $3,665 and (ii) an option to purchase 1,600,000 shares of its common stock with an exercise price of $0.01 per share expiring five (5) years from the date of issuance valued at nil, on the date of grant, as officer's compensation.

(2)

On June 30, 2011 the Company issued 125,000 shares each or 250,000 shares of its common stock in aggregate, valued at $250 on the date of issuance to the two (2) outside members of the board of directors as compensation.

(3)

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, 3,650,000 each were issued to Mr. William A. Lambos and Mr. Peter A. Hannouche, respectively.

(4)

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, 3,005,000 of which were issued to Mr. Scot Johnson.


There are no annuity, pension or retirement benefits proposed to be paid to officers, directors or employees in the event of retirement at normal retirement date pursuant to any presently existing plan provided or contributed to by the Company or any of its subsidiaries, if any.


Employment Agreements.


We have employment agreements with our executive officers, Mr. Lambos and Mr. Hannouche, who serve as President/Chief Scientific Officer and Chief Executive Officer, respectively, of CNS, and with Mr. Johnson, who serves as President/ Chief Executive Officer, of PSI.  Each agreement is for a term of three years beginning August 2, 2012 and provides a base salary of $150,000, subject to increase, but not decrease, from time to time as determined by the Board of Directors.  Employment under each agreement is at will and terminable by either party at any time.   If an employment agreement is terminated by the executive for good reason (as defined therein), or by the Company other than for cause (as defined therein), the executive is entitled to pay through the termination date plus three month’s base pay for each full year of service then remaining. If an employment agreement is terminated by the executive for other than good reason, or by the Company for cause, the executive is entitled only to pay through the termination date and a portion of Company shares held by him or for his benefit are subject to forfeiture. Each agreement contains covenants not to compete, secrecy and non-interference which apply during employment and continue for a period of two years following termination.


This discussion of the employment agreements is qualified in its entirety by reference to the employment agreements, copies of which are included as Exhibits 5.1, 5.2, and 5.3 to this Current Report.            


Stock 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.


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 [non-qualifed stock option] 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



39




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.


ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.


Advances from Stockholder.


Advances from founder and officer, Mr. Andrew Kandalepas, at June 30, 2012 and September 30, 2011, consisted of the following:


 

 

June 30,

2012

 

September 30,

2011

Advances from officer

$

36,375

$

134,875


For the period from June 30, 2010 (inception) through September 30, 2012, the Company received advances from Mr. Andrew Kandalepas, its founder of $134,875 in aggregate for working capital purposes.


For the interim period ended June 30, 2012, the Company repaid advances of $98,500 to its founder.


Operating Lease with a Related Party.


On December 20, 2010 the Company entered into a non-cancellable sub-lease for the office space in Illinois with an entity controlled by the majority stockholder of the Company for $1,909.50 per month for the period from January 1, 2011 through December 31, 2011, which has been subsequently extended through December 31, 2013 with the same terms and conditions. Future minimum lease payments required under the non-cancelable operating lease are as follows:


Fiscal year ending September 30:

 

 

 

2013

 

$

5,728

 

 

 

 

 

$

5,728


Notes with Related Parties.


On August 9, 2010, CNS executed an interest bearing note in favor of a family member of one of its members in the principal amount of $37,139. The note accrues interest at a fixed rate of 5% per annum. Interest is computed on the basis of a 360-day year of twelve 30-day months for the actual number of days elapsed. The discussion of such note as set forth herein is qualified in its entirety by reference to Exhibit 10.1.


On August 2, 2012, CNS executed an interest bearing note in favor of William A. Lambos in the principal amount of $ 120,886.30, representing the aggregate amount advanced from time to time to CNS. The note accrues interest at a fixed rate of 2% per annum. The note is payable over in annual payments of interest only, with all principal and accrued interest payable in full on the third anniversary date. A copy of the note is included as Exhibit X.1 to this Current Report and is the legal document that governs the liability described therein. The discussion of such note as set forth herein is qualified in its entirety by reference to Exhibit 10.2.


On August 2, 2012, CNS executed an interest bearing note in favor of Peter A. Hannouche in the principal amount of $ 75,322.14, representing the aggregate amount advanced from time to time to CNS. The note accrues interest at a fixed rate of 2% per annum.   The note is payable over in annual payments of interest only, with all principal and accrued interest payable in full on the third anniversary date.  A copy of the note is included as Exhibit X.2 to this Current Report and is the legal document that governs the liability described therein. The discussion of such note as set forth herein is qualified in its entirety by reference to Exhibit 10.3.



40




Director Independence.


Currently, the Company does not have a policy that its directors or a majority of its directors be independent of management. The Company intends to implement a policy that a majority of the Board members be independent of the Company’s management as the members of the board of directors increases.


ITEM 8. LEGAL PROCEEDINGS.


We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.


ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.


Our common stock is quoted on the Over the Counter Bulletin Board under the symbol “WCUI”.  Such trading is limited and sporadic.  The following table reflects the high and low price information for our common stock for each fiscal quarter during the period commencing on the initial trading date of March 16, 2012, through September 30, 2012. 


Year Ended:    September 30, 2012

Low

High

 

 

 

Second quarter ended March 31, 2012

$0.40

$1.54

 

 

 

Third quarter ended June 30, 2012

$1.53

$2.00

 

 

 

Fourth quarter ended September 30, 2012

$0.32

$1.91


We have never declared or paid any dividends on our capital stock.   We currently intend to retain any available funds and future earnings, if any, for use in the operation of our business and do not anticipate paying any cash dividends in the foreseeable future.


ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.


See Item 3.02 of this Current Report, which describes sales of unregistered securities arising from the CNS and PSI share exchanges.


ITEM 11. DESCRIPTION OF REGISTRANT’S SECURITIES.


Common Stock.


We are authorized by our Articles of Incorporation to issue 75,000,000 shares of common stock, par value $0.001 per share. As of August 2, 2012, and following consummation of the CNS share exchange, there were 22,704,773 shares of common stock issued and outstanding. As of August 24, 2012, and following consummation of the PSI share exchange, there were 30,391,570 shares of common stock issued and outstanding. Holders of shares of common stock have full voting rights, one vote for each share held of record. Stockholders are entitled to receive dividends as may be declared by the Board out of funds legally available therefore and share pro rata in any distributions to stockholders upon liquidation. Stockholders have no conversion, pre-emptive or subscription rights. All outstanding shares of common stock are fully paid and non-assessable.


Preferred Stock.


The Company does not have any Preferred Stock authorized .


Dividends.


We have not paid any cash dividends to our stockholders. The declaration of any future cash dividends is at the discretion of our board of directors and depends upon our earnings, if any, our capital requirements and financial position, our general economic conditions, and other pertinent conditions. It is our present intention not to pay any cash dividends in the foreseeable future, but rather to reinvest earnings, if any, in our business operations.



41




Warrants.


In November 2010, the Company issued (i) warrants to purchase 6,318,334 shares of the Company’s common stock to the investors with an exercise price of $0.01 per share expiring five (5) years from the date of issuance in connection with the sale of common shares in November 2010 (the “2010 Offering”), (ii) warrants to purchase 375,000 shares of the Company’s common stock to stockholder with an exercise price of $0.01 per share expiring five (5) years from the date of issuance as part of the professional services, all of which have been earned upon issuance.


ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Nevada Revised Statutes provide as follows:


NRS 78.7502 DISCRETIONARY AND MANDATORY INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS: GENERAL PROVISIONS.


1. A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he:


(a) Is not liable pursuant to NRS 78.138; or


(b) Acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person is liable pursuant to NRS 78.138 or did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, or that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful.


2. A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he:


(a) Is not liable pursuant to NRS 78.138; or


(b) Acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.


3. To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections 1 and 2, or in defense of any claim, issue or matter therein, the corporation shall indemnify him against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense.


(Added to NRS by 1997, 694; A 2001, 3175)


Article Eleven of the Company’s Bylaws provides as follows:



42




“Every person who was or is a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or a person of whom he is  the legal representative is or was a director or officer of the corporation or is or was serving at the request of the corporation or for its benefit as a director or office of another corporation, or as its representative in a partnership, joint venture, trust or other enterprise, shall be indemnified and held harmless to the fullest extent legally permissible under the General Corporation Law of the State of Nevada from time to time against all expenses, liability and loss (including attorneys’ fees, judgments, fines and amounts paid or to be paid in settlement) reasonably incurred in defending a civil or criminal action, suit or proceeding must be paid by the corporation as they are incurred and in advance of the final disposition of the action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the corporation. Such right of indemnification shall be a contract right which may be enforced in any manner desired by such person. Such right of indemnification shall not be exclusive of any other right which such directors, officers or representatives may have or hereafter acquire and, without limiting the generality of such statement, they shall be entitled to their respective rights of indemnification under any bylaw, agreement, vote of shareholders, provisions of law or otherwise, as well as their rights under this Article.


The Board of Directors may cause the corporation to purchase and maintain insurance on behalf of any person who is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, or as its representative in a partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred in any such capacity or arising out of such status, whether or not the corporation  would have the power to indemnify such person.


The Board of Directors may from time to time adopt further Bylaws with respect to indemnification and may amend these and such Bylaws to provide at all times the fullest indemnification permitted by the General Corporation Law of the State of Nevada.”


Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.


ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.


See Item 9.01 of this Current Report.


ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.


None.


ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.


See Item 9.01 of this Current Report.



43




Item 3.02 Unregistered Sales of Equity Securities.


The 7.3 million shares of common stock in the Company issued in connection with the CNS share exchange, and the 7,686,797 shares of common stock in the Company issued in connection with the PSI share exchange, were issued in reliance upon the exemption from registration requirements under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(2) thereof and Regulation D thereunder. The Company will rely upon certain representations and warranties of the recipients, including their agreements with respect to restrictions on resale, in support of the satisfaction of the conditions contained in Section 4(2) and Regulation D under the Securities Act.


Item 5.01 Changes in Control of Registrant.


As described in Item 2.01 of this Current Report, on August 2, 2012, the CNS share exchange was completed and the Company issued 7.3 million shares of common stock.   This did not result in a change in control.  


As described in Item 2.01 of this Current Report, on August 24, 2012, the PSI share exchange was completed and the Company issued 7,686,797 shares of common stock. This did not result in a change in control.  


Item 5.06 Change in Shell Company Status.


As described in Item 2.01 of this Current Report, on August 2, 2012, the CNS share exchange was completed. As a result of that transaction, we were no longer a shell company as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended.


Item 9.01 Financial Statements and Exhibits.


(a)

Financial Statements of CNS business acquired on August 2, 2012.


99.1

CNS Wellness Florida, LLC financial statements as of and for the fiscal year ended September 30, 2011 and 2010.

99.2

CNS Wellness Florida, LLC financial statements as of and for the interim period ended June 30, 2012 and 2011 (Unaudited).


(b)

Pro forma financial information.


99.3

Pro forma combined financial information of the Company and its subsidiary as of and for the nine months ended June 30, 2012 and as of and for the fiscal year ended September 30, 2011 (Unaudited).


(c)

Shell Company Transaction.


(d)

Exhibits.


Exhibit No.

Description

2.1

Exchange Agreement dated May 30, 2012 by and between CNS Wellness Florida LLC and Wellness Center USA, Inc.

2.2

Exchange Agreement dated June 21, 2012 by and between Psoria-Shield Inc. and Wellness Center USA, Inc.

2.3

Letter of Understanding dated September 20, 2011 by and between Psoria-Shield Inc. and Protein Factory.

5.1

Employment Agreement dated as of August 2, 2012 by and between William A. Lambos and Wellness Center USA, Inc.  

5.2

Employment Agreement dated as of August 2, 2012 by and between Peter A. Hannouche and Wellness Center USA, Inc.  

5.3

Employment Agreement dated as of August 24, 2012 by and between Scot L. Johnson and Wellness Center USA, Inc.

10.1

Note dated August 9, 2010 by CNS Wellness Florida LLC in favor of a family member of one of its members in the principal amount of $37,139.

10.2

Note dated August 2, 2012 by CNS Wellness Florida LLC in favor of William A. Lambos in the amount of $120,886.30.

10.3

Note dated August 2, 2012 by CNS Wellness Florida LLC in favor of Peter A. Hannouche in the amount of $75,322.14.

10.4

License Agreement dated as of August 25, 2009 by and between Psoria-Shield Inc. and Scot L. Johnson

10.5

License Agreement dated as of December 11, 2010 by and between Psoria-Shield Inc. and Scot L. Johnson

99.1

CNS Wellness Florida, LLC financial statements as of and for the fiscal year ended September 30, 2011 and 2010.

99.2

CNS Wellness Florida, LLC financial statements as of and for the interim period ended June 30, 2012 and 2011 (Unaudited).

99.3

Pro forma combined financial information of the Company and its subsidiary as of and for the nine months ended June 30, 2012 and as of and for the fiscal year ended September 30, 2011 (Unaudited).

99.4

Press Release of Wellness Center USA, Inc. dated August 8, 2012.

99.5

Press Release of Wellness Center USA, Inc. dated August 28, 2012.




44



  

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  

WELLNESS CENTER USA, INC.

  

  

Date: January 22, 2013

By:  

/s/ Andrew J. Kandalepas

  

  

Andrew J. Kandalepas

  

  

Chairman, Chief Executive Officer, Principal Accounting Officer, and Chief Financial Officer






45



EXCHANGE AGREEMENT


This Exchange Agreement (“Agreement”) is made this 30th day of May, 2012 by and between William A. Lambos, Ph.D. and Peter A. Hannouche (hereinafter respectively referred to individually as a “Member” and collectively as the “Members”), of CNS-WELLNESS FLORIDA, LLC, a Florida limited liability company d/b/a Cognitive Neuro Sciences (hereinafter referred to as “CNS”), and WELLNESS CENTER USA, INC., an Illinois corporation (hereinafter referred to as the “Company”), collectively (hereinafter referred to as “The Parties”).


RECITALS:


The Company is engaged in the business of selling vitamins and supplements through an“online store” (the “Project”).


CNS is engaged in the business of providing psychological and bio-physiological, EEG-based assessments and treating developmental, behavioral and related disorders and disregulations through multimodal neurotherapy and related interventions (the “Services”).   


The Company wishes to expand into other areas of the health-care field which are complementary with the Project, so that it might increase the potential value of issued and outstanding shares of common stock in the Company (“Shares”).


The Members own or control all issued and outstanding limited liability company interests in CNS (“Interests”) and wish to expand CNS’ provision of Services so that it might increase the potential value of the Interests.


The Company and the Members believe that their wishes for expansion, and to increase the potential the value of the Shares and the Interests, respectively, may be advanced through an exchange of Shares and Interests pursuant to the terms and conditions of this Agreement.


NOW, THEREFORE, in consideration of the foregoing Recitals and the respective representations, warranties and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:


ARTICLE I

Certain Definitions


As used in this Agreement, and in addition to any other defined terms used herein, each of the following terms shall have the following meaning:


1.1

Affiliate .  "Affiliate" of a Person shall mean a Person that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, the first Person.


1.2

Associate .  "Associate" of a Person shall mean (i) an Affiliate of such Person; or (ii) a relative or spouse of such Person, or a relative of such spouse; or (iii) any trust or other estate in which such Person (or any relative or spouse of such Person) has a substantial beneficial interest or as to which such Person (or any relative or spouse of such Person, or a relative of such spouse) serves as a trustee or in a similar fiduciary capacity.


1.3

Closing .  "Closing" shall mean the delivery of the documents and materials described in Section 3.


1.4

Closing Date .  "Closing Date" has the meaning set forth in Section 3.1.


1.5

ERISA .  "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended.





1.6

Financial Statements .  "Financial Statements" shall meaning the financial statements of CNS and the Company, respectively, as further identified herein.


1.7

Indebtedness .  "Indebtedness" shall mean (i) all obligations for borrowed money, whether current or funded, secured or unsecured; (ii) all obligations on the deferred purchase price of any property or services; (iii) all obligations created or arising under any conditional sale or other title retention agreement with respect to property acquired (even though the rights and remedies of the seller, owner or lender under such agreement in the event of a default may be limited to repossession or sale or such property); (iv) all obligations secured by a purchase money mortgage or other Lien to secure all or part of the purchase price of property subject to such mortgage or Lien; (v) all obligations under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases; (vi) any obligation in respect of bankers' acceptances or letters of credit; (vii) any obligations secured by Liens on property, whether or not such obligations were assumed at the time of acquisition of such property; (viii) all obligations of a type referred to in clause (i), (ii), (iii), (iv), (v), (vi) or (vii) above which is directly or indirectly guaranteed by any Affiliate; (ix) any accrued and unpaid interest or other charges on any of the foregoing obligations; (x) present, future or contingent payment obligations under any qualified or non-qualified welfare, benefit or other plan, agreement or arrangement with any former or present employee or Associate of such employee; (xi) Taxes; and (xii) all other forms of obligations except trade accounts payable and accrued expenses incurred in the ordinary course of business.


1.8

Intellectual Property .  "Intellectual Property" shall mean  trademarks, service marks, trade names, trade dress, copyrights, and similar rights, including registrations and applications to register or renew the registration of any of the foregoing, patent and patent applications, and inventions, processes, designs, formulae, trade secrets, know-how, confidential information, and all similar intellectual property rights, and licenses of any of the foregoing.


1.9

Lien .  "Lien" shall mean any mortgage, trust deed, pledge, security interest, claim, charge or encumbrance of any kind.


1.10

Material and Materially .  “Material” and “Materially”, unless otherwise specifically defined, shall mean and include any specified item, event or matter which, in the aggregate, results in, or may have as a result, an impact which exceeds or may exceed $25,000.00.


1.11

Person .  "Person" shall mean any individual, business corporation, municipal or not-for-profit corporation, trust, general or limited partnership, limited liability company, joint venture, unincorporated association, joint stock company, or any other entity or organization of any kind, and any governmental entity, including any agency or political subdivision thereof.


1.12

Securities Act .  "Securities Act" shall mean the Securities Act of 1933.


1.13

Tax Returns .  "Tax Returns" shall mean all returns, amended returns, declarations, statements, reports, information statements, declarations of estimated taxes, backup withholding returns or reports and other documents required to be filed in respect of Taxes.


1.14

Taxes .  "Taxes" shall mean all federal, state, municipal, local and foreign taxes, customs, duties, fees, levies, assessments or charges of any kind whatever including, but not limited to, income, alternative minimum income, franchise, profits, windfall profits, gross receipts, excise, sales, use, license, lease, service, service use, transaction, occupation, severance, stamp, premiums, energy, environmental, withholding, payroll, employment, unemployment, Social Security, worker's compensation, ad valorem, real or personal property, and capital taxes, and any interest, penalties, additions to tax or other additional amounts with respect thereto.


ARTICLE II

Exchange of Shares and Interests


2.1

Exchange of Shares and Interests . Subject to the provisions of this Agreement, the Members are prepared to transfer to the Company all of the Interests in consideration of the Company’s issuance of 7.3 Million Shares to the Members, which Shares will be issued in equal amounts to the Members or as they may direct at the Closing.




2




ARTICLE III

The Closing


3.1

Time and Place of Closing .  The Closing shall take place at the offices of the Company’s attorneys, Rieck and Crotty, P.C., 55 West Monroe Street, Suite 3390, Chicago, Illinois  at 11:00 A.M. Central Standard Time, on July 30, 2012 or at such other time, date or place as may be mutually agreed by the parties (the “Closing Date”).


3.2

Exchange and Transfer of the Shares and Interests .  At the Closing, the Company shall exchange and transfer the Shares to the Members in the manner hereinafter provided, and the Members shall acquire and accept the Shares solely for and in consideration of the Interests, which shall be delivered to the Company at Closing.  


3.3

Deliveries by the Members to the Company .  At the Closing, the Members will deliver to the Company the following:


(a)

Certificates and assignments duly executed by the Members in favor of the Company and representing 100% of the Interests in CNS;


(b)

Certificate of Good Standing for CNS;


(c)

Any consents required from the members and managers of CNS;  

 

(d)

Any consent required under any Material Contract or Lease relating to the assets or business of CNS including, but not limited to, any and all licenses required to continue operation of CNS’ operations in the manner conducted prior to the Closing, duly executed in favor of the Company; and


(e)

Employment Agreement in form acceptable to the Company and the Members, duly executed by each Member and including, among other things, non-disclosure, non-solicitation and non-compete provisions effective for the term of employment and extending for a period of one year following termination of employment. Further, the parties agree that upon Closing the Board of Directors of the Company will appoint each of the Members to fill a vacancy on the Board of Directors of the Company, each to serve until the next annual meeting of the shareholders or until his successor is duly elected.  


3.4

Deliveries by the Company to the Members .  At the Closing, the Company will deliver to the Members the following:


(a)

Certificates representing the Shares, issued in the names of the Members and/or as otherwise directed by the Members.


(b)

Certificate of Good Standing for the Company;   


(c)

Any consents required from shareholders and directors of the Company; and

 

(d)

Any consent required under any Material Contract or Lease relating to the assets or business of the Company, duly executed in favor of Members.


ARTICLE IV

Representations and Warranties of the Members


Except as disclosed in the Schedules and Exhibits attached hereto (individually referred to as a “Schedule” or “Exhibits” and collectively as “Schedules” or “Exhibits”) as referenced to  in the specific Section or Sections hereof to which the disclosure, Exhibit or Schedule pertains, each Member represents and warrants to the Company as follows:   



3




4.1

Title to the Interests .  He owns, beneficially and of record, all of his Interests in CNS, free and clear of any Liens and Indebtedness.


4.2

Organization; Qualification .  CNS is a limited liability company duly organized, validly existing and in good standing under the laws of its organization.  CNS has the corporate power and authority to own all of its properties and assets and to carry on the business as presently conducted and is qualified as a foreign corporation in any  jurisdiction where the failure to be so qualified would have a Material adverse effect on CNS, its business or operations .  


4.3

Authority Relative to this Agreement .  Each Member has full and complete power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby as they relate to such Member.  The execution and delivery of this Agreement by each Member and any and all related agreements and documents, and the consummation of the transactions contemplated hereby and thereby, have been duly and validly authorized.  When executed and delivered, this Agreement, and all related agreements  and documents, shall have been duly and validly executed and delivered by Members and will not violate, constitute or cause a default, or result in any loss of a Material right under, any provision of law or the articles of organization and operating agreement of CNS, or any rule, regulation, order, judgment, decree, contract, instrument or agreement to which any Member is subject, or to which either is a party, and will not result in any termination, acceleration or maturity of any liability, Indebtedness or obligation of any Member.  This Agreement constitutes, and when executed and delivered each of the related agreements and documents shall constitute, a valid and binding obligation of the Members.


4.4

Governmental Authorization and Compliance .  Schedule 4.4 sets forth a complete and accurate list of all licenses, franchises, permits and other governmental authorizations relating to the assets and business operations of CNS.  There are no violations of any such license, franchise, permit and other governmental authorization, nor are there any proceedings pending or threatened to revoke or limit any such license, franchise, permit, or other governmental authorization, except for those instances where such violation, revocation or limitation will not have a Material adverse effect the assets or business operations of  CNS.


4.5

Capitalization .  The records of CNS delivered by the Members to the Company report accurately the authorized capitalization of CNS and the number of Interests presently outstanding and issued, all of which are duly authorized, validly issued, fully paid and non-assessable.  There are no outstanding preemptive rights, subscriptions, warrants, options, contracts, calls or other rights of any kind with regard to any Interests or any other security of CNS of any kind, and there are no other obligations or commitments of CNS relating to any Interests or any other security of any kind.


4.6

Financial Statements .   The Members have previously furnished the Company a complete and accurate copy of the balance sheet for each of the two most recent fiscal year ends, and for the interim period ended March 30, 2012 and the related statements of income and retained earnings for said periods (the "Financial Statements").  The Financial Statements fairly present  the financial position of CNS as of the respective dates, and the results of its operations and changes in financial position for the periods covered thereby, and except to the extent otherwise set forth in the footnotes contained therein have been prepared in accordance with generally accepted accounting principles consistently applied.  


4.7

Title to and Location of Assets .  CNS has good and marketable title to all of its assets, real and personal, tangible and intangible, including those capitalized on or included in the Financial Statements, except only for properties and assets disposed of in the ordinary course of business.


4.8

Leases .  Schedule 4.8 lists all real and personal property leases ("Leases") to which CNS is a party or by which either may be bound.  CNS is not in default in any Material respect under the terms of any Lease.  Each Lease is valid, binding and enforceable, in accordance with its terms, against each party thereto.


4.9

Material Contracts .  Schedule 4.9 lists all Material contracts, agreements, instruments, and commitments arising from or relating to the assets and business operations of CNS or to which it is bound.  All contracts, agreements, instruments, and other commitments described in this Section 4.9 are in full force and effect and CNS has complied with the provisions thereof.  



4




4.10

Intellectual Property .  Schedule 4.10 sets forth a list of all registered trademarks, registered copyrights, patents and patent applications owned or used by CNS in its business operations.  To the knowledge of the Members , no other Person possesses any right, title or interest in, to or under such Intellectual Property.  There is no pending or, to the knowledge of the Members , threatened claim or litigation against CNS contesting its right, title or interest with respect to any such Intellectual Property and such Intellectual Property does not infringe, violate or require the use of any consent, trademark, trade name, license, copyright, trade secret, or other proprietary asset of any other Person.


4.11

Labor Relations .     There are no controversies pending between CNS and any of its present or former employees which: (a) affect, or can reasonably be expected to affect, adversely and Materially, its assets or business operations; or (b) relate to any effort to prevent, restrict or delay consummation of­ any of the transactions contemplated by this Agreement.


4.12

Employment Agreements .  There are no written or oral agreements with any employees of CNS which are not terminable upon notice of thirty (30) days or less.


4.13

Employee Benefit Plans .  There are no employee benefit plans within the meaning of applicable law that affect employees of CNS.   


4.14

Maintenance of Tangible Assets .  The assets of CNS have been and will be from the date hereof through the Closing Date, maintained in good and operable condition ordinary wear and tear excepted.  


4.15

Accounts Receivable .  Accounts receivable are fairly reported in the Financial Statements, arose in the ordinary course of business and are the result of arm’s length, bona fide transactions.   


4.16

Litigation .  There are no actions, suits, claims, investigations or proceedings legal, administrative or arbitrative) pending or, to the best knowledge of Members, threatened, against Members, CNS or any officer, manager or employee thereof, whether at law or in equity and whether civil or criminal in nature, before or by any federal, state, municipal or other court, arbitrator, governmental department, commission, agency or instrumentality.


4.17

Absence of Changes .  Since the date of the Financial Statements, CNS has operated in the ordinary course, and there has been no: (a) Material adverse change in the operations, properties or condition (financial or otherwise); (b) damage, destruction or loss (whether or not covered by insurance) Materially and adversely affecting the assets or business operations or that could reasonably be expected to affect, Materially and adversely, the assets or business operations thereof


4.18

Insurance .  Schedule 4.18 is a complete and accurate list of all currently effective policies of insurance of which CNS is the owner or insured or covering any of its assets or business operations, indicating for each policy the carrier, risks insured, the amounts of coverage, deductible, and expiration date.  All such policies are in full force and effect, all premiums due thereon have been paid, and CNS has complied in all Material respects with the provisions of such policies.


4.19

Taxes .  All Tax Returns required to be filed by or on behalf of CNS  have been duly filed on a timely basis and such Tax Returns are complete and accurate.  All Taxes due and payable have been paid in full on a timely basis.  CNS has withheld and paid over all Taxes required to have been withheld and paid over in connection with amounts paid or owing to any employee, creditor, independent contractor, or other Person.  The liability for unpaid Taxes for all periods ended on or prior to the date of this Agreement included in the Financial Statements does not exceed the liability accruals for Taxes (excluding reserves for deferred Taxes) reflected in such Financial Statements.  


4.20

Environmental Matters .  (a) CNS  has been, and at the Closing will be, in compliance in all Material respects and with all federal, state and local statutes, laws, ordinances, orders, rules, regulations, and moratoria relating to operation and occupancy of its  assets and business operations.  CNS has not at any time received any notice alleging any non-compliance with or potential liability pursuant to any of such statutes, laws, ordinances, orders, rules, regulations, or moratoria.




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(b)   There is no underground storage tank or hazardous waste, substance, chemical, or other condition or use of CNS’s assets or their vicinity, whether natural or man-made, which poses a present or potential threat of damage to the health of persons, to property, to natural resources, or to the environment.


(c)    CNS has no liability, responsibility or obligation, whether fixed, unliquidated, absolute, contingent or otherwise, under any federal, state or local environmental laws or regulations, including any liability, responsibility, or obligation for fines or penalties, or for investigation, expense, removal, or remedial action to effect compliance with or discharge any duty, obligation, or claim under any such laws or regulations, and, to the knowledge of the Members there is no reason to believe that any such claims, actions, suits, proceedings, or investigations under such laws or regulations exist or may be brought or threatened.  


4.22

Schedules .  All of the Schedules provided by and attached to this Agreement by the Members are complete and accurate in all respects.  Schedules may be attached at any time prior to Closing, and subject to acceptance by each other party.


ARTICLE V

Representations and Warranties of the Company


Except as disclosed in the Schedules and Exhibits attached hereto (individually referred to as a “Schedule” or “Exhibits” and collectively as “Schedules” or “Exhibits”) as referenced to  in the specific Section or Sections hereof to which the disclosure, Exhibit or Schedule pertains, the Company represents and warrants to the Members as follows:   


5.1

Organization; Qualification .  The Company is a corporation duly organized, validly existing and in good standing under the laws of its organization.  The Company has the corporate power and authority to own all of its properties and assets and to carry on the business as presently conducted and is qualified as a foreign corporation in any  jurisdiction where the failure to be so qualified would have a Material adverse effect on the Company, its business or operations .  


5.2

Authority Relative to this Agreement .  The Company has full and complete power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby as they relate to the Company.  The execution and delivery of this Agreement by the Company and any and all related agreements and documents, and the consummation of the transactions contemplated hereby and thereby, have been duly and validly authorized.  When executed and delivered, this Agreement, and all related agreements  and documents, shall have been duly and validly executed and delivered by the Company and will not violate, constitute or cause a default, or result in any loss of a Material right under, any provision of law or the articles of incorporation and bylaws of the Company, or any rule, regulation, order, judgment, decree, contract, instrument or agreement to which the Company is subject, or to which it is a party, and will not result in any termination, acceleration or maturity of any liability, Indebtedness or obligation of the Company.  This Agreement constitutes, and when executed and delivered each of the related agreements and documents shall constitute, a valid and binding obligation of the Company.


5.3

Governmental Authorization and Compliance .  Schedule 4.4 sets forth a complete and accurate list of all Material licenses, franchises, permits and other governmental authorizations relating to the assets and business operations of the Company.  There are no violations of any such license, franchise, permit and other governmental authorization, nor are there any proceedings pending or threatened to revoke or limit any such license, franchise, permit, or other governmental authorization, except for those instances where such violation, revocation or limitation will not have a Material adverse effect the assets or business operations of the Company.


5.4

Capitalization .  The corporate records of the Company delivered by the Company to the Members report accurately the authorized capital stock of the Company and the number of shares of stock presently outstanding and issued, all of which is duly authorized, validly issued, fully paid and non-assessable.  Except as set forth in Schedule 5.4 , there are no outstanding preemptive rights, subscriptions, warrants, options, contracts, calls or other rights of any kind with regard to any shares of stock or any other security of the Company of any kind, and there are no capital appreciation rights, phantom stock plans, securities with profit participation rights or features, or similar obligations or commitments of the Company.




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5.5

Financial Statements .   The Company has previously furnished the Members a complete and accurate copy of the balance sheet for each of the two most recent fiscal year ends, and for the interim period ended March 30, 2012 and the related statements of income and retained earnings for said periods (the “Financial Statements”).  The Financial Statements fairly present  the financial position of the Company as of the respective dates, and the results of its operations and changes in financial position for the periods covered thereby, and except to the extent otherwise set forth in the footnotes contained therein have been prepared in accordance with generally accepted accounting principles consistently applied.  


5.6

Title to and Location of Assets .  The Company has good and marketable title to all of its assets, real and personal, tangible and intangible, including those capitalized on or included in the Financial Statements, except only for properties and assets disposed of in the ordinary course of business.


5.7

Leases .  Schedule 5.7 lists all real and personal property leases ("Leases") to which the Company is a party or by which it may be bound.  The Company is not in default in any Material respect under the terms of any Lease.  Each Lease is valid, binding and enforceable, in accordance with its terms, against each party thereto.


5.8

Material Contracts .  Schedule 5.8 lists all Material contracts, agreements, instruments, and commitments arising from or relating to the assets and business operations of the Company or to which it is bound.  All contracts, agreements, instruments, and other commitments described in this Section 5.8 are in full force and effect and the Company has complied with the provisions thereof.  


5.9

Intellectual Property .  Schedule 5.9 sets forth a list of all registered trademarks, registered copyrights, patents and patent applications owned or used by the Company in its business operations.  To the knowledge of the Company , no other Person possesses any right, title or interest in, to or under such Intellectual Property.  There is no pending or, to the knowledge of the Company , threatened claim or litigation against the Company contesting its right, title or interest with respect to any such Intellectual Property and such Intellectual Property does not infringe, violate or require the use of any consent, trademark, trade name, license, copyright, trade secret, or other proprietary asset of any other Person.


5.10

Labor Relations .  There are no controversies pending between the Company and any of its present or former employees which: (a) affect, or can reasonably be expected to affect, adversely and Materially, its assets or business operations; or (b) relate to any effort to prevent, restrict or delay consummation of­ any of the transactions contemplated by this Agreement.   


5.11

Employment Agreements .  There are no written or oral agreements with any employees of the Company which are not terminable upon notice of thirty (30) days or less.


5.12

Employee Benefit Plans .  There are no employee benefit plans within the meaning of applicable law that affect employees of the Company.   


5.13

Maintenance of Tangible Assets .  The assets of the Company  have been and  will be from the date hereof through the Closing Date, maintained in good and operable condition ordinary wear and tear excepted.  


5.14

Accounts Receivable .  Accounts receivable are fairly reported in the Financial Statements, arose in the ordinary course of business and are the result of arm’s length, bona fide transactions.   


5.15

Litigation .  There are no actions, suits, claims, investigations or proceedings (legal, administrative or arbitrative) pending or, to the best knowledge of the Company, threatened, against the Company or any officer, director or employee thereof, whether at law or in equity and whether civil or criminal in nature, before or by any federal, state, municipal or other court, arbitrator, governmental department, commission, agency or instrumentality.


5.16

Absence of Changes .  Since the date of the Financial Statements, the Company has operated in the ordinary course, and there has been no: (a) Material adverse change in the operations, properties or condition (financial or otherwise); (b) damage, destruction or loss (whether or not covered by insurance) Materially and adversely affecting the assets or business operations or that could reasonably be expected to affect, Materially and adversely, the assets or business operations thereof



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5.17

Insurance .  Schedule 5.17 is a complete and accurate list of all currently effective policies of insurance of which the Company is the owner or insured or covering any of its assets or business operations, indicating for each policy the carrier, risks insured, the amounts of coverage, deductible, and expiration date.  All such policies are in full force and effect, all premiums due thereon have been paid, and the Company has complied in all Material respects with the provisions of such policies.


5.18

Taxes .  All Tax Returns required to be filed by or on behalf of the Company   have been duly filed on a timely basis and such Tax Returns are complete and accurate.  All Taxes due and payable have been paid in full on a timely basis.  The Company has withheld and paid over all Taxes required to have been withheld and paid over in connection with amounts paid or owing to any employee, creditor, independent contractor, or other Person.  The liability for unpaid Taxes for all periods ended on or prior to the date of this Agreement included in the Financial Statements does not exceed the liability accruals for Taxes (excluding reserves for deferred Taxes) reflected in such Financial Statements.  


5.19

Environmental Matters .  (a) The Company has been, and at the Closing will be, in compliance in all Material respects and with all federal, state and local statutes, laws, ordinances, orders, rules, regulations, and moratoria relating to operation and occupancy of its  assets and business operations.  The Company has not  at any time received any notice alleging any non-compliance with or potential liability pursuant to any of such statutes, laws, ordinances, orders, rules, regulations, or moratoria.


(b)   There is no underground storage tank or hazardous waste, substance, chemical, or other condition or use of the Company’ s assets or their vicinity, whether natural or man-made, which poses a present or potential threat of damage to the health of persons, to property, to natural resources, or to the environment.


(c)  The Company has no liability, responsibility or obligation, whether fixed, unliquidated, absolute, contingent or otherwise, under any federal, state or local environmental laws or regulations, including any liability, responsibility, or obligation for fines or penalties, or for investigation, expense, removal, or remedial action to effect compliance with or discharge any duty, obligation, or claim under any such laws or regulations, and, to the knowledge of the Company there is no reason to believe that any such claims, actions, suits, proceedings, or investigations under such laws or regulations exist or may be brought or threatened.  


5.20

Schedules .  All of the Schedules provided by and attached to this Agreement by the Company are complete and accurate in all respects.  Schedules may be attached at any time prior to Closing, and subject to acceptance by each other party.


ARTICLE VI

Other Agreements of the Parties


6.1

Expenses .  Whether or not the transactions contemplated are consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby will be paid by the party incurring such costs and expenses.


6.2

Best Efforts .  Subject to the terms and conditions of this Agreement, each of the parties will use its best efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective as soon as practicable the transactions contemplated by this Agreement.


6.3

Further Assurances .  From time to time, without further consideration, the Members at their own expense, will execute and deliver, or cause to be executed and delivered, such documents as the Company may reasonably request to more effectively consummate the transactions contemplated hereby.  From time to time, without further consideration, the Company, at its own expense, will execute and deliver, or cause to be executed and delivered, such documents as the Members may reasonably request to more effectively consummate the transactions contemplated hereby.




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6.4

Negotiations with Others .  During the period from the date of this Agreement to the Closing Date, neither the Members nor the Company shall, directly or indirectly, engage in discussions or negotiations with any person or entity concerning any possible proposal regarding a sale or transfer of all or any part of the Interests or the assets or business operations of CNS.  The Members agree to disclose to the Company the existence and content of any communication they receive concerning any such possible proposal as soon as practicable after receipt of the communication.


ARTICLE VII

Closing Conditions


7.1

Conditions to Each Party's Obligations .  The respective obligations of each party to effect the transactions contemplated hereby shall be subject to the fulfillment at or before the Closing Date of the condition that neither the Members and Company shall be subject to any order, decree or injunction of a court of competent jurisdiction which prevents or delays any of the transactions contemplated by this Agreement or the continuation of CVS’s business in the manner conducted prior to the Closing.


7.2

Conditions to the Obligations of Members .  The obligations of the Members to effect the transactions contemplated hereby shall be further subject to the fulfillment at or before the Closing Date of the following conditions, any one or more of which may be waived by Members:


(a)

Compliance by the Company . The Company shall have performed and complied in all material respects with the provisions contained in this Agreement required to be performed and complied with by it at or before the Closing Date.


(b)

Representations and Warranties .  The representations and warranties of the Company set forth in this Agreement were true and correct in all material respects as of the date of this Agreement and shall also be true and correct in all material respects as of the Closing Date as though made at and as of the Closing Date, except as otherwise contemplated by this Agreement.


(c)

Corporate Authority; Consents; Permits . The Company shall have delivered to Members evidence satisfactory to Members  that the Company   shall have obtained any and all permits, authorizations, lessor consents and approvals of any Person or public body or authority, including shareholders and directors of the Company,  required effectively to transfer the Shares to Members and to continue business operations of the Company in the manner conducted prior to the Closing Date.    


7.3

Conditions to the Obligations of the Company .  The obligations of the Company to effect the transactions contemplated hereby shall be further subject to the fulfillment at or before the Closing Date of the following conditions, any one or more of which may be waived by the Company:


(a)

Compliance by the Members .  The Members shall have performed and complied in all material respects with the provisions contained in this Agreement required to be performed and complied with by or before the Closing Date.


(b)

Representations and Warranties .  The representations and warranties of the Members set forth in this Agreement shall have been true and correct in all material respects as of the date of this Agreement and shall also be true and correct in all material respects as of the Closing Date as though made at and as of the Closing Date, except as otherwise contemplated by this Agreement.


(c)

Authority; Consents; Permits .  The Members shall have delivered to the Company evidence satisfactory to the Company that the Members and/or CNS shall have obtained any and all permits, authorizations, lessor consents and approvals of any Person or public body or authority, including Members and managers of CNS,  required effectively to transfer the Interests to the Company and  to continue business operations of CNS in the manner conducted prior to the Closing Date.    



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7.4

Other Documents .  Each of the parties will furnish to the other party such certificates of such party's members, shareholders, officers, directors, employees, Associates or Affiliates, or such other documents, as may be reasonably necessary to evidence fulfillment of the conditions set forth in this Article VII as the other party may reasonably request.


ARTICLE VIII

Termination


8.1.

Termination .  This Agreement may be terminated at any time prior to the Closing Date:


(a)

By the written agreement of Members and the Company;


(b)

By either Members or the Company by written notice to the other hereto after 5:00 p.m. Central Standard Time on July 30, 2012, if the transactions contemplated hereby shall not have been consummated pursuant hereto, unless such date is extended by the mutual written consent of Members and the Company; or


(c)

By either the Members or the Company if: (i) the representations and warranties of the Members or the Company, shall not have been true and correct in all respects as of the date when made; (ii) the Members or the Company shall have failed to perform and comply with, in all material respects, all agreements and covenants required by this Agreement to have been performed or complied with by such parties prior to the time of such termination and such failure to perform or comply shall be incurable or shall not have been cured within a reasonable period of time but not less than ten  days in duration following notice of such failure, provided that the terminating party shall have performed and complied with, in all material respects, all agreements and covenants required by this Agreement to have been performed or complied with by such terminating party prior to such time; or (iii) any event shall have occurred or any fact or condition shall exist that shall have made it impossible to satisfy a condition precedent to the terminating party's obligations to consummate the transactions contemplated by this Agreement, unless the occurrence of such event or existence of such fact or condition shall be due to the failure of the party seeking to terminate this Agreement or any of its Associates or Affiliates to perform or comply with any of the covenants, agreements, or conditions


8.2

Effect of Termination .  In the event this Agreement is terminated pursuant to the provisions of Section 8.1, this Agreement shall become void and have no effect, without any liability on the part of any party hereto, or any of its members, shareholders, directors, officers, employees, agents, consultants, representatives, agents, Associates or Affiliates.


ARTICLE IX

Miscellaneous Provisions


9.1

Entire Agreement .  This Agreement is to be read together with the Employment Agreements to be delivered by the Members pursuant to Section 3.3 (e), and any default under this Agreement or an Employment Agreement shall constitute a default under the other.   This Agreement sets forth the entire agreement between the parties and supersedes all prior agreements and understandings between the parties with respect thereto.


9.2

Amendment and Modification .  This Agreement may be amended, modified or supplemented only by written agreement signed by each of the parties.


9.3

Waiver of Compliance; Consents .  Except as otherwise provided in this Agreement, any failure of any of the parties to comply with any obligation, covenant, agreement or condition herein may be waived by the party entitled to the benefit thereof only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.  Whenever this Agreement requires or permits the consent of any party, such consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance as set forth in this Section 9.3.



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9.4

Investigations; Survival of Representations and Warranties .  Each of the representations and warranties of the parties contained herein or in any Exhibit, Schedule, certificate, or other document delivered before or at the Closing shall continue and survive the Closing Date.


9.5

Notices.  All notices and other communications under this Agreement shall be in writing and shall be deemed given if: (a) delivered personally; or (b) mailed by certified mail (return receipt requested), postage prepaid; or (c) sent by overnight courier; or (d) transmitted by telefacsimile, email or other electronic transmission;  to the parties at the following addresses (or at such other address for a party as shall be specified by like notice, provided that notices of a change of address shall be effective only upon receipt thereof):


(a)  If to a Member to:

CNS Wellness Florida, LLC

d/b/a Cognitive Neuro Sciences

Two Urban Centre

4890 W. Kennedy Blvd, Suite 295

Tampa, FL 33609


(b)  If to the Company:

Wellness Center USA, Inc.

1014 E. Algonquin Road - Suite111

Schaumburg, IL 60173


9.6

Assignment .  Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party, nor is this Agreement intended to confer upon any other person except the parties hereto any rights or remedies hereunder.


9.7

Governing Law .  This Agreement shall be governed by the laws of the State of Illinois as to all matters including, but not limited to, matters of validity, construction, effect, performance and remedies, and, as partial consideration for the other party's execution and performance hereunder each party waives personal service of any and all process upon it, to the extent permitted by law, and consents that all such service of process be made by upon such party at the address and in the manner set forth in Section 9.5 of this Agreement and service so made shall be deemed to be completed upon the earlier of actual receipt or three  days after the same shall have been posted to such party's address.


9.7

Binding Effect and Benefit .  The provisions hereof shall be binding upon, and shall inure to the benefit of, the parties, and their respective heirs, executors, administrators, its successors, and assigns.


9.8

Counterparts .  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.


9.9

Severability .  Whenever possible, each of the provisions of this Agreement shall be construed and interpreted in such a manner as to be effective and valid under applicable law.  If any provisions of this Agreement or the application of any provision of this Agreement to any party or circumstance shall be prohibited by, or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition without invalidating the remainder of such provision, any other provision of this Agreement, or the application of such provision to other parties or circumstances.




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9.10

Arbitration .

 Except as otherwise provided herein, any controversy, dispute or claim between the parties arising out of, related to or in connection with this Agreement or the performance or breach hereof shall be submitted to and settled by arbitration conducted by the American Arbitration Association in Chicago, Illinois, in accordance with its commercial arbitration rules as then in effect; provided that the arbitration shall be by a single arbitrator mutually selected by the Members and the Company, and if the parties do not agree within thirty (30) days after the date of notification of a request for such arbitration made by either of the parties, the selection of the single arbitrator shall be made by the American Arbitration Association in accordance with said rules.  In addition to, and not in substitution for any and all other relief in law or equity that may be granted by the arbitrator, the arbitrator may grant equitable relief and specific performance to compel compliance hereunder.  The determination of the arbitrator shall be accom­panied by a written opinion of the arbitrator and shall be final, binding and conclusive on the parties, and judgment on the arbitrator's award, including without limitation equitable relief and specific performance, may be entered in and enforced by any court having jurisdiction thereof.  Fees and expenses of the American Arbitration Association and of the arbitrator shall be borne as shall be determined by the arbitrator, and the arbitrator may in his discretion award attorneys' fees and expenses in addition to any other remedy that is allowed and regardless of whether such remedy includes an award of damages.


9.11

Interpretation .  The Article and Section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement.


IN WITNESS WHEREOF, the Members and the Company have executed this Agreement as of the date set forth above.  


Members:

Wellness Center USA, Inc.:


/s/William A. Lambos, Ph.D.

By: /s/ Andrew J. Kandalepas

President

/s/Peter A. Hannouche






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EXCHANGE AGREEMENT


This Exchange Agreement (“Agreement”) is made this 21st day of June , 2012 by and between Scot Johnson, Andrew Stewart, James Fuller, & Joseph Pergolizzi Jr., M.D. (hereinafter referred to individually as a “ Executive Shareholder ” and collectively as the “ Executive Shareholders ”), being certain of the Shareholders who are also officers or directors of PSORIA-SHIELD INC., a Florida company (hereinafter referred to as “ PSI ”), and WELLNESS CENTER USA, INC., an Illinois corporation (hereinafter referred to as the “ Company ”).


RECITALS:


The Company is engaged in the business of providing healthcare solutions (the “Project”).


PSI is engaged in the business of providing targeted UV phototherapy devices to healthcare providers for the treatment of skin disorders (the “ Services ”).   


The Company wishes to expand into other areas of the health-care field which are complementary with the Project, so that it might increase the potential value of issued and outstanding shares of common stock in the Company (“ Shares ”).


The Executive Shareholders own or represent 3,345,000 outstanding shares of common stock in PSI (“ PSI Shares ”), representing 43.52% voting and ownership control of all issued and outstanding shares of stock in PSI, and wish to expand PSI’s provision of Services so that it might increase the potential value of the PSI Shares.


The Company and the Executive Shareholders believe that their wishes for expansion, and to increase the potential the value of the Shares and the PSI Shares, respectively, may be advanced through an exchange of Shares and PSI Shares pursuant the terms and conditions of this Agreement.


NOW, THEREFORE, in consideration of the foregoing Recitals and the respective representations, warranties and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:


ARTICLE I

Certain Definitions


As used in this Agreement, and in addition to any other defined terms used herein, each of the following terms shall have the following meaning:


1.1

Affiliate .  “ Affiliate ” of a Person shall mean a Person that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, the first Person.


1.2

Associate .  “ Associate ” of a Person shall mean (i) an Affiliate of such Person; or (ii) a relative or spouse of such Person, or a relative of such spouse; or (iii) any trust or other estate in which such Person (or any relative or spouse of such Person) has a substantial beneficial interest or as to which such Person (or any relative or spouse of such Person, or a relative of such spouse) serves as a trustee or in a similar fiduciary capacity.


1.3

Closing .  “ Closing ” shall mean the delivery of the documents and materials described in Section 3.


1.4

Closing Date .  “ Closing Date ” has the meaning set forth in Section 3.1.


1.5

ERISA .  “ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended.


1.6

Financial Statements .  “ Financial Statements ” shall meaning the financial statements of PSI and the Company, respectively, as further identified herein.





1.7

Indebtedness .  “ Indebtedness ” shall mean (i) all obligations for borrowed money, whether current or funded, secured or unsecured; (ii) all obligations on the deferred purchase price of any property or services; (iii) all obligations created or arising under any conditional sale or other title retention agreement with respect to property acquired (even though the rights and remedies of the seller, owner or lender under such agreement in the event of a default may be limited to repossession or sale or such property); (iv) all obligations secured by a purchase money mortgage or other Lien to secure all or part of the purchase price of property subject to such mortgage or Lien; (v) all obligations under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases; (vi) any obligation in respect of bankers’ acceptances or letters of credit; (vii) any obligations secured by Liens on property, whether or not such obligations were assumed at the time of acquisition of such property; (viii) all obligations of a type referred to in clause (i), (ii), (iii), (iv), (v), (vi) or (vii) above which is directly or indirectly guaranteed by any Affiliate; (ix) any accrued and unpaid interest or other charges on any of the foregoing obligations; (x) present, future or contingent payment obligations under any qualified or non-qualified welfare, benefit or other plan, agreement or arrangement with any former or present employee or Associate of such employee; (xi) Taxes; and (xii) all other forms of obligations except trade accounts payable and accrued expenses incurred in the ordinary course of business.


1.8

Intellectual Property .  “ Intellectual Property ” shall mean  trademarks, service marks, trade names, trade dress, copyrights, and similar rights, including registrations and applications to register or renew the registration of any of the foregoing, patent and patent applications, and inventions, processes, designs, formulae, trade secrets, know-how, confidential information, and all similar intellectual property rights, and licenses of any of the foregoing.


1.9

Lien .  “ Lien ” shall mean any mortgage, trust deed, pledge, security interest, claim, charge or encumbrance of any kind.


1.10

Material and Materially .  “ Material” and “Materially ”, unless otherwise specifically defined, shall mean and include any specified item, event or matter which, in the aggregate, results in, or may have as a result, an impact which exceeds or may exceed $25,000.00.


1.11

Person .  “ Person ” shall mean any individual, business corporation, municipal or not-for-profit corporation, trust, general or limited partnership, limited liability company, joint venture, unincorporated association, joint stock company, or any other entity or organization of any kind, and any governmental entity, including any agency or political subdivision thereof.


1.12

Securities Act .  “ Securities Act ” shall mean the Securities Act of 1933.


1.13

Tax Returns .  “ Tax Returns ” shall mean all returns, amended returns, declarations, statements, reports, information statements, declarations of estimated taxes, backup withholding returns or reports and other documents required to be filed in respect of Taxes.


1.14

Taxes .  “ Taxes ” shall mean all federal, state, municipal, local and foreign taxes, customs, duties, fees, levies, assessments or charges of any kind whatever including, but not limited to, income, alternative minimum income, franchise, profits, windfall profits, gross receipts, excise, sales, use, license, lease, service, service use, transaction, occupation, severance, stamp, premiums, energy, environmental, withholding, payroll, employment, unemployment, Social Security, worker’s compensation, ad valorem, real or personal property, and capital taxes, and any interest, penalties, additions to tax or other additional amounts with respect thereto.


ARTICLE II

Exchange of Shares and PSI Shares


2.1

Exchange of Shares and PSI Shares . Subject to the provisions of this Agreement, the Executive Shareholders are prepared to transfer to the Company their PSI Shares in consideration of the Company’s issuance of Shares to them on a 1:1 exchange ratio.  In addition, the Executive Shareholders and the Board of Directors of PSI will recommend to all remaining shareholders of PSI that they also exchange their PSI Shares for Shares of the Company on the same 1:1 exchange ratio.  Provided all PSI Shares are exchanged 100% with Shares of the Company, the Company shall issue a total of 7,686,797 Shares according to this Agreement.



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ARTICLE III

The Closing


3.1

Time and Place of Closing .  The Closing shall take place at the offices of the Company’s attorneys, Rieck and Crotty, P.C., 55 West Monroe Street, Suite 3390, Chicago, Illinois  at 11:00 A.M. Central Standard Time, on July  31, 2012 or at such other time, date or place as may be mutually agreed by the parties (the “ Closing Date ”).


3.2

Exchange and Transfer of the Shares and PSI Shares .  At the Closing, the Company shall exchange and transfer the Shares to the Executive Shareholders in the manner hereinafter provided, and the Executive Shareholders shall acquire and accept the Shares solely for and in consideration of the PSI Shares, which shall be delivered to the Company at Closing.  In addition, at Closing the Company shall exchange and transfer Shares to the other shareholders of PSI in the manner hereinafter provided, and the Executive Shareholders shall cause to be delivered at Closing PSI Shares representing 100% of the PSI Shares issued and outstanding to such shareholders, solely for and in consideration of the PSI Shares, which shall be delivered to the Company at Closing.


3.3

Deliveries by the Executive Shareholders to the Company .  At the Closing, the Executive Shareholders will deliver to the Company the following:


(a)

Certificates and assignments duly executed in favor of the Company and representing 100% of the issued and outstanding PSI Shares;


(b)

Certificate of Good Standing for PSI;


(c)

Any consent required under any Material Contract or Lease relating to the assets or business of PSI including, but not limited to, any and all licenses required to continue operation of PSI’ operations in the manner conducted prior to the Closing, duly executed in favor of the Company; and


3.4

Deliveries by the Company to the Executive Shareholders .  At the Closing, the Company will deliver to the Executive Shareholders the following:


(a)

Certificates representing the Shares, issued in the names of the Executive Shareholders and the other shareholders of PSI, reflecting their respective pro rata interest as specified in Exhibit A.


(b)

Certificate of Good Standing for the Company;


(c)

Any consents required from shareholders and directors of the Company; and


(d)

Any consent required under any Material Contract or Lease relating to the assets or business of the Company, duly executed in favor of Executive Shareholders.


(e)

A resolution of the Board of Directors of the Company appointing Scot Johnson to an existing vacant seat on the Company’s Board of Directors.


(f)

Employment Agreement(s) to Scot Johnson and other key PSI personnel, in form acceptable to the Company and the Executive Shareholders, duly executed and including, among other things, non-disclosure, non-solicitation and non-compete provisions effective for the term of employment and extending for a period of  one year following termination of employment.


ARTICLE IV

Representations and Warranties of the Executive Shareholders


Except as disclosed in the Schedules and Exhibits attached hereto (individually referred to as a “ Schedule ” and “Exhibit” and collectively as “ Schedules ” and “Exhibits” ) as referenced to  in the specific Section or Sections hereof to which the disclosure, Exhibit or Schedule pertains, each Executive Shareholder of PSI, executing this Agreement represents and warrants to the Company as follows:   



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4.1

Title to the PSI Shares .  He, she or it owns, beneficially and of record, all of his, her or its’ PSI Shares in PSI, free and clear of any Liens and Indebtedness.


4.2

Organization; Qualification .  PSI is a company duly organized, validly existing and in good standing under the laws of its organization.  PSI has the corporate power and authority to own all of its properties and assets and to carry on the business as presently conducted and is qualified as a foreign corporation in any  jurisdiction where the failure to be so qualified would have a Material adverse effect on PSI, its business or operations.  


4.3

Authority Relative to this Agreement .  Each Executive Shareholder has full and complete power and authority to execute and deliver this Agreement on behalf of himself and to consummate the transactions contemplated hereby solely as they relate to such Executive Shareholder.  The execution and delivery of this Agreement by each Executive Shareholder and any and all related agreements and documents, and the consummation of the transactions contemplated hereby and thereby, have been duly and validly authorized.  When executed and delivered, this Agreement, and all related agreements  and documents, shall have been duly and validly executed and delivered by Executive Shareholders and will not violate, constitute or cause a default, or result in any loss of a Material right under, any provision of law or the articles of incorporation of PSI, or any rule, regulation, order, judgment, decree, contract, instrument or agreement to which any Executive Shareholder is subject, or to which either is a party, and will not result in any termination, acceleration or maturity of any liability, Indebtedness or obligation of any Executive Shareholder.  This Agreement constitutes, and when executed and delivered each of the related agreements and documents shall constitute, a valid and binding obligation of the Executive Shareholders.


4.4

Governmental Authorization and Compliance .  Schedule 4.4 sets forth a complete and accurate list of all licenses, franchises, permits and other governmental authorizations relating to the assets and business operations of PSI.  There are no violations of any such license, franchise, permit and other governmental authorization, nor are there any proceedings pending or threatened to revoke or limit any such license, franchise, permit, or other governmental authorization, except for those instances where such violation, revocation or limitation will not have a Material adverse effect the assets or business operations of PSI.


4.5

Capitalization .  Schedule 4.5 includes the records of PSI delivered by the Executive Shareholders to the Company report accurately the authorized capitalization of PSI and the number of PSI Shares presently outstanding and issued to all shareholders, all of which are duly authorized, validly issued, fully paid and non-assessable.  There are no additional outstanding preemptive rights, subscriptions, warrants, options, contracts, calls or other rights of any kind with regard to any PSI Shares or any other security of PSI of any kind, and there are no capital appreciation rights, phantom stock plans, securities with profit participation rights or features, other similar obligations or commitments of PSI relating to any PSI Shares or any other security of any kind.


4.6

Financial Statements .   The Executive Shareholders have previously furnished the Company a complete and accurate copy of the balance sheet for each of the two most recent fiscal year ends, and for the interim period ended March 31 st , 2012 and the related statements of income and retained earnings for said periods (the “ Financial Statements ”).  The Financial Statements fairly present  the financial position of PSI as of the respective dates, and the results of its operations and changes in financial position for the periods covered thereby, and except to the extent otherwise set forth in the footnotes contained therein have been prepared in accordance with generally accepted accounting principles consistently applied.  


4.7

Title to and Location of Assets .  PSI has good and marketable title to all of its assets, real and personal, tangible and intangible, including those capitalized on or included in the Financial Statements, except only for properties and assets disposed of in the ordinary course of business.


4.8

Leases .  Schedule 4.8 lists all real and personal property leases (“ Leases ”) to which PSI is a party or by which either may be bound.  PSI is not in default in any Material respect under the terms of any Lease.


4.9

Material Contracts .  Schedule 4.9 lists all Material contracts, agreements, instruments, and commitments arising from or relating to the assets and business operations of PSI or to which it is bound.  All contracts, agreements, instruments, and other commitments described in this Section 4.9 to the knowledge of the Executive Shareholders are in full force and effect and PSI has complied with the provisions thereof.  



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4.10

Intellectual Property .  Schedule 4.10 sets forth a list of all registered trademarks, registered copyrights, patents and patent applications owned or used by PSI in its business operations.  To the knowledge of the Executive Shareholders, no other Person possesses any right, title or interest in, to or under such Intellectual Property.  There is no pending or, to the knowledge of the Executive Shareholders, threatened claim or litigation against PSI contesting its right, title or interest with respect to any such Intellectual Property and such Intellectual Property does not infringe, violate or require the use of any consent, trademark, trade name, license, copyright, trade secret, or other proprietary asset of any other Person.


4.11

Labor Relations .  To the knowledge of the Executive Shareholders, there are no controversies pending between PSI and any of its present or former employees which: (a) affect, or can reasonably be expected to affect, adversely and Materially, its assets or business operations; or (b) relate to any effort to prevent, restrict or delay consummation of any of the transactions contemplated by this Agreement.


4.12

Employment Agreements .  To the knowledge of the Executive Shareholders, there are no written or oral agreements with any employees of PSI which are not terminable upon notice of thirty (30) days or less.


4.13

Employee Benefit Plans .  There are no employee benefit plans within the meaning of applicable law that affect employees of PSI.


4.14

Maintenance of Tangible Assets .  The assets of PSI have been and will be from the date hereof through the Closing Date, maintained in good and operable condition ordinary wear and tear excepted.


4.15

Accounts Receivable .  Accounts receivable are fairly reported in the Financial Statements, arose in the ordinary course of business and are the result of arm’s length, bona fide transactions.  


4.16

Litigation .  There are no actions, suits, claims, investigations or proceedings legal, administrative or arbitrative) pending against Executive Shareholders, PSI or any officer, manager or employee thereof, whether at law or in equity and whether civil or criminal in nature, before or by any federal, state, municipal or other court, arbitrator, governmental department, commission, agency or instrumentality.


4.17

Absence of Changes .  Since the date of the Financial Statements, PSI has operated in the ordinary course, and there has been no: (a) Material adverse change in the operations, properties or condition (financial or otherwise); (b) damage, destruction or loss (whether or not covered by insurance) Materially and adversely affecting the assets or business operations or that could reasonably be expected to affect, Materially and adversely, the assets or business operations thereof.


4.18

Insurance .  Schedule 4.18 is a complete and accurate list of all currently effective policies of insurance of which PSI is the owner or insured or covering any of its assets or business operations, indicating for each policy the carrier, risks insured, the amounts of coverage, deductible, and expiration date.  All such policies are in full force and effect, all premiums due thereon have been paid, and PSI has complied in all Material respects with the provisions of such policies.


4.19

Taxes .  All Tax Returns required to be filed by or on behalf of PSI have been duly filed on a timely basis and such Tax Returns are complete and accurate.  All Taxes due and payable have been paid in full on a timely basis.  PSI has withheld and paid over all Taxes required to have been withheld and paid over in connection with amounts paid or owing to any employee, creditor, independent contractor, or other Person.  The liability for unpaid Taxes for all periods ended on or prior to the date of this Agreement included in the Financial Statements does not exceed the liability accruals for Taxes (excluding reserves for deferred Taxes) reflected in such Financial Statements.  


4.20

Environmental Matters .  PSI has been, and at the Closing will be, in compliance in all Material respects and with all federal, state and local statutes, laws, ordinances, orders, rules, regulations, and moratoria relating to operation and occupancy of its  assets and business operations.  PSI has not at any time received any notice alleging any non-compliance with or potential liability pursuant to any of such statutes, laws, ordinances, orders, rules, regulations, or moratoria.


4.21

Schedules .  All of the Schedules and Exhibits provided by and attached to this Agreement by the Executive Shareholders are complete and accurate in all respects.  Schedules and Exhibits may be attached at any time prior to Closing, and subject to acceptance by each other party.



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4 .22

Nature of Transaction .  The Company is aware that only Executive Shareholders of PSI who are also senior officers are executing this Agreement.  The representation and warranties contained in Article IV of the Executive Shareholders regarding PSI are obligations only of the Executive Shareholders executing this Agreement.  It is the intention of the Executive Shareholders, PSI and the Company, that the Company will offer to exchange Shares with all the remaining shareholders of PSI not executing this Agreement for their PSI Shares, upon terms and conditions substantially similar to those set forth herein.  No shareholder not a party to this Agreement shall be bound by this Agreement in any respect, nor shall any shareholder not a party to this Agreement be deemed to be liable for any breach of any representation, warranty, provision, covenant or condition of this Agreement.  Each shareholder will receive from the Company an offer to exchange Shares for PSI Shares and, if such shareholder elects to tender his, her or its PSI Shares in exchange for Shares, the only obligations, liabilities, representations or warranties to which such shareholder will be bound will be set forth in such an exchange agreement executed by such shareholder upon tender of his, her or its PSI Shares and as provided in such exchange agreement.


ARTICLE V

Representations and Warranties of the Company


Except as disclosed in the Schedules and Exhibits attached hereto (individually referred to as a “ Schedule ” and “ Exhibit ” and collectively as “ Schedules ” and “ Exhibits ”) as referenced to  in the specific Section or Sections hereof to which the disclosure, Exhibit or Schedule pertains, the Company represents and warrants to the Executive Shareholders as follows:   


5.1

Organization; Qualification .  The Company is a corporation duly organized, validly existing and in good standing under the laws of its organization.  The Company has the corporate power and authority to own all of its properties and assets and to carry on the business as presently conducted and is qualified as a foreign corporation in any  jurisdiction where the failure to be so qualified would have a Material adverse effect on the Company, its business or operations.  


5.2

Authority Relative to this Agreement .  The Company has full and complete power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby as they relate to the Company.  The execution and delivery of this Agreement by the Company and any and all related agreements and documents, and the consummation of the transactions contemplated hereby and thereby, have been duly and validly authorized.  When executed and delivered, this Agreement, and all related agreements  and documents, shall have been duly and validly executed and delivered by the Company and will not violate, constitute or cause a default, or result in any loss of a Material right under, any provision of law or the articles of incorporation and bylaws of the Company, or any rule, regulation, order, judgment, decree, contract, instrument or agreement to which the Company is subject, or to which it is a party, and will not result in any termination, acceleration or maturity of any liability, Indebtedness or obligation of the Company.  This Agreement constitutes, and when executed and delivered each of the related agreements and documents shall constitute, a valid and binding obligation of the Company.


5.3

Governmental Authorization and Compliance .  Schedule 5.3 sets forth a complete and accurate list of all Material licenses, franchises, permits and other governmental authorizations relating to the assets and business operations of the Company.  There are no violations of any such license, franchise, permit and other governmental authorization, nor are there any proceedings pending or threatened to revoke or limit any such license, franchise, permit, or other governmental authorization, except for those instances where such violation, revocation or limitation will not have a Material adverse effect the assets or business operations of the Company.


5.4

Capitalization .  The corporate records of the Company delivered by the Company to the Executive Shareholders report accurately the authorized capital stock of the Company and the number of shares of stock presently outstanding and issued, all of which is duly authorized, validly issued, fully paid and non-assessable.  Except as set forth in Schedule 5.4, there are no outstanding preemptive rights, subscriptions, warrants, options, contracts, calls or other rights of any kind with regard to any shares of stock or any other security of the Company of any kind, and there are no capital appreciation rights, phantom stock plans, securities with profit participation rights or features, or similar obligations or commitments of the Company.


5.5

Financial Statements .  The Company has previously furnished the Executive Shareholders a complete and accurate copy of the balance sheet for each of the two most recent fiscal year ends, and for the interim period ended March 31 st , 2012 and the related statements of income and retained earnings for said periods (the “ Financial Statements ”).  The Financial Statements fairly present the financial position of the Company as of the respective dates, and the results of its operations and changes in financial position for the periods covered thereby, and except to the extent otherwise set forth in the footnotes contained therein have been prepared in accordance with generally accepted accounting principles consistently applied.  



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5.6

Title to and Location of Assets .  The Company has good and marketable title to all of its assets, real and personal, tangible and intangible, including those capitalized on or included in the Financial Statements, except only for properties and assets disposed of in the ordinary course of business.


5.7

Leases .  Schedule 5.7 lists all real and personal property leases (“ Leases ”) to which the Company is a party or by which it may be bound.  The Company is not in default in any Material respect under the terms of any Lease.  Each Lease is valid, binding and enforceable, in accordance with its terms, against each party thereto.


5.8

Material Contracts .  Schedule 5.8 lists all Material contracts, agreements, instruments, and commitments arising from or relating to the assets and business operations of the Company or to which it is bound.  All contracts, agreements, instruments, and other commitments described in this Section 5.8 are in full force and effect and the Company has complied with the provisions thereof.  


5.9

Intellectual Property .  Schedule 5.9 sets forth a list of all registered trademarks, registered copyrights, patents and patent applications owned or used by the Company in its business operations.  To the knowledge of the Company, no other Person possesses any right, title or interest in, to or under such Intellectual Property.  There is no pending or, to the knowledge of the Company, threatened claim or litigation against the Company contesting its right, title or interest with respect to any such Intellectual Property and such Intellectual Property does not infringe, violate or require the use of any consent, trademark, trade name, license, copyright, trade secret, or other proprietary asset of any other Person.


5.10

Labor Relations .  There are no controversies pending between the Company and any of its present or former employees which: (a) affect, or can reasonably be expected to affect, adversely and Materially, its assets or business operations; or (b) relate to any effort to prevent, restrict or delay consummation of any of the transactions contemplated by this Agreement.


5.11

Employment Agreements .  There are no written or oral agreements with any employees of the Company which are not terminable upon notice of thirty (30) days or less.


5.12

Employee Benefit Plans .  There are no employee benefit plans within the meaning of applicable law that affect employees of the Company.


5.13

Maintenance of Tangible Assets .  The assets of the Company have been and will be from the date hereof through the Closing Date, maintained in good and operable condition ordinary wear and tear excepted.  


5.14

Accounts Receivable .  Accounts receivable are fairly reported in the Financial Statements, arose in the ordinary course of business and are the result of arm’s length, bona fide transactions.


5.15

Litigation .  There are no actions, suits, claims, investigations or proceedings (legal, administrative or arbitrative) pending against the Company or any officer, director or employee thereof, whether at law or in equity and whether civil or criminal in nature, before or by any federal, state, municipal or other court, arbitrator, governmental department, commission, agency or instrumentality.


5.16

Absence of Changes .  Since the date of the Financial Statements, the Company has operated in the ordinary course, and there has been no: (a) Material adverse change in the operations, properties or condition (financial or otherwise); (b) damage, destruction or loss (whether or not covered by insurance) Materially and adversely affecting the assets or business operations or that could reasonably be expected to affect, Materially and adversely, the assets or business operations thereof.


5.17

Insurance .  Schedule 5.17 is a complete and accurate list of all currently effective policies of insurance of which the Company is the owner or insured or covering any of its assets or business operations, indicating for each policy the carrier, risks insured, the amounts of coverage, deductible, and expiration date.  All such policies are in full force and effect, all premiums due thereon have been paid, and the Company has complied in all Material respects with the provisions of such policies.


5.18

Taxes .  All Tax Returns required to be filed by or on behalf of the Company have been duly filed on a timely basis and such Tax Returns are complete and accurate.  All Taxes due and payable have been paid in full on a timely basis.  The Company has withheld and paid over all Taxes required to have been withheld and paid over in connection with amounts paid or owing to any employee, creditor, independent contractor, or other Person.  The liability for unpaid Taxes for all periods ended on or prior to the date of this Agreement included in the Financial Statements does not exceed the liability accruals for Taxes (excluding reserves for deferred Taxes) reflected in such Financial Statements.  



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5.19

Environmental Matters .


(a)

The Company has been, and at the Closing will be, in compliance in all Material respects and with all federal, state and local statutes, laws, ordinances, orders, rules, regulations, and moratoria relating to operation and occupancy of its assets and business operations.  The Company has not  at any time received any notice alleging any non-compliance with or potential liability pursuant to any of such statutes, laws, ordinances, orders, rules, regulations, or moratoria.


(b)

There is no underground storage tank or hazardous waste, substance, chemical, or other condition or use of the Company’ s assets or their vicinity, whether natural or man-made, which poses a present or potential threat of damage to the health of persons, to property, to natural resources, or to the environment.


(c)

The Company has no liability, responsibility or obligation, whether fixed, unliquidated, absolute, contingent or otherwise, under any federal, state or local environmental laws or regulations, including any liability, responsibility, or obligation for fines or penalties, or for investigation, expense, removal, or remedial action to effect compliance with or discharge any duty, obligation, or claim under any such laws or regulations, and, to the knowledge of the Company there is no reason to believe that any such claims, actions, suits, proceedings, or investigations under such laws or regulations exist or may be brought or threatened.  


5.20

Schedules .  All of the Schedules and Exhibits provided by and attached to this Agreement by the Executive Shareholders are complete and accurate in all respects.  Schedules and Exhibits may be attached at any time prior to Closing, and subject to acceptance by each other party.


ARTICLE VI

Other Agreements of the Parties


6.1

Expenses .  Whether or not the transactions contemplated are consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby will be paid by the party incurring such costs and expenses.


6.2

Best Efforts .  Subject to the terms and conditions of this Agreement, each of the parties will use its commercially reasonable best efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective as soon as practicable the transactions contemplated by this Agreement.


6.3

Further Assurances .  From time to time, without further consideration, the Executive Shareholders at their own expense, will execute and deliver, or cause to be executed and delivered, such documents as the Company may reasonably request to more effectively consummate the transactions contemplated hereby.  From time to time, without further consideration, the Company, at its own expense, will execute and deliver, or cause to be executed and delivered, such documents as the Executive Shareholders may reasonably request to more effectively consummate the transactions contemplated hereby.


6.4

Negotiations with Others .  During the period from the date of this Agreement to the Closing Date, neither the Executive Shareholders nor the Company shall, directly or indirectly, engage in discussions or negotiations with any person or entity concerning any possible proposal regarding a sale or transfer of all or any part of the PSI Shares or the assets or business operations of PSI.  The Executive Shareholders agree to disclose to the Company the existence and content of any communication they receive concerning any such possible proposal as soon as practicable after receipt of the communication.


6.5

Indemnification by Company .  Subject to the provisions of Sections 6.5, 6.7, 6.8 and 6.9, from and after the Closing Date, Company hereby covenants and agrees to indemnify and hold Executive Shareholders, and all other exchanging shareholders who exchange or tender their shares, their Affiliates and their respective Affiliates, members, managers, directors, officers, partners, trustees, shareholders, employees and agents (each, a “ Executive Shareholder Indemnified Party ” and collectively, the “ PSI Indemnified Parties ”) harmless from, against and in respect of:



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(a)

any Loss resulting from the inaccuracy of any representation or warranty by Company under this Agreement or in any certificate or other instrument provided by Company as required by this Agreement; and


(b)

any Loss resulting from any nonfulfillment of any covenant or agreement on the part of Company under this Agreement.


The foregoing matters giving rise to the PSI Indemnified Parties’ rights to indemnification hereunder are hereinafter referred to as “ PSI Claims .”


6.6

Indemnification by Executive Shareholders .  Subject to the provisions of Sections 6.6, 6.7, 6.8 and 6.10, from and after the Closing Date, Executive Shareholders (as defined herein), severally but not jointly, hereby covenant and agree to indemnify and hold Company, Company’s Affiliates, and their respective Affiliates, members, managers, directors, officers, partners, trustees, shareholders, employees and agents (each, a “ Company Indemnified Party ” and collectively, the “ Company Indemnified Parties ”) harmless from, against and in respect of:


(a)

any Loss resulting from the inaccuracy of any representation or warranty under this Agreement or in any certificate provided by Executive Shareholders to Buyer as required by this Agreement;


(b)

any Loss resulting from any nonfulfillment of any covenant or agreement on the part of Executive Shareholders under this Agreement; and


(c)

any Loss resulting from any claim asserted against any Company Indemnified Party or PSI by any shareholder of PSI not executing this Agreement and not electing to exchange his, her or its PSI Shares for Shares as provided herein.   


The foregoing matters giving rise to the Company Indemnified Parties’ right to indemnification hereunder are hereinafter referred to as “ Company Claims .”


6.7

Third Party Claims; Notification of Claims .


(a)

Promptly after the assertion by any third party of any claim (a “ Third Party Claim ”) against any Person entitled to indemnification under this Article VI (the “ Indemnitee ”) that results or may result in the incurrence by such Indemnitee of any Loss for which such Indemnitee would be entitled to indemnification pursuant to this Article VI, such Indemnitee shall promptly notify in writing (each such notice, a “ Third Party Claim Notice ”) the party or parties from whom such indemnification could be sought under this Article VI (each, an “ Indemnitor ” and collectively, the “ Indemnitors ”) of such Third Party Claim.  The Indemnitor may, at its option, assume the defense of the Indemnitee against any Third Party Claim (including the employment of counsel reasonably satisfactory to the Indemnitee) if the Indemnitor promptly notifies the Indemnitee of its intention to do so and keeps the Indemnitee fully informed as to all matters relating to the defense and settlement of such action.  The Indemnitee shall not settle or compromise any Third Party Claim as to which the Indemnitor has assumed the defense.  The Indemnitor shall in no case settle or compromise a Third Party Claim or consent to the entry of judgment with respect to a Third Party Claim, other than solely for money damages within the limits set forth in Section 6.8, without the prior written consent of the Indemnitee (which consent shall not be unreasonably withheld, conditioned or delayed) if such settlement, compromise or judgment would adversely affect the Indemnitee in any continuing manner.



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(b)

In addition to the provisions set forth in this Section 6.7 (and without limiting such provisions), following the discovery of any facts or circumstances which would reasonably be expected to give rise to a claim for indemnification under Article VI, the Indemnitee shall provide written notice to the Indemnitor reasonably promptly after discovery of such facts or circumstances, setting forth in reasonable detail the specific facts and circumstances relating to such claim, the amount of Losses relating to such claim (or a non-binding, good faith, reasonable estimate thereof if the actual amount is not known or not capable of reasonable calculation), and the specific sections(s) of this Agreement upon which the Indemnitee seeking indemnification is relying in seeking such indemnification (an “Indemnification Notice”).  As additional or different facts and circumstances relating to any pending claim for indemnification under Article VI become known to the Indemnitee, such Indemnitee shall provide to the Indemnitor a supplement to the Indemnification Notice relating to such claim.


6.8

Limitations of Liability .


(a)

The Company shall not be required to indemnify any PSI Indemnified Party with respect to any claim for indemnification unless and until the aggregate amount of PSI Claims exceeds the sum of One Hundred Thousand Dollars ($100,000) (the “ Threshold Amount ”), in which case such indemnification obligation shall relate to the entire amount of such PSI Claim or PSI Claims.  The maximum amount for which Company is obligated to indemnify hereunder with respect to PSI Claims is fifty percent (50%) of the market value of the Company shares delivered on the Closing Date (the “ Cap Amount ”).  Notwithstanding anything to the contrary contained herein or in any related document, Company shall not be liable to PSI for any consequential damages, including, but not limited to, loss of revenue or income, cost of capital, or loss of business reputation or opportunity relating to the breach or alleged breach of this Agreement.  The limitations set forth above shall not be applicable to any claim for indemnification based on actual fraud or intentional misrepresentation by Company.


(b)

The Executive Shareholders shall not be required to indemnify any Company Indemnified Party with respect to any claim for indemnification unless and until the aggregate amount of all Company Claims exceeds the sum of One Hundred Thousand Dollars ($100,000), in which case such indemnification obligation shall relate to the entire amount of such Company Claim or Company Claims.  The maximum amount for which Executive Shareholders are obligated to indemnify hereunder with respect to Company Claims is the Cap Amount.  Notwithstanding anything to the contrary contained herein or in any related document, Executive Shareholders shall not be liable to Company for any consequential damages, including, but not limited to, loss of revenue or income, cost of capital, or loss of business reputation or opportunity relating to the breach or alleged breach of this Agreement.  The limitations set forth above shall not be applicable to any claim by Company for indemnification based on actual fraud or intentional misrepresentation by Seller or the Owners.


(c)

Each party hereto shall provide each other party hereto with such additional information as such party may reasonably request regarding any claim for indemnification under this Article VI.


6.9

Survival of Company’s Representations and Warranties; Limitation of Certain PSI Claims .  The representations and warranties of Company contained in this Agreement shall survive the Closing for a period ending on the one (1) year anniversary of the Closing Date and any PSI Indemnified Parties Claims made pursuant to Article VI must be made prior to such time.  The limitations set forth above shall not be applicable to any claim for indemnification based on actual fraud or intentional misrepresentation by Company.


6.10

Survival of Executive Shareholder Representations and Warranties; Limitation of Certain Company Claims .  The representations and warranties of Executive Shareholders contained in this Agreement shall survive the Closing for a period ending on the one (1) year anniversary of the Closing Date and any Company Claims must be made prior to such time.  The limitations set forth above shall not be applicable to any claim by Company for indemnification based on actual fraud or intentional misrepresentation by Executive Shareholders.



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6.11

Insurance Proceeds .  Notwithstanding the foregoing, each party to this Agreement shall use commercially reasonable efforts to seek recovery under its respective applicable insurance policies, if any, covering any indemnifiable Losses to the same extent as it would if such indemnifiable Losses were not subject to indemnification hereunder.  The amount of any indemnifiable Losses subject to any Claim shall be calculated net of any insurance proceeds (net of any collection expenses) received by the insured party on account of such Claim.  In the event than an insurance recovery is made by any insured party with respect to any claim for which it has been indemnified under this Article VI, then the insured party shall pay to any other party that made any payment of any Claim or portion of any Claim  an amount equal to the aggregate amount of the recovery (net of all collection expenses) up to the actual amount of such indemnification payment.


6.12

Exclusive Remedy; Specific Performance .  The remedies set forth in this Article VI (together with the termination rights contained in this Agreement) constitute the parties’ exclusive remedies arising out of or in connection with this Agreement.  Notwithstanding the foregoing, in the event of a party’s willful breach of the terms of this Agreement, the non-breaching party shall be entitled to relief consisting of a judicial order of specific performance by the breaching party, which shall be cumulative with any other legally available remedies.


ARTICLE VII

Closing Conditions


7.1

Conditions to Each Party’s Obligations .  The respective obligations of each party to effect the transactions contemplated hereby shall be subject to the fulfillment at or before the Closing Date of the condition that neither the Executive Shareholders and Company shall be subject to any order, decree or injunction of a court of competent jurisdiction which prevents or delays any of the transactions contemplated by this Agreement or the continuation of PSI’s or the Company’s business in the manner conducted prior to the Closing.


7.2

Conditions to the Obligations of Executive Shareholders .  The obligations of the Executive Shareholders to effect the transactions contemplated hereby shall be further subject to the fulfillment at or before the Closing Date of the following conditions, any one or more of which may be waived by Executive Shareholders:


(a)

Compliance by the Company . The Company shall have performed and complied in all material respects with the provisions contained in this Agreement required to be performed and complied with by it at or before the Closing Date.


(b)

Representations and Warranties .  The representations and warranties of the Company set forth in this Agreement were true and correct in all material respects as of the date of this Agreement and shall also be true and correct in all material respects as of the Closing Date as though made at and as of the Closing Date, except as otherwise contemplated by this Agreement.


(c)

Corporate Authority; Consents; Permits . The Company shall have delivered to Executive Shareholders evidence satisfactory to Executive Shareholders that the Company shall have obtained any and all permits, authorizations, lessor consents and approvals of any Person or public body or authority, including shareholders and directors of the Company,  required effectively to transfer the Shares to Executive Shareholders and to continue business operations of the Company in the manner conducted prior to the Closing Date.


(d)

Capital Infusion .  The Company will support PSI’s financial needs beginning on the Closing Date and going forward on an as needed basis.


7.3

Conditions to the Obligations of the Company .  The obligations of the Company to effect the transactions contemplated hereby shall be further subject to the fulfillment at or before the Closing Date of the following conditions, any one or more of which may be waived by the Company:


(a)

Compliance by the Executive Shareholders .  The Executive Shareholders shall have performed and complied in all material respects with the provisions contained in this Agreement required to be performed and complied with by or before the Closing Date.



11




(b)

Representations and Warranties .  The representations and warranties of the Executive Shareholders set forth in this Agreement shall have been true and correct in all material respects as of the date of this Agreement and shall also be true and correct in all material respects as of the Closing Date as though made at and as of the Closing Date, except as otherwise contemplated by this Agreement.


(c)

Authority; Consents; Permits .  The Executive Shareholders shall have delivered to the Company evidence satisfactory to the Company that the Executive Shareholders and/or PSI shall have obtained any and all permits, authorizations, lessor consents and approvals of any Person or public body or authority, including Executive Shareholders and managers of PSI, required effectively to transfer the PSI Shares to the Company and to continue business operations of PSI in the manner conducted prior to the Closing Date.


7.4

Other Documents .  Each of the parties will furnish to the other party such certificates of such party’s members, shareholders, officers, directors, employees, Associates or Affiliates, or such other documents, as may be reasonably necessary to evidence fulfillment of the conditions set forth in this Article VII as the other party may reasonably request.


ARTICLE VIII

Termination


8.1

Termination .  This Agreement may be terminated at any time prior to the Closing Date:


(a)

By the written agreement of Executive Shareholders and the Company;


(b)

By either Executive Shareholders or the Company by written notice to the other hereto after 5:00 p.m. Central Standard Time on July 31, 2012 if the transactions contemplated hereby shall not have been consummated pursuant hereto, unless such date is extended by the mutual written consent of Executive Shareholders and the Company; or


(c)

By written notice of the Executive Shareholders to the Company if, in the exercise of the Executive Shareholders absolute discretion, any Schedule  or Exhibit submitted by the Company to the Executive Shareholders after execution of this Agreement by all parties is not satisfactory to the Executive Shareholders.


(d)

By written notice of the Company to the Executive Shareholders if, in the exercise of the Company’s absolute discretion, any  Schedule or Exhibit submitted by the Executive Shareholders to the Company after execution of this Agreement by all parties is not satisfactory to the Company of if the Executive Shareholders do not deliver at Closing certificates representing 100% of the issued and outstanding PSI Shares in consideration of  Shares to be exchanged therefor as provided herein.


(e)

By either the Executive Shareholders or the Company if: (i) the representations and warranties of the Executive Shareholders or the Company, shall not have been true and correct in all material respects as of the date when made; (ii) the Executive Shareholders or the Company shall have failed to perform and comply with, in all material respects, all agreements and covenants required by this Agreement to have been performed or complied with by such parties prior to the time of such termination and such failure to perform or comply shall be incurable or shall not have been cured within a reasonable period of time but not less than ten  days in duration following notice of such failure, provided that the terminating party shall have performed and complied with, in all material respects, all agreements and covenants required by this Agreement to have been performed or complied with by such terminating party prior to such time; or (iii) any event shall have occurred or any fact or condition shall exist that shall have made it impossible to satisfy a condition precedent to the terminating party’s obligations to consummate the transactions contemplated by this Agreement, unless the occurrence of such event or existence of such fact or condition shall be due to the failure of the party seeking to terminate this Agreement or any of its Associates or Affiliates to perform or comply with any of the covenants, agreements, or conditions



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8.2

Effect of Termination .  In the event this Agreement is terminated pursuant to the provisions of Section 8.1, this Agreement shall become void and have no effect, without any liability on the part of any party hereto, or any of its members, shareholders, directors, officers, employees, agents, consultants, representatives, agents, Associates or Affiliates.


ARTICLE IX

Miscellaneous Provisions


9.1

Entire Agreement .  This Agreement is to be read together with the Employment Agreements to be delivered by the Executive Shareholders pursuant to Section 3.3 (e), and any default under this Agreement or an Employment Agreement shall constitute a default under the other.   This Agreement sets forth the entire agreement between the parties and supersedes all prior agreements and understandings between the parties with respect thereto.


9.2

Amendment and Modification .  This Agreement may be amended, modified or supplemented only by written agreement signed by each of the parties.


9.3

Waiver of Compliance; Consents .  Except as otherwise provided in this Agreement, any failure of any of the parties to comply with any obligation, covenant, agreement or condition herein may be waived by the party entitled to the benefit thereof only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.  Whenever this Agreement requires or permits the consent of any party, such consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance as set forth in this Section 9.3.


9.4

Investigations; Survival of Representations and Warranties .  Each of the representations and warranties of the parties contained herein or in any Exhibit, Schedule, certificate, or other document delivered before or at the Closing shall continue and survive the Closing Date.


9.5

Notices .  All notices and other communications under this Agreement shall be in writing and shall be deemed given if: (a) delivered personally; or (b) mailed by certified mail (return receipt requested), postage prepaid; or (c) sent by overnight courier; or (d) transmitted by telefacsimile, email or other electronic transmission;  to the parties at the following addresses (or at such other address for a party as shall be specified by like notice, provided that notices of a change of address shall be effective only upon receipt thereof):


If to an Executive Shareholder to:

     

     

      

Psoria-Shield Inc.

6408 West Linebaugh Ave.

Suite 103

Tampa, FL 33625

 

 

If to the Company:

      

      

      

Wellness Center USA, Inc.

1014 E. Algonquin Road - Suite 111

Schaumburg, IL 60173


9.6

Assignment .  Neither this Agreement nor any of the rights, PSI Shares or obligations hereunder shall be assigned by any party, nor is this Agreement intended to confer upon any other person except the parties hereto any rights or remedies hereunder.


9.7

Governing Law .  This Agreement shall be governed by the laws of the State of Illinois as to all matters including, but not limited to, matters of validity, construction, effect, performance and remedies, and, as partial consideration for the other party’s execution and performance hereunder each party waives personal service of any and all process upon it, to the extent permitted by law, and consents that all such service of process be made by upon such party at the address and in the manner set forth in Section 9.5 of this Agreement and service so made shall be deemed to be completed upon the earlier of actual receipt or three  days after the same shall have been posted to such party’s address.


9.8

Binding Effect and Benefit .  The provisions hereof shall be binding upon, and shall inure to the benefit of, the parties, and their respective heirs, executors, administrators, its successors, and assigns.


9.9

Counterparts .  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.




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9.10

Severability .  Whenever possible, each of the provisions of this Agreement shall be construed and interpreted in such a manner as to be effective and valid under applicable law.  If any provisions of this Agreement or the application of any provision of this Agreement to any party or circumstance shall be prohibited by, or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition without invalidating the remainder of such provision, any other provision of this Agreement, or the application of such provision to other parties or circumstances.


9.11

Arbitration . Except as otherwise provided herein, any controversy, dispute or claim between the parties arising out of, related to or in connection with this Agreement or the performance or breach hereof shall be submitted to and settled by arbitration conducted by the American Arbitration Association in Chicago, Illinois, in accordance with its commercial arbitration rules as then in effect; provided that the arbitration shall be by a single arbitrator mutually selected by the Executive Shareholders and the Company, and if the parties do not agree within thirty (30) days after the date of notification of a request for such arbitration made by either of the parties, the selection of the single arbitrator shall be made by the American Arbitration Association in accordance with said rules.  In addition to, and not in substitution for any and all other relief in law or equity that may be granted by the arbitrator, the arbitrator may grant equitable relief and specific performance to compel compliance hereunder.  The determination of the arbitrator shall be accompanied by a written opinion of the arbitrator and shall be final, binding and conclusive on the parties, and judgment on the arbitrator’s award, including without limitation equitable relief and specific performance, may be entered in and enforced by any court having jurisdiction thereof.  Fees and expenses of the American Arbitration Association and of the arbitrator shall be borne as shall be determined by the arbitrator, and the arbitrator may in his discretion award attorneys’ fees and expenses in addition to any other remedy that is allowed and regardless of whether such remedy includes an award of damages.


9.12

Interpretation .  The Article and Section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement.

IN WITNESS WHEREOF, the Executive Shareholders and the Company have executed this Agreement as of the date set forth above.


Executive Shareholders:

Wellness Center USA, Inc.:



By: /s/ Scot Johnson                                             

        Scot Johnson, President



By: /s/ Andrew Kandalepas                     

         Andrew Kandalepas, President



By: /s/ Andrew Stewart                                        

        Andrew Stewart, Board of Directors

 



By: /s/ Joseph Pergolizzi                                     

Joseph Pergolizzi Jr., M.D., Board of Directors

 



By: /s/ James Fuller                                            

          James Fuller, Board of Directors

 

 

 




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EXCLUSIVE LICENSE AGREEMENT

THIS EXCLUSIVE LICENSE AGREEMENT (this “ Agreement ”) is made and entered into this 25th day of August, 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., a Florida corporation (“ Licensee ”).

W I T N E S S E T H :

WHEREAS , Licensors jointly hold and own all right, title, and interest in and to the provisional patent application described on Exhibit A hereto (the “ Patent Application ”);

WHEREAS , upon the terms and conditions set forth herein, Licensee desires to acquire, and Licensors desire to grant, an exclusive license to exploit the Patent Application and other related intellectual property upon the terms set forth herein for the purpose of developing, making, having made, selling, marketing, distributing, and otherwise commercializing Licensee’s targeted ultraviolet (“ UV ”) phototherapy device designed to be used for the treatment of, and/or to perform diagnostic assessments associated with, UV-treatable skin conditions (the “ Product ”) and related products.

NOW, THEREFORE , the parties do mutually agree as follows:

1.

Definitions

1.1

Affiliate ” shall mean, as to any specified person or entity, any other person or entity that directly or indirectly controls, or is under common control with, or is controlled by, such specified person or entity and, if such other person is an individual, any member of the immediate family of such individual.  As used in this definition, “control” (including, with its correlative meanings, “controlled by” and “under common control with”) shall mean possession, directly or indirectly, of power to direct or cause the direction of the management or policies (whether through ownership of securities or partnership or other ownership interests, by contract, or otherwise) and “immediate family” shall mean any parent, child, grandchild, spouse, or sibling.

1.2

Field ” shall mean (i) targeted UV phototherapy devices, utilizing UV wavelengths between 300 nm and 400 nm, that are designed and used to treat, and/or to perform diagnostic assessments associated with, UV-treatable skin conditions and (ii) any other products that are mutually agreed to in writing by Licensors and Licensee after the date hereof.

1.3

Improvement ” shall mean any discoveries and/or inventions (whether patented or not) that constitute a modification of the technologies covered by the Licensed Patents (as defined below), provided that such modification, if unlicensed, would infringe one or more claims of the Licensed Patents.

1.4

Know-how ” shall mean the general and specific knowledge, experience and information known to Licensors as of the date of this Agreement, not in written or printed form, applicable to the design, development, manufacture, production, service and sale of the Licensed Product(s).

1.5

Licensed Product ” shall mean any product, including, but not limited to the Product, which, if made, used, sold, or commercialized by Licensee or a sublicensee would, but for Licensee’s rights under this Agreement, constitute an infringement of a valid claim of the Licensed Patents in the relevant jurisdiction.

1.6

Licensed Patents ” shall mean (i) the Patent Application, (ii) any non-provisional patent applications filed by the Licensors covering the technology described in the Patent Application, (iii) all U.S. and foreign patents issuing from the Patent Application and the non-provisional patent applications described in clause (ii) of this Section 1.6, and (iv) all U.S. and foreign patents issuing from current or later filed divisionals, reissues, reexaminations, continuations, continuations-in part, renewals, extensions, substitutions, and foreign equivalents and counterparts of any patents or patent applications listed in clauses (i), (ii), and (iii) of this Section 1.6.

1.7

Technical Data ” shall mean any and all documents containing formulas, designs, and technical information, engineering or production data, drawings, plans, specifications, techniques, methods, processes, trade secrets, reports, models, codes, software, works of authorship, and any and all other material and matter used by or in possession of Licensors as of the date of this Agreement and applicable to the manufacturing, production, composition, marketing, sale, distribution, development, or commercialization of the Product.





2.

Grant of License

2.1

Licensors hereby grant 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 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.

2.2

Licensors shall, without charge, furnish Licensee with all Technical Data and Know-how owned by or in the possession of Licensors as of the date of this Agreement which are applicable to the Licensed Product(s).

2.3

The parties agree that any rights not specifically granted to Licensee by this Agreement are expressly reserved by Licensors.  For purposes of illustration and not of limitation, Licensors shall not be restricted from using or licensing the Licensed Patents in fields of use outside of the Field, such as in phototherapy devices not utilizing UV wavelengths between 300 nm and 400 nm and in devices that are designed and used to treat, and/or to perform diagnostic assessments associated with, UV-treatable and non-UV-treatable maladies of the body (rather than maladies of the skin) and non-UV-treatable skin conditions.

3.

Consideration for License

As the sole and exclusive consideration for the rights and licenses granted in this Agreement, each of the Licensors shall receive, on the date hereof, 3,000,000 shares of common stock of Licensee.

4.

Covenants of Licensors

4.1

On or before August 25, 2010, Licensors shall, at their own cost and expense, file one or more non-provisional patent applications covering the technology described in the Patent Application.

4.2

Licensors shall, at their own cost and expense, make all maintenance filings and similar filings or disclosures in order to maintain the effectiveness and registrations of the Licensed Patents at all times during the License Term.

4.3

In the event that Licensors fail to take any of the actions specified in this Section 4 (any such action referred to as a “ Required Action ”), then (i) Licensee shall have the right to take a Required Action on behalf of Licensors, in which case Licensors shall reimburse and jointly and severally indemnify Licensee from and against any all costs, expenses, and other amounts reasonably incurred by Licensee in taking such Required Action, and (ii) each of the Licensors hereby appoints Licensee as his agent and attorney-in-fact for purposes of executing any documents and taking any action in connection with a Required Action.

4.4

During the License Term, Licensors will not, and will cause their Affiliates not to, render aid, advice, or services to any individual or organization in connection with, or license to any individual or organization any intellectual property in furtherance of, the design, development, manufacturing, marketing, promotion, sale, or distribution of any UV phototherapy device that will compete with or be competitive with the Licensed Product(s) in the Field.

5.

Term and Termination

5.1

The term of the rights and licenses granted in Section 2 above shall commence on the date of this Agreement and shall continue in effect in perpetuity unless and to the extent terminated as set forth in Sections 5.2 through 5.4 below (the “ License Term ”).

5.2

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

5.3

The License Term shall terminate on the thirtieth (30th) day after Licensors give Licensee written notice of a material breach by Licensee of any term or condition of this Agreement, unless the breach is cured before that day.  The right of Licensors to terminate the License Term pursuant to this paragraph shall be in addition to and not in lieu of any other right or remedy that Licensors may have at law or in equity.

5.4

The License Term shall terminate on the thirtieth (30th) day after Licensee gives Licensors written notice of a material breach by either or both of the Licensors of any term or condition of this Agreement, unless the breach is cured before that day.  The right of Licensee to terminate the License Term pursuant to this paragraph shall be in addition to and not in lieu of any other right or remedy that Licensee may have at law or in equity.



2




5.5

In the event that the License Term is terminated pursuant to this Section 5, then the rights and duties of the parties of this Agreement shall immediately terminate and be of no further force and effect, except that (i) no such termination shall affect any rights or remedy (including claims for breach) that accrued under this Agreement prior to and including the date of termination, (ii) the terminating party shall not be liable for damages of any kind as a result of properly exercising its respective right to terminate this Agreement and/or the License Term, and (iii) no such termination shall affect the parties’ rights and duties under Sections 9 and 10 of this Agreement, which provisions shall survive any termination of the License Term or this Agreement.

6.

Infringement by Others

6.1

In the event that any party to this Agreement learns of a third party who is infringing any Licensed Patents within the Field (a “ Relevant Infringement Claim ”), such party will notify the other parties immediately.  Licensee shall have the first right to pursue all Relevant Infringement Claims, at its expense, unless Licensors elect to pursue it in the case of a claim that does not relate primarily to the Field.  Nothing in this section shall obligate Licensee to take any action, and any action taken by Licensee shall be at Licensee’s sole discretion.   If Licensee does not take action to pursue such claim within one hundred twenty (120) days after receiving notice of such claim (or, if earlier, upon the expiration of the applicable statute of limitations), then Licensors shall have the option to pursue such Relevant Infringement Claim.

6.2

A party not pursuing litigation under this Section 6  (the “ Non-Litigating Party ”) agrees to provide required assistance, at the reasonable expense of the litigating party (the “ Litigating Party ”), should the Litigating Party properly pursue an enforcement action under this Section 6.

6.3

If a Litigating Party properly prosecutes a Relevant Infringement Claim in accordance with this Section 6, the Litigating Party agrees to share with the Non-Litigating Party the remainder of any proceeds from the action, after the Litigating Party’s expenses, attorneys’ and expert witness’ fees, and other costs have been deducted, in a ratio to be mutually agreed upon by the parties taking into account the relative damages suffered by the parties from the infringement; provided, however, that the Non-Litigating Party’s portion of the remainder shall not exceed thirty percent (30%) of such remainder.

7.

Assignment

Neither this Agreement nor any license or rights hereunder shall be assignable or otherwise transferable by any party hereto without the prior written consent of each other party.

8.

Representations by Licensors and Licensee

8.1

Licensors hereby, jointly and severally, represent and warrant to Licensee that (i) Licensors are the sole and unencumbered legal and beneficial owners or licensees of the Licensed Patents in the Field and that no other person or entity has any rights to the Licensed Patents in the Field other than Licensee’s rights pursuant to this Agreement, (ii) Licensors have full power to grant the rights, licenses and privileges herein given, (iii) the exercise of the rights granted to Licensee under this Agreement will not result in the infringement of any intellectual property rights of any third party, and there is no pending or threatened action or proceeding by a third party contesting or inconsistent with the rights being granted to Licensee hereunder, and (iv) the Licensed Patents, Know-how, and Technical Data as licensed hereunder are sufficient to enable Licensee to develop, make, have made, market, sell, promote, distribute, and otherwise commercialize the Product.  THE WARRANTIES CONTAINED IN THIS SECTION 8 ARE THE ONLY WARRANTIES MADE BY LICENSORS.  LICENSORS EXPRESSLY DISCLAIM ALL OTHER REPRESENTATIONS AND WARRANTIES, WHETHER EXPRESS, IMPLIED, STATUTORY, OR ARISING OUT OF CUSTOM OR TRADE USAGE, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND NON-INFRINGEMENT.  LICENSORS MAKE NO WARRANTIES WITH RESPECT TO FREEDOM FROM ALLEGED INFRINGEMENT OF THIRD PARTY PATENTS OR FREEDOM FROM THIRD PARTY INFRINGERS.  LICENSORS MUST ONLY HOLD LICENSEE HARMLESS AGAINST SUCH ALLEGED INFRINGEMENT OF THIRD PARTIES.

8.2

Licensee hereby represents and warrants to Licensors that Licensee has full power and authority to enter into this Agreement and to perform the terms and conditions hereof.

9.

Terms of Agreement

Each party agrees not to disclose any terms of this Agreement to any third party without the consent of the other parties; provided, however, that disclosures may be made as required by securities or other applicable laws, or by any party to its accountants, attorneys, and other professional advisors.  No party shall release any publicity or information concerning this Agreement without the other parties’ prior written approval, which shall not be unreasonably withheld or delayed.



3




10.

Miscellaneous

10.1

This Agreement constitutes the entire understanding and agreement of and among the parties with respect to the subject matter hereof, and supersedes all prior representations and agreements; and there are no conditions to this Agreement which are not set forth herein.

10.2

This Agreement shall not be modified or varied by any oral agreement or representation or otherwise than by an instrument in writing of subsequent date hereto duly executed by the parties.

10.3

Failure of any party to insist upon strict performance of any of the covenants, terms or conditions of this Agreement shall not be deemed to be a waiver of any other breach or default in the performance of the same or any other covenant, term or condition contained therein; and the waiver of any breach of this Agreement by any party hereto shall in no event constitute a waiver as to any future breach, whether similar or dissimilar in nature.

10.4

All notices, requests, demands and other communications hereunder shall be in English, shall be given in writing, and shall be: (i) personally delivered; (ii) sent by telecopier, facsimile transmission or other electronic means of transmitting written documents with confirmation of receipt; or (iii) sent to the parties at their respective addresses indicated herein by registered or certified mail, return receipt requested and postage prepaid, or by private overnight mail courier services with confirmation of receipt.  The respective addresses to be used for all such notices, demands or requests are as follows:

(a)

If to Licensee:  


PSORIA-SHIELD Inc.

12743 Country Brook Lane

Tampa, Florida 33625

Attention:  Scot Johnson and Edwin Longo

Fax No.: 800-596-9622

Or to such other person or address as Licensee shall furnish to Licensors in writing.


(b)

If to Licensors:  


Scot L. Johnson

12743 Country Brook Lane

Tampa, Florida 33625


and


Edwin T. Longo

140 Putnam Avenue

Ormond Beach, Florida 32174

Fax No.: (813) 435-2256

Or to such other person or address as Licensors shall furnish to Licensee in writing.

If personally delivered, such communication shall be deemed delivered upon actual receipt by the “attention” addressees or persons authorized to accept for such addressees; if transmitted by facsimile pursuant to this paragraph, such communication shall be deemed delivered the next business day after transmission (and sender shall bear the burden of proof of delivery); if sent by overnight courier pursuant to this paragraph, such communication shall be deemed delivered upon receipt by the “attention” addressees or persons authorized to accept for such addressees; and if sent by mail pursuant to this paragraph, such communication shall be deemed delivered as of the date of delivery indicated on the receipt issued by the relevant postal service, or, if the addressee fails or refuses to accept delivery, as of the date of such failure or refusal.  Any party to this Agreement may change its address for the purposes of this Agreement by giving notice thereof in accordance with this paragraph.

10.5

This Agreement shall be governed and construed in accordance with the laws, without reference to principles of conflicts of laws, of the State of Florida.  The parties irrevocably agree that any legal actions or proceedings brought by or against them with respect to this Agreement shall be brought exclusively in the state or federal courts located in Hillsborough County, Florida, and by execution and delivery hereof, the parties irrevocably submit to such jurisdiction and hereby irrevocably waive any and all objections which they may have with respect to venue in any of the above courts.  THE PARTIES HEREBY EXPRESSLY WAIVE ANY AND ALL RIGHT TO A TRIAL BY JURY WITH RESPECT TO ANY ACTION, PROCEEDING OR OTHER LITIGATION RESULTING FROM OR INVOLVING THE ENFORCEMENT OF THIS AGREEMENT.



4




10.6

In any action between the parties for relief based in whole or in part on this Agreement (or the breach thereof), the prevailing party shall be entitled to recover (in addition to any other relief awarded or granted) its reasonable costs and expenses (including attorneys’ fees and expert witness fees) incurred in the proceeding.

10.7

The section and paragraph headings in this Agreement are for convenience only and are not intended to affect the meaning or interpretation of this Agreement.  The recitals set forth in the preamble to this Agreement are true and correct and are made a part of this Agreement.

10.8

This Agreement may be executed simultaneously in counterparts, each of which will be deemed an original, but all of which together will constitute the same Agreement.

[signatures on following page(s)]




5



IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the day and year first above written.




LICENSEE:


PSORIA-SHIELD Inc., a Florida corporation


By: _______________________________________

Name:  Scot L. Johnson

Title:  President and Chief Technology Officer

 

LICENSORS:


__________________________________________

Scot L. Johnson, as an individual



__________________________________________

Edwin T. Longo, as an individual




6



EXHIBIT A

DESCRIPTION OF PATENT APPLICATION


Title of Provisional Patent Application:

“Innovative Concepts, Methods, and Housings for Handheld Energy Transmission Devices”

Description of Provisional Patent Application:

The provisional patent application, referenced as SLJ-001P and filed on August 17, 2009, contains several innovative concepts for the improvement of handheld phototherapy devices.  It also contains several innovative concepts for the improvement of handheld devices in general, either used on humans, animals, or plants, or used on inanimate objects.  It also contains several innovative concepts for diagnostic measurements which can be used in conjunction with phototherapy devices or independently, separate from phototherapy devices.  The provisional patent application contains at least two descriptions of and sufficient information to allow for incorporation of at least several of the innovative concepts into handheld delivery devices.

Several of the innovative concepts include:

1)

Type of Light Source

2)

Location of Light Source

3)

Ability to View Treatment Site or Work Surface

4)

Ability to Record Image of Treatment Site

5)

Ability to View Treatment Data

6)

Methods for Avoiding Overlapping Dosage/Application

7)

Safety Mechanisms for Prevention of Unintended Dosage/Application

8)

Diagnostic Methods for Assessing Efficacy of Treatment and/or Changes/Trends at the Treatment Site

9)

Ambidextrous, Ergonomic, Agile Handheld Structures that Incorporate at Least Several of the Above Concepts

The provisional patent application describes the innovative concepts, diagnostics, and handheld structures using one embodiment of their application.  The common embodiment employed is a targeted UV phototherapy device intended to treat psoriasis (of the skin).




EXCLUSIVE LICENSE AGREEMENT

THIS EXCLUSIVE LICENSE AGREEMENT (this “ Agreement ”) is made and entered into this 11 th day of December, 2010, by and among Scot L. Johnson (“ Johnson ”) (referred to herein as the “ Licensor ”), and PSORIA-SHIELD Inc., a Florida corporation (“ Licensee ”).

W I T N E S S E T H :


WHEREAS , Licensor jointly holds and owns all right, title, and interest in and to the provisional patent application described on Exhibit A hereto (the “ Patent Application ”);

WHEREAS , upon the terms and conditions set forth herein, Licensee desires to acquire, and Licensor desires to grant, an exclusive license to exploit the Patent Application and other related intellectual property upon the terms set forth herein for the purpose of developing, making, having made, selling, marketing, distributing, and otherwise commercializing Licensee’s targeted ultraviolet (“ UV ”) phototherapy device designed to be used for the treatment of, and/or to perform diagnostic assessments associated with, UV-treatable skin conditions (the “ Product ”) and related products.

NOW, THEREFORE , the parties do mutually agree as follows:

1.

Definitions

1.1

Affiliate ” shall mean, as to any specified person or entity, any other person or entity that directly or indirectly controls, or is under common control with, or is controlled by, such specified person or entity and, if such other person is an individual, any member of the immediate family of such individual.  As used in this definition, “control” (including, with its correlative meanings, “controlled by” and “under common control with”) shall mean possession, directly or indirectly, of power to direct or cause the direction of the management or policies (whether through ownership of securities or partnership or other ownership interests, by contract, or otherwise) and “immediate family” shall mean any parent, child, grandchild, spouse, or sibling.

1.2

Field ” shall mean (i) targeted UV phototherapy devices, utilizing UV wavelengths between 300 nm and 400 nm, that are designed and used to treat, and/or to perform diagnostic assessments associated with, UV-treatable skin conditions and (ii) any other products that are mutually agreed to in writing by Licensors and Licensee after the date hereof.

1.3

Improvement ” shall mean any discoveries and/or inventions (whether patented or not) that constitute a modification of the technologies covered by the Licensed Patents (as defined below), provided that such modification, if unlicensed, would infringe one or more claims of the Licensed Patents.

1.4

Know-how ” shall mean the general and specific knowledge, experience and information known to Licensors as of the date of this Agreement, not in written or printed form, applicable to the design, development, manufacture, production, service and sale of the Licensed Product(s).

1.5

Licensed Product ” shall mean any product, including, but not limited to the Product, which, if made, used, sold, or commercialized by Licensee or a sublicensee would, but for Licensee’s rights under this Agreement, constitute an infringement of a valid claim of the Licensed Patents in the relevant jurisdiction.

1.6

Licensed Patents ” shall mean (i) the Patent Application, (ii) any non-provisional patent applications filed by the Licensor covering the technology described in the Patent Application, (iii) all U.S. and foreign patents issuing from the Patent Application and the non-provisional patent applications described in clause (ii) of this Section 1.6, and (iv) all U.S. and foreign patents issuing from current or later filed divisionals, reissues, reexaminations, continuations, continuations-in part, renewals, extensions, substitutions, and foreign equivalents and counterparts of any patents or patent applications listed in clauses (i), (ii), and (iii) of this Section 1.6.

1.7

Technical Data ” shall mean any and all documents containing formulas, designs, and technical information, engineering or production data, drawings, plans, specifications, techniques, methods, processes, trade secrets, reports, models, codes, software, works of authorship, and any and all other material and matter used by or in possession of Licensor as of the date of this Agreement and applicable to the manufacturing, production, composition, marketing, sale, distribution, development, or commercialization of the Product.





2.

Grant of License

2.1

Licensor hereby grants 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 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.

2.2

Licensor shall, without charge, furnish Licensee with all Technical Data and Know-how owned by or in the possession of Licensor as of the date of this Agreement which are applicable to the Licensed Product(s).

2.3

The parties agree that any rights not specifically granted to Licensee by this Agreement are expressly reserved by Licensor.  For purposes of illustration and not of limitation, Licensor shall not be restricted from using or licensing the Licensed Patents in fields of use outside of the Field, such as in phototherapy devices not utilizing UV wavelengths between 300 nm and 400 nm and in devices that are designed and used to treat, and/or to perform diagnostic assessments associated with, UV-treatable and non-UV-treatable maladies of the body (rather than maladies of the skin) and non-UV-treatable skin conditions.

3.

Consideration for License

As the sole and exclusive consideration for the rights and licenses granted in this Agreement, the Licensor shall receive, on the date hereof, 5,000 shares of common stock of Licensee.

4.

Covenants of Licensor

4.1

On or before December 11 th , 2011, Licensor shall, at his own cost and expense, file one or more non-provisional patent applications covering the technology described in the Patent Application.

4.2

Licensor shall, at his own cost and expense, make all maintenance filings and similar filings or disclosures in order to maintain the effectiveness and registrations of the Licensed Patents at all times during the License Term.

4.3

In the event that Licensor fails to take any of the actions specified in this Section 4 (any such action referred to as a “ Required Action ”), then (i) Licensee shall have the right to take a Required Action on behalf of Licensor, in which case Licensor shall reimburse and jointly and severally indemnify Licensee from and against any and all costs, expenses, and other amounts reasonably incurred by Licensee in taking such Required Action, and (ii) Licensor hereby appoints Licensee as his agent and attorney-in-fact for purposes of executing any documents and taking any action in connection with a Required Action.

4.4

During the License Term, Licensor will not, and will cause his Affiliates not to, render aid, advice, or services to any individual or organization in connection with, or license to any individual or organization any intellectual property in furtherance of, the design, development, manufacturing, marketing, promotion, sale, or distribution of any UV phototherapy device that will compete with or be competitive with the Licensed Product(s) in the Field.

5.

Term and Termination

5.1

The term of the rights and licenses granted in Section 2 above shall commence on the date of this Agreement and shall continue in effect in perpetuity unless and to the extent terminated as set forth in Sections 5.2 through 5.4 below (the “ License Term ”).

5.2

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

5.3

The License Term shall terminate on the thirtieth (30th) day after Licensor gives Licensee written notice of a material breach by Licensee of any term or condition of this Agreement, unless the breach is cured before that day.  The right of Licensor to terminate the License Term pursuant to this paragraph shall be in addition to and not in lieu of any other right or remedy that Licensor may have at law or in equity.

5.4

The License Term shall terminate on the thirtieth (30th) day after Licensee gives Licensor written notice of a material breach by Licensor of any term or condition of this Agreement, unless the breach is cured before that day.  The right of Licensee to terminate the License Term pursuant to this paragraph shall be in addition to and not in lieu of any other right or remedy that Licensee may have at law or in equity.



2




5.5

In the event that the License Term is terminated pursuant to this Section 5, then the rights and duties of the parties of this Agreement shall immediately terminate and be of no further force and effect, except that (i) no such termination shall affect any rights or remedy (including claims for breach) that accrued under this Agreement prior to and including the date of termination, (ii) the terminating party shall not be liable for damages of any kind as a result of properly exercising its respective right to terminate this Agreement and/or the License Term, and (iii) no such termination shall affect the parties’ rights and duties under Sections 9 and 10 of this Agreement, which provisions shall survive any termination of the License Term or this Agreement.

6.

Infringement by Others

6.1

In the event that any party to this Agreement learns of a third party who is infringing any Licensed Patents within the Field (a “ Relevant Infringement Claim ”), such party will notify the other parties immediately.  Licensee shall have the first right to pursue all Relevant Infringement Claims, at its expense, unless Licensor elects to pursue it in the case of a claim that does not relate primarily to the Field.  Nothing in this section shall obligate Licensee to take any action, and any action taken by Licensee shall be at Licensee’s sole discretion.   If Licensee does not take action to pursue such claim within one hundred twenty (120) days after receiving notice of such claim (or, if earlier, upon the expiration of the applicable statute of limitations), then Licensor shall have the option to pursue such Relevant Infringement Claim.

6.2

A party not pursuing litigation under this Section 6  (the “ Non-Litigating Party ”) agrees to provide required assistance, at the reasonable expense of the litigating party (the “ Litigating Party ”), should the Litigating Party properly pursue an enforcement action under this Section 6.

6.3

If a Litigating Party properly prosecutes a Relevant Infringement Claim in accordance with this Section 6, the Litigating Party agrees to share with the Non-Litigating Party the remainder of any proceeds from the action, after the Litigating Party’s expenses, attorneys’ and expert witness’ fees, and other costs have been deducted, in a ratio to be mutually agreed upon by the parties taking into account the relative damages suffered by the parties from the infringement; provided, however, that the Non-Litigating Party’s portion of the remainder shall not exceed thirty percent (30%) of such remainder.

7.

Assignment

Neither this Agreement nor any license or rights hereunder shall be assignable or otherwise transferable by any party hereto without the prior written consent of each other party.

8.

Representations by Licensor and Licensee

8.1

Licensor hereby, jointly and severally, represent and warrant to Licensee that (i) Licensor is the sole and unencumbered legal and beneficial owner or licensee of the Licensed Patents in the Field and that no other person or entity has any rights to the Licensed Patents in the Field other than Licensee’s rights pursuant to this Agreement, (ii) Licensor has full power to grant the rights, licenses and privileges herein given, (iii) the exercise of the rights granted to Licensee under this Agreement will not result in the infringement of any intellectual property rights of any third party, and there is no pending or threatened action or proceeding by a third party contesting or inconsistent with the rights being granted to Licensee hereunder, and (iv) the Licensed Patents, Know-how, and Technical Data as licensed hereunder are sufficient to enable Licensee to develop, make, have made, market, sell, promote, distribute, and otherwise commercialize the Product.  THE WARRANTIES CONTAINED IN THIS SECTION 8 ARE THE ONLY WARRANTIES MADE BY LICENSOR.  LICENSOR EXPRESSLY DISCLAIMS ALL OTHER REPRESENTATIONS AND WARRANTIES, WHETHER EXPRESS, IMPLIED, STATUTORY, OR ARISING OUT OF CUSTOM OR TRADE USAGE, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND NON-INFRINGEMENT.  LICENSORS MAKE NO WARRANTIES WITH RESPECT TO FREEDOM FROM ALLEGED INFRINGEMENT OF THIRD PARTY PATENTS OR FREEDOM FROM THIRD PARTY INFRINGERS.  LICENSOR MUST ONLY HOLD LICENSEE HARMLESS AGAINST SUCH ALLEGED INFRINGEMENT OF THIRD PARTIES.

8.2

Licensee hereby represents and warrants to Licensor that Licensee has full power and authority to enter into this Agreement and to perform the terms and conditions hereof.

9.

Terms of Agreement

Each party agrees not to disclose any terms of this Agreement to any third party without the consent of the other parties; provided, however, that disclosures may be made as required by securities or other applicable laws, or by any party to its accountants, attorneys, and other professional advisors.  No party shall release any publicity or information concerning this Agreement without the other parties’ prior written approval, which shall not be unreasonably withheld or delayed.



3




10.

Miscellaneous

10.1

This Agreement constitutes the entire understanding and agreement of and among the parties with respect to the subject matter hereof, and supersedes all prior representations and agreements; and there are no conditions to this Agreement which are not set forth herein.

10.2

This Agreement shall not be modified or varied by any oral agreement or representation or otherwise than by an instrument in writing of subsequent date hereto duly executed by the parties.

10.3

Failure of any party to insist upon strict performance of any of the covenants, terms or conditions of this Agreement shall not be deemed to be a waiver of any other breach or default in the performance of the same or any other covenant, term or condition contained therein; and the waiver of any breach of this Agreement by any party hereto shall in no event constitute a waiver as to any future breach, whether similar or dissimilar in nature.

10.4

All notices, requests, demands and other communications hereunder shall be in English, shall be given in writing, and shall be: (i) personally delivered; (ii) sent by telecopier, facsimile transmission or other electronic means of transmitting written documents with confirmation of receipt; or (iii) sent to the parties at their respective addresses indicated herein by registered or certified mail, return receipt requested and postage prepaid, or by private overnight mail courier services with confirmation of receipt.  The respective addresses to be used for all such notices, demands or requests are as follows:

(a)

If to Licensee:  


PSORIA-SHIELD Inc.

Attn. Edwin Longo

6408 W. Linebaugh Avenue

Suite 104

Tampa, Florida 33625

Fax No.: 800-596-9622

Or to such other person or address as Licensee shall furnish to Licensor in writing.


(b)

If to Licensor:  


Scot L. Johnson

12743 Country Brook Lane

Tampa, Florida 33625

Fax 813-435-2256

Or to such other person or address as Licensor shall furnish to Licensee in writing.

If personally delivered, such communication shall be deemed delivered upon actual receipt by the “attention” addressees or persons authorized to accept for such addressees; if transmitted by facsimile pursuant to this paragraph, such communication shall be deemed delivered the next business day after transmission (and sender shall bear the burden of proof of delivery); if sent by overnight courier pursuant to this paragraph, such communication shall be deemed delivered upon receipt by the “attention” addressees or persons authorized to accept for such addressees; and if sent by mail pursuant to this paragraph, such communication shall be deemed delivered as of the date of delivery indicated on the receipt issued by the relevant postal service, or, if the addressee fails or refuses to accept delivery, as of the date of such failure or refusal.  Any party to this Agreement may change its address for the purposes of this Agreement by giving notice thereof in accordance with this paragraph.

10.5

This Agreement shall be governed and construed in accordance with the laws, without reference to principles of conflicts of laws, of the State of Florida.  The parties irrevocably agree that any legal actions or proceedings brought by or against them with respect to this Agreement shall be brought exclusively in the state or federal courts located in Hillsborough County, Florida, and by execution and delivery hereof, the parties irrevocably submit to such jurisdiction and hereby irrevocably waive any and all objections which they may have with respect to venue in any of the above courts.  THE PARTIES HEREBY EXPRESSLY WAIVE ANY AND ALL RIGHT TO A TRIAL BY JURY WITH RESPECT TO ANY ACTION, PROCEEDING OR OTHER LITIGATION RESULTING FROM OR INVOLVING THE ENFORCEMENT OF THIS AGREEMENT.

10.6

In any action between the parties for relief based in whole or in part on this Agreement (or the breach thereof), the prevailing party shall be entitled to recover (in addition to any other relief awarded or granted) its reasonable costs and expenses (including attorneys’ fees and expert witness fees) incurred in the proceeding.



4




10.7

The section and paragraph headings in this Agreement are for convenience only and are not intended to affect the meaning or interpretation of this Agreement.  The recitals set forth in the preamble to this Agreement are true and correct and are made a part of this Agreement.

10.8

This Agreement may be executed simultaneously in counterparts, each of which will be deemed an original, but all of which together will constitute the same Agreement.

[signatures on following page(s)]




5



IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the day and year first above written.




LICENSEE:


PSORIA-SHIELD Inc., a Florida corporation



By:________________________________________

Name:  Edwin Longo

Title:  Vice President



 

LICENSOR:



____________________________________________

Scot L. Johnson, as an individual




6



EXHIBIT A

DESCRIPTION OF PATENT APPLICATION


Title of Provisional Patent Application:

“Thermally Conductive Package and System”

Description of Provisional Patent Application:

The provisional patent application, referenced as SLJ-002P and filed on December 11 th , 2010, contains several innovative concepts for the improvement of microelectronics packages and thermal management solutions.  It also contains several innovative concepts for the improvement of handheld phototherapy devices in general, either used on humans, animals, or plants, or used on inanimate objects.  It also contains several innovative concepts for replacement of laser therapy devices with LED devices.  The provisional patent application contains at least one description of and sufficient information to allow for incorporation of at least one microelectronics package and several of the innovative concepts focus on unique optical focusing solutions.

Several of the innovative concepts include:

1)

Unique microelectronics package concepts

2)

Location of Light Source

3)

Methods for cooling and securing the microelectronics package

4)

Methods for incorporating electronics to control new microelectronic package

5)

Method for incorporating the system into a handpiece

6)

Methods for focusing the optical output

The provisional patent application describes the innovative concepts and handheld structure using one embodiment of their application and several optical embodiments.  The common embodiment employed is a targeted UV phototherapy device intended to treat UV treatable skin conditions.






Exhibit 99.1


CNS Wellness Florida, LLC


September 30, 2011 and 2010


Index to the Financial Statements


Contents

Page(s)

 

 

Report of Independent Registered Public Accounting Firm

F-2

 

 

Balance Sheets at September 30, 2011 and 2010

F-3

 

 

Statements of Operations for the Fiscal Year Ended September 30, 2011 and 2010

F-4

 

 

Statement of Members’ Equity (Deficit) for the Fiscal Year Ended September 30, 2011 and 2010

F-5

 

 

Statements of Cash Flows for the Fiscal Year Ended September 30, 2011 and 2010

F-6

 

 

Notes to the Financial Statements

F-7





F-1





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Members of

CNS Wellness Florida, LLC

Tampa, Florida


We have audited the accompanying balance sheets of CNS Wellness Florida, LLC (the “Company”) as of September 30, 2011 and 2010 and the related statements of operations, members’ equity (deficit) and cash flows for the fiscal years then ended.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.


We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.


In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2011 and 2010 and the results of its operations and its cash flows for the fiscal years then ended in conformity with accounting principles generally accepted in the United States of America.




/s/Li & Company, PC

Li & Company, PC


Skillman, New Jersey

October 22, 2012



F-2






CNS Wellness Florida, LLC

 

Balance Sheets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

2011

 

September 30,

2010

 Assets

 

 

 

 

 

 

 Current Assets

 

 

 

 

 

 

 

 Cash

 

$

8,937

 

$

20,325

 

 Accounts receivable

 

 

9,190

 

 

19,079

 

 Prepayments and other current assets

 

 

-

 

 

11,365

 

 

 

 

 

 

 

 

 

 

 

 

Total current assets

 

 

18,127

 

 

50,769

 

 

 

 

 

 

 

 

 

 

 Property and Equipment

 

 

 

 

 

 

 

 Property and equipment

 

 

44,929

 

 

42,819

 

 Accumulated depreciation

 

 

(19,285)

 

 

(9,897)

 

 

 

 

 

 

 

 

 

 

 

 

 Property and equipment, net

 

 

25,644

 

 

32,922

 

 

 

 

 

 

 

 

 

 

 Other Assets

 

 

 

 

 

 

 

 Security deposit

 

 

36,939

 

 

36,939

 

 

 

 

 

 

 

 

 

 

 

 

 Total other assets

 

 

36,939

 

 

36,939

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$

80,710

 

$

120,630

 

 

 

 

 

 

 

 

 

 

 Liabilities and Members' Equity (Deficit)

 

 

 

 

 

 

 Current Liabilities

 

 

 

 

 

 

 

 Accounts payable

 

$

59,996

 

$

7,838

 

 Accrued interest - related party

 

 

2,122

 

 

265

 

 Credit cards payable

 

 

68,460

 

 

17,480

 

 Payroll liabilities

 

 

3,648

 

 

5,860

 

 Current portion of deferred rent

 

 

11,363

 

 

-

 

 Advances from members

 

 

82,679

 

 

17,929

 

 Note payable - related party

 

 

37,139

 

 

37,139

 

 Unearned revenues

 

 

10,025

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 Total current liabilities

 

 

275,432

 

 

86,511

 

 

 

 

 

 

 

 

 

 

 Non-Current Liabilities

 

 

 

 

 

 

 

 Deferred rent, net of current portion

 

 

40,726

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 Total non-current liabilities

 

 

40,726

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 Total liabilities

 

 

316,158

 

 

86,511

 

 

 

 

 

 

 

 

 

 

 Commitments and Contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Members' Equity (Deficit)

 

 

 

 

 

 

 

 Members' capital

 

 

(51,092)

 

 

(36,142)

 

 Accumulated deficit

 

 

(184,356)

 

 

70,261

 

 

 

 

 

 

 

 

 

 

 

 

 Total members' equity (deficit)

 

 

(235,448)

 

 

34,119

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Liabilities and Members' Equity (Deficit)

 

$

80,710

 

$

120,630

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to the financial statements.




F-3






CNS Wellness Florida, LLC

 

Statements of Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Fiscal Year

 

For the Fiscal Year

 

 

 

 

 

Ended

 

Ended

 

 

 

 

 

September 30, 2011

 

September 30, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Revenue

 

 

$

277,670

 

$

552,511

 

 

 

 

 

 

 

 

 

 

 Costs of Goods Sold

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Gross Profit

 

 

277,670

 

 

552,511

 

 

 

 

 

 

 

 

 

 

 Operating Expenses

 

 

 

 

 

 

 

 Rent expenses

 

 

114,448

 

 

40,933

 

 Payroll expenses and contract labor

 

 

198,804

 

 

184,495

 

 Payroll expenses - members

 

 

-

 

 

45,192

 

 Marketing expenses

 

 

99,829

 

 

93,065

 

 General and administrative

 

 

109,401

 

 

125,694

 

 

 

 

 

 

 

 

 

 

 

 

 Total operating expenses

 

 

522,482

 

 

489,379

 

 

 

 

 

 

 

 

 

 

 Income (Loss) from Operations

 

 

(244,812)

 

 

63,132

 

 

 

 

 

 

 

 

 

 

 Other (Income) Expense

 

 

 

 

 

 

 

 Other (income) expense

 

 

7,948

 

 

156

 

 Interest expense - related party

 

 

1,857

 

 

265

 

 

 

 

 

 

 

 

 

 

 

 

 Total other (income) expense

 

 

9,805

 

 

421

 

 

 

 

 

 

 

 

 

 

 Income (Loss) before Income Taxes

 

 

(254,617)

 

 

62,711

 

 

 

 

 

 

 

 

 

 

 Income Tax Provision

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

 Net Income (Loss)

 

$

(254,617)

 

$

62,711

 

 

 

 

 

 

 

 

 

 

 Pro Forma Financial Information (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Income (Loss) before Income Taxes

 

 

(254,617)

 

 

62,711

 

 

 

 

 

 

 

 

 

 

 Income Tax Provision (Benefit)

 

 

(23,889)

 

 

21,322

 

 

 

 

 

 

 

 

 

 

 Net Income (Loss)

 

$

(230,728)

 

$

41,389

 

 

 

 

 

 

 

 

 

 

 See accompanying notes to the financial statements.




F-4






CNS Wellness Florida, LLC

 

Statement of Members' Equity (Deficit)

For the Fiscal Year Ended September 30, 2011 and 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Members'

Capital

 

Accumulated

Deficit

 

Total Members'

Equity (Deficit)

 

 

 

 

 

 

 

 

 

 

 

 

 Balance September 30, 2009

 

 

$

39,067

 

$

7,550

 

$

46,617

 

 

 

 

 

 

 

 

 

 

 

 

 

 Members' capital contribution

 

 

 

57,791

 

 

-

 

 

57,791

 

 

 

 

 

 

 

 

 

 

 

 

 

 Members' capital distribution

 

 

 

(133,000)

 

 

-

 

 

(133,000)

 

 

 

 

 

 

 

 

 

 

 

 

 Net Income

 

 

 

-

 

 

62,711

 

 

62,711

 

 

 

 

 

 

 

 

 

 

 

 

 Balance, September 30, 2010

 

 

 

(36,142)

 

 

70,261

 

 

34,119

 

 

 

 

 

 

 

 

 

 

 

 

 

 Member capital contribution

 

 

 

50

 

 

-

 

 

50

 

 

 

 

 

 

 

 

 

 

 

 

 

 Member capital distribution

 

 

 

(15,000)

 

 

-

 

 

(15,000)

 

 

 

 

 

 

 

 

 

 

 

 

 Net loss

 

 

 

-

 

 

(254,617)

 

 

(254,617)

 

 

 

 

 

 

 

 

 

 

 

 

 Balance, September 30, 2011

 

 

 

(51,092)

 

 

(184,356)

 

 

(235,448)

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to the financial statements.




F-5






CNS Wellness Florida, LLC

 

 

 

 

 

 

 

 

 

Statements of Cash Flows

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Fiscal Year

 

For the Fiscal Year

 

 

 

 

Ended

 

Ended

 

 

 

 

September 30, 2011

 

September 30, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Cash Flows from Operating Activities

 

 

 

 

 

 

 Net income (loss)

 

$

(254,617)

 

$

62,711

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

 

 

 

 

 Depreciation expense

 

 

9,388

 

 

9,897

 

 Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 Acccounts receivable

 

 

9,889

 

 

(11,239)

 

 

 Prepayments and other current assets

 

 

11,365

 

 

(11,365)

 

 

 Security deposit

 

 

-

 

 

(36,939)

 

 

 Accounts payable

 

 

52,158

 

 

7,838

 

 

 Accrued interest - related party

 

 

1,857

 

 

265

 

 

 Credit cards payable

 

 

50,980

 

 

17,480

 

 

 Payroll liabilities

 

 

(2,212)

 

 

2,685

 

 

 Deferred rent

 

 

52,089

 

 

-

 

 

 Unearned revenue

 

 

10,025

 

 

-

 

 

 

 

 

 

 

 

 

 Net Cash Provided by (Used in) Operating Activities

 

 

(59,078)

 

 

41,333

 

 

 

 

 

 

 

 

 

 Cash Flows from Investing Activities

 

 

 

 

 

 

 

 Purchase of office equipment  

 

 

(2,110)

 

 

(18,752)

 

 

 

 

 

 

 

 

 

 Net Cash Used in Investing Activities

 

 

(2,110)

 

 

(18,752)

 

 

 

 

 

 

 

 

 

 Cash Flows from Financing Activities

 

 

 

 

 

 

 

 Advances from members

 

 

64,750

 

 

17,408

 

 Note payable - related party

 

 

-

 

 

37,139

 

 Member capital contribution (distribution)

 

 

(14,950)

 

 

(75,209)

 

 

 

 

 

 

 

 

 

 Net Cash Provided by (Used in) Financing Activities

 

 

49,800

 

 

(20,662)

 

 

 

 

 

 

 

 

 

 Net Change in Cash

 

 

(11,388)

 

 

1,919

 

 

 

 

 

 

 

 

 

 Cash - beginning of year

 

 

20,326

 

 

18,406

 

 

 

 

 

 

 

 

 

 Cash - end of year

 

$

8,938

 

$

20,325

 

 

 

 

 

 

 

 

 

 Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 Interest paid

 

$

-

 

$

-

 

 

 

 

 

 

 

 

 

 

 Income tax paid

 

$

-

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Non Cash Financing and Investing Activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to the financial statements.




F-6





CNS Wellness Florida, LLC


September 30, 2011 and 2010

Notes to the Financial Statements



Note 1 - Organization and Operations


Cognitive Neuro Sciences, Inc., (the ''Predecessor")


Cognitive Neuro Sciences, Inc., (the ''Predecessor") was incorporated on March 14, 2006 under the laws of the State of Florida. The 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 the Predecessor decided to dissolve the Predecessor and form a Limited Liability Company (“LLC”) to carry-on the Predecessor’s business.


CNS Wellness Florida, LLC


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


Note 2 - Summary of Significant Accounting Policies


Basis of Presentation


The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).


Use of Estimates and Assumptions


The preparation of financial statements in conformity with generally accepted accounting principles 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 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 life of office equipment; income tax rate, income tax provision, deferred tax assets, deferred tax assets and the valuation allowance of 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.




F-7






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 receivable, accounts payable and accrued expenses, payroll liabilities, deferred rent and deferred revenue 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.


It is not, however, practical to determine the fair value of advances from members, if any, due to their related party nature.


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, 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.




F-8






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


Fiscal Year End


The Company elected December 31 st as its fiscal year end date for the purpose of tax compliance upon its formation.


The Company elected September 30 th as its fiscal year end date for the purpose of audits of its financial statements.


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.


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.  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.


There was no allowance for doubtful accounts at September 30, 2011 or 2010.


The Company does not have any off-balance-sheet credit exposure to its customers at September 30, 2011 or 2010.


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.


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.




F-9






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. mounts 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.


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.




F-10






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.


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.


Advertising costs


Advertising costs are expensed as incurred.


Income Tax Provision


The Company elected under Section 1362 of the Internal Revenue Code which has been accepted to be taxed as a Subchapter S Corporation effective as of the date of its formation. Under the provisions of Subchapter S Corporation of the Internal Revenue Code, the Company was treated as a pass through entity for federal income tax purposes and the taxable income or loss is reported by the shareholders of the Company on their individual income tax returns and taxed separately on their distributive share of the S corporation’s income whether or not that income is actually distribute.


The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). 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 its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the fiscal year ended September 30, 2011 or 2010.




F-11






Pro Forma Income Tax Information (Unaudited)


The operating results of the Company were included in the tax returns of the members of the Company for income tax purposes.  The pro forma income tax rate, income tax provision, if any, and deferred tax assets included in the accompanying financial statements and the income tax note reflect the provision for income tax which would have been recorded if the Company had been incorporated as a C Corporation as of the date of its formation.


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.


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


FASB Accounting Standards Update No. 2011-08


In September 2011, the FASB issued the FASB Accounting Standards Update No. 2011-08 “ Intangibles—Goodwill and Other: Testing Goodwill for Impairment” (“ASU 2011-08”). This Update is to simplify how public and nonpublic entities test goodwill for impairment. The amendments permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount.


The guidance is effective for interim and annual periods beginning on or after December 15, 2011. Early adoption is permitted.


FASB Accounting Standards Update No. 2011-11


In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-11 “Balance Sheet: Disclosures about Offsetting Assets and Liabilities” (“ASU 2011-11”). This Update requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The objective of this disclosure is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of IFRS.


The amended guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods.




F-12






FASB Accounting Standards Update No. 2012-02


In July 2012, the FASB issued the FASB Accounting Standards Update No. 2012-02 “ Intangibles—Goodwill and Other (Topic 350) Testing Indefinite-Lived Intangible Assets for Impairment” (“ASU 2012-02”).


This Update is intended to reduce the cost and complexity of testing indefinite-lived intangible assets other than goodwill for impairment. This guidance builds upon the guidance in ASU 2011-08, entitled  Testing Goodwill for Impairment . ASU 2011-08 was issued on September 15, 2011, and feedback from stakeholders during the exposure period related to the goodwill impairment testing guidance was that the guidance also would be helpful in impairment testing for intangible assets other than goodwill. 


The revised standard allows an entity the option to first assess qualitatively whether it is more likely than not (that is, a likelihood of more than 50 percent) that an indefinite-lived intangible asset is impaired, thus necessitating that it perform the quantitative impairment test. An entity is not required to calculate the fair value of an indefinite-lived intangible asset and perform the quantitative impairment test unless the entity determines that it is more likely than not that the asset is impaired.


This Update is effective for annual and interim impairment tests performed in fiscal years beginning after September 15, 2012.  Earlier implementation is permitted.


Other Recently Issued, but not yet Effective Accounting Pronouncements


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.


Note 3 – Financial Conditions


The accompanying 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 accompanying financial statements, the Company had a members’ deficit at September 30, 2011, a net loss and net cash used in operating activities for the fiscal year then ended, respectively.


While the Company is attempting to commence operations 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 generate sufficient revenues and in its ability to raise additional funds, 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.


The 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.




F-13






Note 4 – Property and Equipment


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


 

Estimated Useful Life (Years)

 

September 30, 2011

 

 

September 30, 2010

 

 

 

 

 

 

 

 

 

Computer equipment

5

 

$

6,586

 

 

$

4,476

 

 

 

 

 

 

 

 

 

Furniture and fixture

7

 

 

1,842

 

 

 

1,842

 

 

 

 

 

 

 

 

 

Medical equipment

5

 

 

29,245

 

 

 

29,245

 

 

 

 

 

 

 

 

 

Software

3

 

 

7,256

 

 

 

7,256

 

 

 

 

 

 

 

 

 

 

 

44,929

 

 

 

42,819

 

 

 

 

 

 

 

 

 

Less accumulated depreciation and amortization

 

 

 

(19,285

)

 

 

(9,897

 

 

 

 

 

 

 

 

 

 

$

25,644

 

 

$

32,922


Depreciation and Amortization Expense


Depreciation expense for the fiscal year ended September 30, 2011 and 2010 was $9,388 and $9,897, respectively.


Impairment


The Company completed the annual impairment test of equipment and determined that there was no impairment as the fair value of property and equipment, substantially exceeded their carrying values as of September 30, 2011 and 2010.


Note 5 – Related Party Transactions


Related Parties


Related parties with whom the Company had transactions are:


Related Parties

 

Relationship

 

 

 

William A. Lambos, Ph.D.

 

Chief Cognitive Neuroscientist and Member of the Company

 

 

 

Peter A. Hannouche

 

CEO and COO and Member of the Company


Advances from Members


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




F-14






Notes Payable – Related Party


Note payable – related party, consisted of the following:


 

 

September 30, 2011

 

 

September 30, 2010

 

 

 

 

 

 

 

 

On August 29, 2010 the Company issued a promissory note to a family member of one of its 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

 

 

 

 

 

 


The Company accrued interest of approximately $1,857 and $265 for the fiscal year ended September 30, 2011 and 2010 under this note, respectively.


Note 6 – Commitments and Contingencies


Operating Lease


On August 10, 2010 the Company entered into a non-cancellable sub-lease for office space of approximate 4,552 square feet of rentable area in Tampa, Florida with a third party, effective December 1, 2010, for the 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) $36,939.11 representing the security deposit into a certificate of deposit as a security deposit upon execution. The certificate of deposit matures on August 10, 2012 and has an interest rate of 1.10%.  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:

 

 

2012

$

139,447

 

 

 

2013

 

143,647

 

 

 

2014

 

147,958

 

 

 

2015

 

152,402

 

 

 

 

$

583,454

 

 


Deferred Rent


To induce the Company 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, which is recognized on a straight-line basis over the duration of the initial lease term of 65 months.


Note 7 – Members’ Equity (Deficit)


Member Capital Contribution


Upon formation of the Company, one of its members contributed property and equipment, to the Company valued at the member’s cost basis of $24,067.


Members made cash contributions of $50 and $57,791 during the fiscal year ended September 30, 2011 and 2010, respectively.




F-15






Member Capital Distribution


Members took cash distributions of $15,000 and $133,000 during the fiscal year ended September 30, 2011 and 2010, respectively.


Note 8 – Income Tax Provision


Pro Forma Income Tax Information (Unaudited)


The operating results of the Company were included in the tax returns of the members of the Company for income tax purposes.  The pro forma income tax rate, income tax provision, if any, and deferred tax assets included in the accompanying financial statements and the income tax note reflect the provision for income tax which would have been recorded if the Company had been incorporated as a C Corporation as of the date of its formation.


Deferred Tax Assets


If the Company had been incorporated as a C Corporation as of the date of its formation, at September 30, 2011, the Company would have had net operating loss (“NOL”) carry–forwards for Federal income tax purposes of $184,356 that may be offset against future taxable income through 2031.  No tax benefit would have been reported with respect to these net operating loss carry-forwards in the accompanying financial statements because the Company believes that the realization of the Company’s net deferred tax assets of approximately $62,681 was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are fully offset by the full valuation allowance.


Deferred tax assets would consist primarily of the tax effect of NOL carry-forwards.  The Company would have provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its realizability.  The valuation allowance would have increased approximately $62,681 for the fiscal year ended September 30, 2011.


Components of deferred tax assets would have been as follows:


 

 

September 30,

2011

 

September 30,

2010

Net deferred tax assets – Non-current:

 

 

 

 

 

 

 

 

 

 

 

 

 

Expected income tax benefit from NOL carry-forwards

 

$

62,681

 

 

-

 

 

 

 

 

 

 

Less: Valuation allowance

 

 

(62,681)

 

 

(-)

 

 

 

 

 

Deferred tax assets, net of valuation allowance

 

$

-

 

$

-


Income Tax Provision in the Statements of Operations


A reconciliation of the federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes would have been as follows:


 

 

For the Fiscal Year Ended

September 30,

2011

 

 

For the Fiscal Year Ended

September 30,

2010

 

 

 

 

 

 

 

 

 

 

Federal statutory income tax rate

 

 

34.0

%

 

 

34.0

%

 

 

 

 

 

 

 

 

 

Change in valuation allowance on net operating loss carry-forwards

 

 

(34.0

)

 

 

(34.0

)

 

 

 

 

 

 

 

 

 

Effective income tax rate

 

 

0.0

%

 

 

0.0

%




F-16






Tax Returns Remaining subject to IRS Audits


The federal income tax return for the fiscal year ended December 31, 2009 was filed on September 14, 2010. The Company is not required to file a state tax return. The Company has to date not filed its 2010 income tax return. Both the 2009 and 2010 tax returns will remain subject to audit under the statute of limitations by the Internal Revenue Service for a period of three (3) years from the date they are filed.


Note 9 – Subsequent Events


The Company has evaluated all events that occurred after the balance sheet date through the date when the financial statements were issued to determine if they must be reported.  The Management of the Company determined that there were certain reportable subsequent events to be disclosed as follows:


On May 30, 2012, Wellness Center USA, Inc. (“WCUI”) entered into an Exchange Agreement (“Exchange Agreement”) to acquire all of the limited liability company interests in the Company. On August 2, 2012m WCUI consummated the Exchange Agreement and acquired al of the issued and outstanding limited liability company interests in CNS for an in consideration of the issuance of 7.3 million shares of WCUI’s common stock pursuant to the Exchange Agreement. The 7.3 million common shares issued in connection with the shares exchange represented 32.2% of the 22,704,773 shares of issued and outstanding common stock of WCUI as of the consummation of the shares exchange under the Exchange Agreement. CNS is now operated as a wholly-owned subsidiary of WCUI.



F-17




Exhibit 99.2


CNS Wellness Florida, LLC


June 30, 2012 and 2011


Index to the Financial Statements


Contents

Page(s)

 

 

Balance Sheets at June 30, 2012 (Unaudited) and September 30, 2011

F-2

 

 

Statements of Operations for the Nine Months Ended June 30, 2012 and 2011 (Unaudited)

F-3

 

 

Statement of Members’ Equity (Deficit) for the Interim Period Ended June 30, 2012 (Unaudited)

F-4

 

 

Statements of Cash Flows for the Nine Months Ended June 30, 2012 and 2011 (Unaudited)

F-5

 

 

Notes to the Financial Statements (Unaudited)

F-6







F-1






CNS Wellness Florida, LLC

 

Balance Sheets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2012

 

September 30, 2011

 

 

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 Assets

 

 

 

 

 

 

 Current Assets

 

 

 

 

 

 

 

 Cash

 

$

8,798

 

$

8,937

 

 Accounts receivable

 

 

-

 

 

9,190

 

 Prepayments and other current assets

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

Total current assets

 

 

8,798

 

 

18,127

 

 

 

 

 

 

 

 

 

 

 Property and Equipment

 

 

 

 

 

 

 

 Property and equipment

 

 

44,929

 

 

44,929

 

 Accumulated depreciation

 

 

(26,470)

 

 

(19,285)

 

 

 

 

 

 

 

 

 

 

 

 

 Property and equipment, net

 

 

18,459

 

 

25,644

 

 

 

 

 

 

 

 

 

 

 Other Assets

 

 

 

 

 

 

 

 Security deposit

 

 

36,939

 

 

36,939

 

 

 

 

 

 

 

 

 

 

 

 

 Total other assets

 

 

36,939

 

 

36,939

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$

64,196

 

$

80,710

 

 

 

 

 

 

 

 

 

 

 Liabilities and Members' Equity (Deficit)

 

 

 

 

 

 

 Current Liabilities

 

 

 

 

 

 

 

 Accounts payable

 

$

30,424

 

$

59,996

 

 Accrued interest - related party

 

 

3,516

 

 

2,122

 

 Credit cards payable

 

 

66,855

 

 

68,460

 

 Payroll liabilities

 

 

3,057

 

 

3,648

 

 Current portion of deferred rent

 

 

11,363

 

 

11,363

 

 Advances from members

 

 

197,608

 

 

82,679

 

 Note payable - related party

 

 

37,139

 

 

37,139

 

 Unearned revenues

 

 

-

 

 

10,025

 

 

 

 

 

 

 

 

 

 

 

 

 Total current liabilities

 

 

349,962

 

 

275,432

 

 

 

 

 

 

 

 

 

 

 Non-Current Liabilities

 

 

 

 

 

 

 

 Deferred rent, net of current portion

 

 

32,203

 

 

40,726

 

 

 

 

 

 

 

 

 

 

 

 

 Total non-current liabilities

 

 

32,203

 

 

40,726

 

 

 

 

 

 

 

 

 

 

 

 

 

 Total liabilities

 

 

382,165

 

 

316,158

 

 

 

 

 

 

 

 

 

 

 Commitments and Contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Members' Equity (Deficit)

 

 

 

 

 

 

 

 Members' capital

 

 

(51,092)

 

 

(51,092)

 

 Accumulated deficit

 

 

(266,877)

 

 

(184,356)

 

 

 

 

 

 

 

 

 

 

 

 

 Total members' equity (deficit)

 

 

(317,969)

 

 

(235,448)

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Liabilities and Members' Equity (Deficit)

 

$

64,196

 

$

80,710

 

 

 

 

 

 

 

 

 

 

See accompanying notes to the financial statements.




F-2






CNS Wellness Florida, LLC

 

Statements of Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Nine Months

 

For the Nine Months

 

 

 

 

 

Ended

 

Ended

 

 

 

 

 

June 30, 2012

 

June 30, 2011

 

 

 

 

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 Revenue

 

 

$

223,540

 

$

171,570

 

 

 

 

 

 

 

 

 

 

 Costs of Goods Sold

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Gross Profit

 

 

223,540

 

 

171,570

 

 

 

 

 

 

 

 

 

 

 Operating Expenses

 

 

 

 

 

 

 

 Rent expenses

 

 

101,213

 

 

83,194

 

 Payroll expenses and contract labor

 

 

99,275

 

 

150,363

 

 Payroll expenses - members

 

 

10,000

 

 

-

 

 Marketing expenses

 

 

13,526

 

 

75,857

 

 General and administrative

 

 

73,670

 

 

94,689

 

 

 

 

 

 

 

 

 

 

 

 

 Total operating expenses

 

 

297,684

 

 

404,103

 

 

 

 

 

 

 

 

 

 

 Income (Loss) from Operations

 

 

(74,144)

 

 

(232,533)

 

 

 

 

 

 

 

 

 

 

 Other (Income) Expense

 

 

 

 

 

 

 

 Other (income) expense

 

 

6,983

 

 

5,754

 

 Interest expense - related party

 

 

1,394

 

 

1,390

 

 

 

 

 

 

 

 

 

 

 

 

 Total other (income) expense

 

 

8,377

 

 

7,144

 

 

 

 

 

 

 

 

 

 

 Income (Loss) before Income Taxes

 

 

(82,521)

 

 

(239,677)

 

 

 

 

 

 

 

 

 

 

 Income Tax Provision

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

 Net Income (Loss)

 

$

(82,521)

 

$

(239,677)

 

 

 

 

 

 

 

 

 

 

 Pro Forma Financial Information (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Income (Loss) before Income Taxes

 

 

(82,521)

 

 

(239,677)

 

 

 

 

 

 

 

 

 

 

 Income Tax Provision (Benefit)

 

 

-

 

 

(23,889)

 

 

 

 

 

 

 

 

 

 

 Net Income (Loss)

 

$

(82,521)

 

$

(215,788)

 

 

 

 

 

 

 

 

 

 

 See accompanying notes to the financial statements.




F-3






CNS Wellness Florida, LLC

 

Statement of Members' Equity (Deficit)

For the Interim Period Ended June 30, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Members'

Capital

 

Accumulated

Deficit

 

Total Members'

Equity (Deficit)

 

 

 

 

 

 

 

 

 

 

 

 

 Balance September 30, 2009

 

 

$

39,067

 

$

7,550

 

$

46,617

 

 

 

 

 

 

 

 

 

 

 

 

 

 Members' capital contribution

 

 

 

57,791

 

 

-

 

 

57,791

 

 

 

 

 

 

 

 

 

 

 

 

 

 Members' capital distribution

 

 

 

(133,000)

 

 

-

 

 

(133,000)

 

 

 

 

 

 

 

 

 

 

 

 

 Net Income

 

 

 

-

 

 

62,711

 

 

62,711

 

 

 

 

 

 

 

 

 

 

 

 

 Balance, September 30, 2010

 

 

 

(36,142)

 

 

70,261

 

 

34,119

 

 

 

 

 

 

 

 

 

 

 

 

 

 Member capital contribution

 

 

 

50

 

 

-

 

 

50

 

 

 

 

 

 

 

 

 

 

 

 

 

 Member capital distribution

 

 

 

(15,000)

 

 

-

 

 

(15,000)

 

 

 

 

 

 

 

 

 

 

 

 

 Net loss

 

 

 

-

 

 

(254,617)

 

 

(254,617)

 

 

 

 

 

 

 

 

 

 

 

 

 Balance, September 30, 2011

 

 

 

(51,092)

 

 

(184,356)

 

 

(235,448)

 

 

 

 

 

 

 

 

 

 

 

 

 Net loss

 

 

 

-

 

 

(82,521)

 

 

(82,521)

 

 

 

 

 

 

 

 

 

 

 

 

 Balance, June 30, 2012

 

 

$

(51,092)

 

$

(266,877)

 

$

(317,969)

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to the financial statements.




F-4






CNS Wellness Florida, LLC

 

 

 

 

 

 

 

 

 

Statements of Cash Flows

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Nine Months

 

For the Nine Months

 

 

 

 

Ended

 

Ended

 

 

 

 

June 30, 2012

 

June 30, 2011

 

 

 

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 Cash Flows from Operating Activities

 

 

 

 

 

 

 Net income (loss)

 

$

(82,521)

 

$

(239,677)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

 

 

 

 

 Depreciation expense

 

 

7,185

 

 

6,963

 

 Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 Accounts receivable

 

 

9,190

 

 

14,534

 

 

 Prepayments and other current assets

 

 

-

 

 

11,365

 

 

 Accounts payable

 

 

(29,572)

 

 

26,150

 

 

 Accrued interest - related party

 

 

1,394

 

 

1,390

 

 

 Credit cards payable

 

 

(1,605)

 

 

44,392

 

 

 Payroll liabilities

 

 

(591)

 

 

(2,250)

 

 

 Deferred rent

 

 

(8,523)

 

 

54,930

 

 

 Unearned revenue

 

 

(10,025)

 

 

67,452

 

 

 

 

 

 

 

 

 

Net Cash Provided by (Used in) Operating Activities

 

 

(115,068)

 

 

(14,751)

 

 

 

 

 

 

 

 

 

 Cash Flows from Investing Activities

 

 

 

 

 

 

 

 Purchase of office equipment  

 

 

-

 

 

(1,015)

 

 

 

 

 

 

 

 

 

 Net Cash Used in Investing Activities

 

 

-

 

 

(1,015)

 

 

 

 

 

 

 

 

 

 Cash Flows from Financing Activities

 

 

 

 

 

 

 

 Advances from members

 

 

114,929

 

 

31,004

 

 Member capital contribution (distribution)

 

 

-

 

 

(14,950)

 

 

 

 

 

 

 

 

 

 Net Cash Provided by (Used in) Financing Activities

 

 

114,929

 

 

16,054

 

 

 

 

 

 

 

 

 

 Net Change in Cash

 

 

(139)

 

 

288

 

 

 

 

 

 

 

 

 

 Cash - beginning of period

 

 

8,937

 

 

20,326

 

 

 

 

 

 

 

 

 

 Cash - end of period

 

$

8,798

 

$

20,614

 

 

 

 

 

 

 

 

 

 Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 Interest paid

 

$

-

 

$

-

 

 

 

 

 

 

 

 

 

 

 Income tax paid

 

$

-

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Non Cash Financing and Investing Activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to the financial statements.




F-5





CNS Wellness Florida, LLC


June 30, 2012 and 2011

Notes to the Financial Statements

(Unaudited)


Note 1 - Organization and Operations


Cognitive Neuro Sciences, Inc., (the ''Predecessor")


Cognitive Neuro Sciences, Inc., (the ''Predecessor") was incorporated on March 14, 2006 under the laws of the State of Florida. The 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 the Predecessor decided to dissolve the Predecessor and form a Limited Liability Company (“LLC”) to carry-on the Predecessor’s business.


CNS Wellness Florida, LLC


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


Note 2 - Summary of Significant Accounting Policies


Basis of Presentation


The accompanying unaudited interim 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 the 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 period presented.  Unaudited interim results are not necessarily indicative of the results for the full fiscal year.  These financial statements should be read in conjunction with the financial statements of the Company for the fiscal year September 30, 2011 and notes thereto contained in the information filed as part of the amended Current Statement on Form 8K/A, of which this is a part.


Use of Estimates and Assumptions


The preparation of financial statements in conformity with generally accepted accounting principles 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 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 life of office equipment; income tax rate, income tax provision, deferred tax assets, deferred tax assets and the valuation allowance of 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.



F-6






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 receivable, accounts payable and accrued expenses, payroll liabilities, deferred rent and deferred revenue 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.


It is not, however, practical to determine the fair value of advances from members, if any, due to their related party nature.


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, 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.



F-7






Fiscal Year End


The Company elected December 31 st as its fiscal year end date for the purpose of tax compliance upon its formation.


The Company elected September 30 th as its fiscal year end date for the purpose of audits of its financial statements.


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.


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.  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.


There was no allowance for doubtful accounts at June 30, 2012 or September 30, 2011.


The Company does not have any off-balance-sheet credit exposure to its customers at June 30, 2012 or September 30, 2011.


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.


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.




F-8






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. mounts 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.


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.




F-9






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.


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.


Advertising costs


Advertising costs are expensed as incurred.


Income Tax Provision


The Company elected under Section 1362 of the Internal Revenue Code which has been accepted to be taxed as a Subchapter S Corporation effective as of the date of its formation. Under the provisions of Subchapter S Corporation of the Internal Revenue Code, the Company was treated as a pass through entity for federal income tax purposes and the taxable income or loss is reported by the shareholders of the Company on their individual income tax returns and taxed separately on their distributive share of the S corporation’s income whether or not that income is actually distribute.


The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). 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 its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the interim period ended June 30, 2012 or 2011.




F-10






Pro Forma Income Tax Information (Unaudited)


The operating results of the Company were included in the tax returns of the members of the Company for income tax purposes.  The pro forma income tax rate, income tax provision, if any, and deferred tax assets included in the accompanying financial statements and the income tax note reflect the provision for income tax which would have been recorded if the Company had been incorporated as a C Corporation as of the date of its formation.


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.


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


FASB Accounting Standards Update No. 2011-08


In September 2011, the FASB issued the FASB Accounting Standards Update No. 2011-08 “ Intangibles—Goodwill and Other: Testing Goodwill for Impairment” (“ASU 2011-08”). This Update is to simplify how public and nonpublic entities test goodwill for impairment. The amendments permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount.


The guidance is effective for interim and annual periods beginning on or after December 15, 2011. Early adoption is permitted.


FASB Accounting Standards Update No. 2011-11


In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-11 “Balance Sheet: Disclosures about Offsetting Assets and Liabilities” (“ASU 2011-11”). This Update requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The objective of this disclosure is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of IFRS.


The amended guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods.




F-11






FASB Accounting Standards Update No. 2012-02


In July 2012, the FASB issued the FASB Accounting Standards Update No. 2012-02 “ Intangibles—Goodwill and Other (Topic 350) Testing Indefinite-Lived Intangible Assets for Impairment” (“ASU 2012-02”).


This Update is intended to reduce the cost and complexity of testing indefinite-lived intangible assets other than goodwill for impairment. This guidance builds upon the guidance in ASU 2011-08, entitled  Testing Goodwill for Impairment . ASU 2011-08 was issued on September 15, 2011, and feedback from stakeholders during the exposure period related to the goodwill impairment testing guidance was that the guidance also would be helpful in impairment testing for intangible assets other than goodwill. 


The revised standard allows an entity the option to first assess qualitatively whether it is more likely than not (that is, a likelihood of more than 50 percent) that an indefinite-lived intangible asset is impaired, thus necessitating that it perform the quantitative impairment test. An entity is not required to calculate the fair value of an indefinite-lived intangible asset and perform the quantitative impairment test unless the entity determines that it is more likely than not that the asset is impaired.


This Update is effective for annual and interim impairment tests performed in fiscal years beginning after September 15, 2012.  Earlier implementation is permitted.


Other Recently Issued, but not yet Effective Accounting Pronouncements


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.


Note 3 – Going Concern


The accompanying 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 accompanying financial statements, the Company had a members’ deficit at June 30, 2012, a net loss and net cash used in operating activities for the interim period then ended, respectively. These factors raise substantial doubt about the Company’s ability to continue as a going concern.


While the Company is attempting to commence operations 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 generate sufficient revenues and in its ability to raise additional funds, 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.


The 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.




F-12






Note 4 – Property and Equipment


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


 

Estimated Useful Life (Years)

 

June 30,

2012

 

September 30,

2011

 

 

 

 

 

 

 

 

Computer equipment

5

 

$

6,586

 

$

6,586

 

 

 

 

 

 

 

 

Furniture and fixture

7

 

 

1,842

 

 

1,842

 

 

 

 

 

 

 

 

Medical equipment

5

 

 

29,245

 

 

29,245

 

 

 

 

 

 

 

 

Software

3

 

 

7,256

 

 

7,256

 

 

 

 

 

 

 

 

 

 

44,929

 

 

44,929

 

 

 

 

 

 

 

 

Less accumulated depreciation and amortization

 

 

 

(26,470)

 

 

(19,285)

 

 

 

 

 

 

 

 

 

$

18,459

 

$

25,644


Depreciation and Amortization Expense


Depreciation expense for the interim period ended June 30, 2012 and 2011 was $7,185 and $6,963, respectively.


Impairment


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


Note 5 – Related Party Transactions


Related Parties


Related parties with whom the Company had transactions are:


Related Parties

 

Relationship

 

 

 

William A. Lambos, Ph.D.

 

Chief Cognitive Neuroscientist and Member of the Company

 

 

 

Peter A. Hannouche

 

CEO and COO and Member of the Company


Advances from Members


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




F-13






Notes Payable – Related Party


Note payable – related party, consisted of the following:


 

 

June 30, 2012

 

September 30, 2011

 

 

 

 

 

 

 

On August 29, 2010 the Company issued a promissory note to a family member of one of its 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

 

 

 

 

 


The Company accrued interest of approximately $1,394 and $1,390 for the interim period ended June 30, 2012 and 2011 under this note, respectively.


Note 6 – Commitments and Contingencies


Operating Lease


On August 10, 2010 the Company entered into a non-cancellable sub-lease for office space of approximate 4,552 square feet of rentable area in Tampa, Florida with a third party, effective December 1, 2010, for the 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) $36,939.11 representing the security deposit into a certificate of deposit as a security deposit upon execution. The certificate of deposit matures on August 10, 2012 and has an interest rate of 1.10%.  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:

 

 

 

2012 (remainder of the year)

 

$

35,118

 

 

 

 

2013

 

 

143,647

 

 

 

 

2014

 

 

147,958

 

 

 

 

2015

 

 

152,402

 

 

 

 

 

 

$

479,125

 

 

 


Deferred Rent


To induce the Company 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, which is recognized on a straight-line basis over the duration of the initial lease term of 65 months.


Note 7 – Members’ Equity (Deficit)


Member Capital Contribution


Upon formation of the Company, one of its members contributed property and equipment, to the Company valued at the member’s cost basis of $24,067.


Members made cash contributions of $50 and $57,791 during the fiscal year ended September 30, 2011 and 2010, respectively.


Member Capital Distribution


Members took cash distributions of $15,000 and $133,000 during the fiscal year ended September 30, 2011 and 2010, respectively.




F-14






Note 8 – Subsequent Events


The Company has evaluated all events that occurred after the balance sheet date through the date when the financial statements were issued to determine if they must be reported.  The Management of the Company determined that there were certain reportable subsequent events to be disclosed as follows:


On May 30, 2012, Wellness Center USA, Inc. (“WCUI”) entered into an Exchange Agreement (“Exchange Agreement”) to acquire all of the limited liability company interests in the Company. On August 2, 2012, WCUI 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 WCUI’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 WCUI as of the consummation of the share exchange under the Exchange Agreement.   CNS is now operated as a wholly-owned subsidiary of WCUI.



F-15


Exhibit 99.3


Wellness Center USA, Inc.

and

CNS Wellness Florida, LLC


Index to the Pro Forma Combined Financial Statements


(Unaudited)


Contents              Page(s)


Pro Forma Combined Financial Statements

P-2


Pro Forma Combined Balance Sheet at June 30, 2012

P-3


Pro Forma Combined Statement of Operations for the Nine Months Ended June 30, 2012

P-4


Pro Forma Combined Statement of Operations for the Fiscal Year Ended September 30, 2011

P-5


Notes to the Pro Forma Combined Financial Statements

P-6


 



P-1




Wellness Center USA, Inc.

and

CNS Wellness Florida, LLC


As of and for the Nine Months Ended June 30, 2012

and

As of and for the Fiscal Year Ended September 30, 2011


Pro Forma Combined Financial Statements


(Unaudited)


On May 30, 2012, Wellness Center USA, Inc. (“WCUI” or 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 represent 32.2% of the 22,704,773 shares of issued and outstanding common stock of the Company as of the closing of the share exchange under the Exchange Agreement.  CNS is now operated as a wholly-owned subsidiary of the Company.


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.


The merger between the Company and CNS has been accounted for as a business acquisition under the acquisition method of accounting in accordance with ASC Topic 805 “ Business Combinations” with Wellness Center USA, Inc. being the accounting acquirer for the merger between Wellness Center USA, Inc. and CNS Wellness Florida, LLC.


The accompanying pro forma combined balance sheet as of June 30, 2012 and the pro forma combined statements of operations for the nine  months ended June 30, 2012 and for the fiscal year ended September 30, 2011 are based on the historical financial statements of the Company and CNS after giving effect to WCUI’s acquisition of CNS using the acquisition method of accounting and applying the assumptions and adjustments described in the accompanying notes to the pro forma combined financial statements as if such acquisition had occurred as of September 30, 2011 for the balance sheet, and October 1, 2010 for statements of operations for pro forma financial statements purposes.


The pro forma combined financial statements have been prepared 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 CNS been a combined company during the specified periods.  The pro forma adjustments are based on the preliminary information available at the time of the preparation of this document and assumptions that management believes are reasonable.  The pro forma combined financial statements, 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 on Form 10-K for the fiscal year ended September 30, 2011 as filed with United States Securities and Exchange Commission (“SEC”) on December 13, 2011 and in its Quarterly Report on Form 10-Q for the interim period ended June  30, 2012 as filed with SEC on August 20, 2012 and CNS’s historical financial statements included in the Amendment No. 1 to the Current Report on Form 8-K/A for the fiscal year ended September 30, 2011 and for the interim period ended June  30, 2012 as Exhibits as filed with SEC on October 23, 2012.



P-2





Wellness Center USA, Inc.

 

Pro Forma Combined Balance Sheet

June 30, 2012

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Historical

 

Pro Forma

 

 

 

 

 

Wellness Center USA, Inc.

 

CNS Wellness Florida, LLC

 

Adjustments

 

Combined

 

 

 

 

 

 

 

 

 

 

 

 

 ASSETS

 

 

 

 

 

 

 

 

 

 CURRENT ASSETS:

 

 

 

 

 

 

 

 

 

 Cash

 

$

37,048

$

8,798

$

-

$

45,846

 

 

 Total current assets

 

37,048

 

8,798

 

-

 

45,846

 

 

 

 

 

 

 

 

 

 

 

 

 PROPERTY AND EQUIPMENT

 

 

 

 

 

 

 

 

 

 Property and equipment

 

1,792

 

44,929

 

-

 

46,721

 

 Accumulated depreciation

 

(597)

 

(26,470)

 

-

 

(27,067)

 

 

 Property and equipment, net

 

1,195

 

18,459

 

-

 

19,654

 

 

 

 

 

 

 

 

 

 

 

 

 WEBSITE DEVELOPMENT COST

 

 

 

 

 

 

 

 

 

 Website development cost

 

17,809

 

-

 

-

 

17,809

 

 Accumulated amortization

 

(1,402)

 

-

 

-

 

(1,402)

 

 

 Website development cost, net

 

16,407

 

-

 

-

 

16,407

 

 

 

 

 

 

 

 

 

 

 

 

 TRADE MARK

 

 

 

 

 

 

 

 

 

 Trade mark

 

-

 

-

(1)

110,000

 

110,000

 

 Accumulated amortization

 

-

 

-

(2)

(12,222)

 

(12,222)

 

 

 Trade mark, net

 

-

 

-

 

97,778

 

97,778

 

 

 

 

 

 

 

 

 

 

 

 

 PURCHASED TECHNOLOGY

 

 

 

 

 

 

 

 

 

 Purchased technology

 

-

 

-

(1)

325,000

 

325,000

 

 Accumulated amortization

 

-

 

-

(3)

(16,250)

 

(16,250)

 

 

 Purchased technology, net

 

-

 

-

 

308,750

 

308,750

 

 

 

 

 

 

 

 

 

 

 

 

 NON-COMPETE AGREEMENTS

 

 

 

 

 

 

 

 

 

 Non-compete agreements

 

-

 

-

(1)

120,000

 

120,000

 

 Accumulated amortization

 

-

 

-

(4)

(40,000)

 

(40,000)

 

 

 Non-compete agreements, net

 

-

 

-

 

80,000

 

80,000

 

 

 

 

 

 

 

 

 

 

 

 

 OTHER ASSETS

 

 

 

 

 

 

 

 

 

 Goodwill

 

-

 

-

(1)

2,545,000

 

2,545,000

 

 Security deposit

 

-

 

36,939

 

-

 

36,939

 

 

 Total other assets

 

-

 

36,939

 

2,545,000

 

2,581,939

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Total Assets

$

54,650

$

64,196

$

3,031,528

$

3,150,374

 

 

 

 

 

 

 

 

 

 

 

 



P-3





 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

 

 Accounts payable

$

180

$

30,424

$

-

$

30,604

 

 Accrued interest - related party

 

-

 

3,516

 

-

 

3,516

 

 Credit card payable

 

-

 

66,855

 

-

 

66,855

 

 Current portion of deferred rent

 

-

 

11,363

 

 

 

11,363

 

 Payroll liabilities

 

-

 

3,057

 

 

 

3,057

 

 Note payable - related parties

 

-

 

37,139

 

 

 

37,139

 

 Advances from related parties

 

36,375

 

197,608

 

-

 

233,983

 

 Accrued expenses and other current liabilities

 

650

 

-

 

-

 

650

 

 

 Total current liabilities

 

37,205

 

349,962

 

-

 

387,167

 

 

 

 

 

 

 

 

 

 

 

 

 NON-CURRENT LIABILITIES

 

 

 

 

 

 

 

 

 

Non-current liabilities

 

-

 

32,203

 

-

 

32,203

 

 

 Total non-current liabilities

 

-

 

32,203

 

-

 

32,203

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Total liabilities

 

37,205

 

382,165

 

-

 

419,370

 

 

 

 

 

 

 

 

 

 

 

 

 COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 STOCKHOLDERS' EQUITY (DEFICIT):

 

 

 

 

 

 

 

 

 

Common stock: $0.001 par value; 74,000,000 shares authorized;  

 

 

 

 

 

 

 

 

 

 

 15,367,273 shares issued and outstanding

 

 

 

 

 

 

 

-

 

 

 22,667,273 shares issued and outstanding - Pro Forma

 

15,367

 

 

(1)

7,300

 

22,667

 

Additional paid-in capital

 

291,037

 

 

(1)

2,774,731

 

3,065,768

 

Members' capital

 

-

 

(51,092)

(1)

51,092

 

-

 

Accumulated deficit

 

(288,959)

 

(266,877)

(1)

266,877

 

(357,431)

 

 

 

 

 

 

 

 

(2)(3)(4)

(68,472)

 

 

 

 

 Total Stockholders' Equity (Deficit)

 

17,445

 

(317,969)

 

3,031,528

 

2,731,004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Total Liabilities and Stockholders' Equity (Deficit)

$

54,650

$

64,196

$

3,031,528

$

3,150,374

 

 

 

 

 

 

 

 

 

 

 

 

(1)

To reflect issuance of 7,300,000 shares of WCUI's common stock 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.

(2)

To amortize the fair value of trade mark over the estimated useful lives of nine (9) years.

 

(3)

To amortize the fair value of purchased technology over the estimated useful lives of 20 years.

 

(4)

To amortize the fair value of non-compete agreements over the estimated useful lives of three (3) years.

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to the pro forma combined financial statements.



P-4





Wellness Center USA, Inc.

 

Pro Forma Combined Statement of Operations

For the Nine Months Ended June 30, 2012

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Historical

 

Pro Forma

 

 

 

 

 

Wellness Center USA, Inc.

 

CNS Wellness Florida, LLC

 

Adjustments

 

Combined

 

 

 

 

 

For the Nine

 

For the Nine

 

 

 

 

 

 

 

 

 

Months Ended

 

Months Ended

 

 

 

 

 

 

 

 

 

June 30, 2012

 

June 30, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 NET REVENUES

$

1,187

$

223,540

$

-

$

224,727

 

 

 

 

 

 

 

 

 

 

 

 

 COST OF SALES

 

837

 

-

 

-

 

837

 Inventory obsolescence adjustments

 

 

-

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 GROSS PROFIT

 

350

 

223,540

 

-

 

223,890

 

 

 

 

 

 

 

 

 

 

 

 

 OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 Adverting & promotion

 

-

 

13,526

 

-

 

13,526

 

 Amortization

 

-

 

-

(2)(3)(4)

51,354

 

51,354

 

 Consulting fees

 

22,066

 

-

 

-

 

22,066

 

 Payroll expenses and contract labor

 

-

 

99,275

 

-

 

99,275

 

 Payroll expenses - officers

 

-

 

10,000

 

-

 

10,000

 

 Professional fee

 

59,181

 

-

 

-

 

59,181

 

 Rent expenses

 

18,912

 

101,213

 

-

 

120,125

 

 General and administrative

 

36,924

 

73,670

 

-

 

110,594

 

 

 Total Operating Expenses

 

137,083

 

297,684

 

51,354

 

486,121

 

 

 

 

 

 

 

 

 

 

 

 

 LOSS FROM OPERATIONS

 

 

(136,733)

 

(74,144)

 

(51,354)

 

(262,231)

 

 

 

 

 

 

 

 

 

 

 

 

 OTHER (INCOME) EXPENSE:

 

 

 

 

 

 

 

 

 

 Interest expense - related party

 

-

 

1,394

 

-

 

1,394

 

 Other (income) expense

 

-

 

6,983

 

-

 

6,983

 

 

 Other (income) expense, net

 

-

 

8,377

 

-

 

8,377

 

 

 

 

 

 

 

 

 

 

 

 

 LOSS BEFORE INCOME TAXES

 

 

 

 

 

 

 

 

 

 

 AND NONCONTROLLING INTEREST

 

(136,733)

 

(82,521)

 

(51,354)

 

(270,608)

 

 

 

 

 

 

 

 

 

 

 

 

 INCOME TAX PROVISION

 

 

-

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 LOSS BEFORE NONCONTROLLING INTEREST

 

(136,733)

 

(82,521)

 

(51,354)

 

(270,608)

 

 

 

 

 

 

 

 

 

 

 

 

 NONCONTROLLING INTEREST

 

-

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 NET LOSS

 

$

(136,733)

$

(82,521)

$

(51,354)

$

(270,608)

 

 

 

 

 

 

 

 

 

 

 

 

 NET LOSS PER COMMON SHARE

   - BASIC AND DILUTED:

$

(0.01)

 

 

$

(0.01)

$

(0.01)

 

 

 

 

 

 

 

 

 

 

 

 

 Weighted average common shares outstanding

   - basic and diluted

 

15,122,726

 

 

(1)

7,300,000

 

22,422,726

 

 

 

 

 

 

 

 

 

 

 

 

(1)

To reflect issuance of 7,300,000 shares of WCUI's common stock 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.

(2)

To amortize the fair value of trade mark over the estimated useful lives of nine (9) years.

 

 

 

 

(3)

To amortize the fair value of purchased technology over the estimated useful lives of 20 years.

 

 

 

 

(4)

To amortize the fair value of non-compete agreements over the estimated useful lives of three (3) years.

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to the pro forma combined financial statements.



P-5





Wellness Center USA, Inc.

 

Pro Forma Combined Statement of Operations

For the Fiscal Year Ended September 30, 2011

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Historical

 

Pro Forma

 

 

 

 

 

Wellness Center USA, Inc.

 

CNS Wellness Florida, LLC

 

Adjustments

 

Combined

 

 

 

 

 

For the Fiscal

 

For the Fiscal

 

 

 

 

 

 

 

 

 

Year Ended

 

Year Ended

 

 

 

 

 

 

 

 

 

September 30, 2011

 

September 30, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 NET REVENUES

$

312

$

277,670

$

-

$

277,982

 

 

 

 

 

 

 

 

 

 

 

 

 COST OF SALES

 

314

 

-

 

-

 

314

 Inventory obsolescence adjustments

 

-

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 GROSS PROFIT

 

(2)

 

277,670

 

-

 

277,668

 

 

 

 

 

 

 

 

 

 

 

 

 OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 Adverting & promotion

 

-

 

99,829

 

 

 

99,829

 

 Amortization

 

-

 

-

(2)(3)(4)

68,472

 

68,472

 

 Consulting fees

 

13,913

 

-

 

-

 

13,913

 

 Payroll expenses and contract labor

 

-

 

198,804

 

-

 

198,804

 

 Payroll expenses - officers

 

-

 

-

 

-

 

-

 

 Professional fee

 

59,335

 

-

 

-

 

59,335

 

 Rent expenses

 

21,489

 

114,448

 

-

 

135,937

 

 General and administrative

 

14,447

 

109,401

 

-

 

123,848

 

 

 Total Operating Expenses

 

109,184

 

522,482

 

68,472

 

700,138

 

 

 

 

 

 

 

 

 

 

 

 

 LOSS FROM OPERATIONS

 

(109,186)

 

(244,812)

 

(68,472)

 

(422,470)

 

 

 

 

 

 

 

 

 

 

 

 

 OTHER (INCOME) EXPENSE:

 

 

 

 

 

 

 

 

 

 Interest expense - related party

 

-

 

1,857

 

-

 

1,857

 

 Other (income) expense

 

-

 

7,948

 

-

 

7,948

 

 

 Other (income) expense, net

 

-

 

9,805

 

-

 

9,805

 

 

 

 

 

 

 

 

 

 

 

 

 LOSS BEFORE INCOME TAXES

 

 

 

 

 

 

 

 

 

 AND NONCONTROLLING INTEREST

 

(109,186)

 

(254,617)

 

(68,472)

 

(432,275)

 INCOME TAX PROVISION

 

-

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 LOSS BEFORE NONCONTROLLING

           INTEREST

 

(109,186)

 

(254,617)

 

(68,472)

 

(432,275)

 NONCONTROLLING INTEREST

 

-

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 LOSS FROM CONTINUING OPERATIONS

 

(109,186)

 

(254,617)

 

(68,472)

 

(432,275)

 

 

 

 

 

 

 

 

 

 

 

 

 

LOSS FROM DISCONTINUED OPERATIONS, net of tax

 

-

 

-

 

-

 

-

 

 LOSS ON SALES OF DISCONTINUED OPERATIONS, net of tax

 

-

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 NET LOSS

 

(109,186)

 

(254,617)

 

(68,472)

 

(432,275)

 

 

 

 

 

 

 

 

 

 

 

 

 OTHER COMPREHENSIVE INCOME:

 

 

 

 

 

 

 

 

 

 Foreign currency translation gain (loss)

 

-

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 COMPREHENSIVE INCOME (LOSS)

$

(109,186)

$

(254,617)

$

(68,472)

$

(432,275)



P-6





 

 

 

 

 

 

 

 

 

 

 

 

 NET LOSS PER COMMON SHARE

   - BASIC AND DILUTED:

$

(0.01)

 

 

$

(0.01)

$

(0.02)

 

 

 

 

 

 

 

 

 

 

 

 

 Weighted average common shares outstanding

   - basic and diluted

 

13,125,860

 

 

(1)

7,300,000

 

20,425,860

 

 

 

 

 

 

 

 

 

 

 

 

(1)

To reflect issuance of 7,300,000 shares of WCUI's common stock 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.

(2)

 To amortize the fair value of trade mark over the estimated useful lives of nine (9) years.

(3)

 To amortize the fair value of purchased technology over the estimated useful lives of 20 years.

(4)

 To amortize the fair value of non-compete agreements over the estimated useful lives of three (3) years.

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to the pro forma combined financial statements.



P-7




Wellness Center USA, Inc.

and

CNS Wellness Florida, LLC


As of and for the nine months ended June 30, 2012

and

As of and for the fiscal year ended September 30, 2011


Notes to the Pro Forma Combined Financial Statements


(Unaudited)


NOTE 1

 - Basis of Pro Forma Presentation


Acquisition of CNS Wellness Florida, LLC


On May 30, 2012, Wellness Center USA, Inc. (“WCUI” or 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 represent 32.2% of the 22,704,773 shares of issued and outstanding common stock of the Company as of the closing of the share exchange under the Exchange Agreement.  CNS is now operated as a wholly-owned subsidiary of the Company.


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 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.



P-8





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

%

 

 

 

 

 

 

 

 

 


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

 

 

 

 

 

 

 

 

 

 

 

Unpatented 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

 




P-9





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 the 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade mark

 

 

 

-

 

 

 

110,000

 

 

 

110,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unpatented 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

 


The accompanying pro forma combined balance sheet as of June 30, 2012 and the pro forma combined statements of operations for the nine  months ended June 30, 2012 and for the fiscal year ended September 30, 2011 are based on the historical financial statements of the Company and CNS after giving effect to WCUI’s acquisition of CNS using the acquisition method of accounting and applying the assumptions and adjustments described in the accompanying notes to the pro forma combined financial statements as if such acquisition had occurred as of September 30, 2011 for the balance sheet, and October 1, 2010 for statements of operations for pro forma financial statements purposes.


The pro forma combined financial statements do not purport to represent what the results of operations or financial position of the Company would actually have been if the merger had in fact occurred on October 1, 2010, nor do they purport to project the results of operations or financial position of the Company for any future period or as of any date, respectively.


These pro forma combined financial statements do not give effect to any restructuring costs or to any potential cost savings or other operating efficiencies that could result from the merger between WCUI and CNS since such amounts, if any, are not presently determinable.



P-10





NOTE 2

 - Pro Forma Adjustments


The accompanying pro forma combined financial statements reflect the following pro forma adjustments:


1) To reflect issuance of 7,300,000 shares of WCUI's common stock 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.

 

 

 

 

 

 

 

 

 

Common stock: $0.001 par value

 

 

(7,300

)

 

 

 

 

 

Additional paid-in capital

 

 

(2,774,731

)

 

 

 

 

 

Members' capital

 

 

(51,092

)

 

 

 

 

 

Accumulated deficit

 

 

(266,877

)

 

 

 

 

 

Trade mark

 

 

110,000

 

 

 

 

 

 

Acquired technology

 

 

325,000

 

 

 

 

 

 

Non-compete agreements

 

 

120,000

 

 

 

 

 

 

Goodwill

 

 

2,545,000

 

 

 

 

 

 

2) To amortize trade mark over the estimated useful lives of nine (9) years.

 

 

 

 

 

 

 

 

 

Amortization

 

 

12,222

 

 

 

 

 

 

Accumulated amortization

 

 

(12,222

)

 

 

 

 

 

3) To amortize acquired technology over the estimated useful lives of 20 years.

 

 

 

 

 

 

 

 

 

Amortization

 

 

16,250

 

 

 

 

 

 

Accumulated amortization

 

 

(16,250

)

 

 

 

 

 

4) To amortize non-compete agreements over the estimated useful lives of three (3) years.

 

 

 

 

 

 

 

 

 

Amortization

 

 

40,000

 

 

 

 

 

 

Accumulated amortization

 

 

(40,000

)




P-11



Wellness Center USA, Inc. Acquisition of CNS-Wellness LLC – Completed


CNS-Wellness is now a Wholly Owned Subsidiary of Wellness Center USA, Inc.


SCHAUMBURG, Ill., Aug 8, 2012 /PRNewswire/ -- Wellness Center USA, Inc. (OTCQB: WCUI), a Schaumburg, IL based healthcare and nutraceutical company, today announced the consummation of its CNS-Wellness LLC (CNS) acquisition. CNS is a Tampa, FL based cognitive neuroscience company specializing in the treatment of brain-based behavioral health disorders without the use of drugs. These disorders range from affective (emotional) and stress-related problems such as; anxiety, depression and bipolar disorder to developmental disabilities and conditions, including autistic spectrum disorders, as well as disregulatory conditions such as; AH/HD and epilepsy.


(Logo: http://photos.prnewswire.com/prnh/20120621/LA28371LOGO )


CNS's drug free and non-invasive methods provide demonstrated alternative solutions to pharmaceutical therapies. With over six years of research and actual clinical practice, CNS has optimized a state-of-the-art real-time brain mapping assessment and treatment system. Interventions include stimulation and interactive EEG-based feedback software to retrain the human brain. Wellness Center USA and CNS expect to establish clinical practice facilities nationwide, beginning Q4 2012. From CNS's Tampa headquarters, CNS will train qualified healthcare professionals to populate the new practices, ensuring the highest quality of healthcare possible.


Wellness Center USA Inc. acquired CNS through a Share Exchange Transaction whereby all issued and outstanding shares of CNS were purchased in exchange for 7.3 million Wellness Center USA, Inc. (WCUI) shares. CNS's former principals, Dr. William Lambos and Mr. Peter Hannouche, will serve as CNS's President/Chief Scientific Officer and Chief Executive Officer, respectively, and have joined Wellness Center's Board of Directors.


Going forward, CNS's financial results shall be reported consolidated by Wellness Center USA, Inc., starting with the fiscal quarter ending September 30, 2012. Similarly, Wellness Center's pending acquisition of Psoria-Shield Inc., will also be included in the Company's consolidated financial results upon consummation of the Psoria-Shield Inc. acquisition.


"The acquisition of CNS is the first example of Wellness Center USA's commitment to bringing the best healthcare technologies to the patients who need them on a larger scale than previously possible. CNS breakthrough technology improves learning and behavioral abilities for children with ADHD and Autism, without the burden of drug dependency. We also have great expectations for a positive impact on the cost of treatment for the public and healthcare system, as CNS achieves awareness through national presence. With this valuable acquisition and further execution of our plan, we aim to increase the shareholders' value of the company," says Andrew Kandalepas, CEO of Wellness Center USA.


Dr. William Lambos, Chief Scientific Officer and President of CNS, stated, "With our Wellness Center closing, our vision for CNS playing a major role in the future of behavioral health is coming to be realized. Being on the same team with Wellness Center USA, capital investment needed to make CNS a national cognitive provider is greatly enhanced. CNS's scientifically based and effective alternative therapies, yet safe and natural, have never been more urgently needed by the changing world in this new millennium." Peter A. Hannouche, CEO of CNS, added, "It's becoming well known that I've made it my personal and professional mission to bring CNS treatment approaches to as many people as possible. The completion of our transaction advances this mission a giant step. Our excitement about the future growth of CNS and Wellness Center is hard to overstate."


As part of the evaluation and due diligence process preceding this transaction, CNS was asked to conduct treatment on certain individuals selected by Wellness Center USA, Inc. One adult was treated for acute anxiety disorder, and a child for a developmental learning disability. The exceptional response of these two individuals to CNS treatment validated CNS's prior achievements and continued performance capabilities to date. Although this could not be considered a controlled study, the results nonetheless confirmed the effectiveness of the CNS approach.


Dr. Lambos continued, "About half of our clients come to us for help with adjustment and stress-related issues; another third are children with developmental difficulties, and the rest seek treatment for other disorders we treat, such as; chronic pain, migraine headaches, seizure disorder, rehabilitation from traumatic brain injury, and so forth. The percentage of individuals in the population who can benefit from a CNS treatment methodology is well over 50%. More than 90% of the patients treated at our facility have improved significantly and are living happier more productive lives."


Addressing the business model, depending on the severity of a disorder, treatments range from 6 to 15 weeks, and typically cost $4,000 to $10,000. In most cases, the results are permanent and without use or dependency on drugs. CNS has a scalable operation that allows for growth of profitable treatment centers nationally and globally.





About Wellness Center USA, Inc. http://wellnesscenterusa.com/


Wellness Center USA Inc., is a newly formed business created to address important healthcare and wellness needs; through break-through solutions, centered on the "well-being of the body and mind". Such solutions include advanced nutritional products, alternative and complementary medicine (ACM), and behavioral health services.


Wellness Center USA Inc.'s first business unit ( www.aminofactory.com ) is an online market place for modern nutrition of vitamins and supplements. Its products are amino acid based, sold to the general public and sports minded enthusiasts. Our present portfolios of amino acids sold through aminofactory.com are: Beta Alamine, Acetyl L-Carnitine, Ajinomoto L-Leucine, Ajinomoto L-Glutamine, and Ajinomoto Instantized BCAA.


Wellness Center USA Inc.'s second business is CNS Wellness ( www.cns-wellness.com ), an operating cognitive science clinic business, specializing in the treatment of behavioral health disorders in at least three focus areas: a) stress related disorders including anxiety and panic attacks, depression, and obsessive-compulsive spectrum disorders, b) developmental and learning disorders such as autistic spectrum issues and Asperser's syndrome, AD/HD, learning differences and birth trauma-related issues, and c) purely brain-based issues including epilepsy and seizure disorder, traumatic brain injuries, and related acquired brain syndromes


Safe Harbor Statement:


Certain statements contained in this news release that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include statements regarding the proposed exchange transaction, the anticipated closing date of the transaction and anticipated future results following a closing of the transaction. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words like "believe," "expect," "anticipate," "estimate," and "intend" or future or conditional verbs such as "will," "would," "should," "could," or "may." While it is not possible to identify all factors, risks and uncertainties that might relate to, affect or arise from the proposed transaction, and which might cause actual results to differ materially from expected results, such factors, risks and uncertainties include delays in completing the transaction, difficulties in integrating operations following the transaction, difficulties in manufacturing and delivering products, potential market rejection of products or services, increased competitive pressures, changes in general economic conditions, legislative and regulatory changes that adversely affect the business in which the parties are engaged, changes in the securities markets and other factors, risks and uncertainties disclosed from time to time in documents that the Company files with the SEC.


CONTACT: Andrew J. Kandalepas, +1-847-925-1885, Fax: +1-847-925-1859, Andrew@wellnesscenterusa.com




[F8KA3012213_EX99Z5001.JPG]


Contact:

At The Company:

Andrew J. Kandalepas

Tel:  847.925.1885

Fax: 847.925.1859

Andrew@wellnesscenterusa.com


FOR IMMEDIATE RELEASE


Wellness Center USA, Inc. Completes Psoria-Shield Inc. Acquisition


Psoria-Shield Inc. is now a Wholly Owned Subsidiary of Wellness Center USA, Inc.  



SCHAUMBURG, IL, August 28, 2012 /PRNewswire/ - Wellness Center USA, Inc. (OTCQB: WCUI), a Schaumburg IL based healthcare and nutraceutical company, today reported the closing of its Psoria-Shield Inc. (PSI) acquisition. PSI is a Tampa, FL based developer and manufacturer of UltraViolet (UV) phototherapy devices for the treatment of skin diseases. PSI’s flagship product “Psoria-Light®”, is the first deep UV LED “Targeted Phototherapy” device to effectively treat Psoriasis, Eczema, Alopecia Areata, Vitiligo and other ultraviolet-treatable skin diseases affecting an estimated 11% of the world population.


Upon consummation of the Exchange Agreement, PSI became a wholly owned subsidiary of Wellness Center USA, Inc. PSI was acquired through a Share Exchange Transaction whereby all issued and outstanding shares of PSI were acquired in exchange for 7,686,797 shares of Wellness Center USA, Inc. common stock. PSI is a self-managed operating company led by its founder and CEO Mr. Scot Johnson. At the time of the closing, Mr. Johnson joined Wellness Center USA’s Board of Directors.


As with CNS-Wellness (CNS), Wellness Center USA’s earlier acquisition, PSI’s financial results shall be reported on a consolidated basis, by Wellness Center USA, Inc., starting from the August 24, 2012, the date of acquisition. PSI’s sales and marketing campaign is underway, with domestic device placements and signed international distribution agreements.


“With the acquisition of PSI, Wellness Center USA, Inc. now has two operating companies providing revenue through clinical services and product sales. Both businesses have empowered Wellness Center USA with cutting-edge intellectual property, and more importantly with highly talented industry leaders. This important acquisition marks an increase in value to our shareholders," says Andrew Kandalepas, CEO of Wellness Center USA, Inc.


“The closing with Wellness Center USA, Inc. falls on the expansion of our domestic and international sales program. Our sales and marketing promotion is being largely enhanced through the Wellness Center USA, Inc. network and its funding capabilities. Given how well our product has been received by device resellers and distributors, we welcome the assistance provided by Wellness Center USA, Inc. to support manufacturing needs as sales demand increases. Further, I look forward to working with Dr. William A. Lambos of CNS.  The synergy with CNS creates a new arena for joint development of medical devices utilizing CNS’s intellectual property.  Both through device sales and service revenue, we expect to be a major contributor in the Wellness Center USA, Inc. family”, comments Scot Johnson, President and CEO of PSI.


Psoria-Light® is an FDA cleared, CE marked, Class II Medical device, developed and produced at PSI’s FDA-registered manufacturing facility in Tampa, Florida, under its ISO 13485 certified quality system. The Psoria-Light platform is expandable, allowing the development of additional hand-pieces to treat a myriad of other dermatological disorders, utilizing light sources ranging from LED to Laser.





Psoria-Light® is the latest accomplishment of PSI’s medical engineering team, the same team which previously developed over 40 FDA cleared, Class II medical devices sold worldwide. Psoria-Light’s patent-pending emitter adapts deep UV LED technology jointly developed and utilized for photoelectron generation projects by Stanford University, NASA Ames Research Center, NASA Goddard Space Flight Center, the European Space Agency (ESA) and DARPA.  Today, Psoria-Light is recognized by the Space Foundation ( spacefoundation.org ) exclusively in their market as a Certified Space Technology for this achievement ( http://www.spacecertification.org/certified-products/psoria-light ).


About Wellness Center USA, Inc.   http://wellnesscenterusa.com /


Wellness Center USA, Inc. was created to address important healthcare and wellness needs; through break-through solutions, centered on the “well-being of the body and mind”. Wellness Center USA, Inc.’s three business units are:


AminoFactory ( www.aminofactory.com ), is an online market place for modern nutrition of vitamins and supplements. Its products are amino acid based, sold to the general public and sports minded enthusiasts. Current portfolio of products sold through aminofactory.com consists of: Beta Alamine, Acetyl L-Carnitine, Ajinomoto L-Leucine, Ajinomoto L-Glutamine, and Ajinomoto Instantized BCAA.


CNS-Wellness ( www.cns-wellness.com ), is a Tampa FL based cognitive science clinic business, specializing in the treatment of behavioral health disorders in at least three focus areas: a) stress related disorders including anxiety and panic attacks, depression, and obsessive-compulsive spectrum disorders, b) developmental and learning disorders such as autistic spectrum issues and Asperser’s syndrome, AD/HD, learning differences and birth trauma-related issues, and c) purely brain-based issues including epilepsy and seizure disorder, traumatic brain injuries, and related acquired brain syndromes.


Psoria-Shield Inc. ( www.psoria-shield.com ), is a Tampa FL based company specializing in design, manufacturing, and distribution of medical devices to domestic and international markets.  PSI employs full-time engineering, production, sales staff, and manufactures within an ISO 13485 certified quality system.  PSI’s flagship product, Psoria-Light®, is FDA-cleared and CE marked and delivers targeted UV phototherapy for the treatment of certain skin disorders.


Safe Harbor Statement:


Certain statements contained in this news release that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Such statements include statements regarding the proposed exchange transaction, the anticipated closing date of the transaction and anticipated future results following a closing of the transaction.  Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts.  They often include words like “believe,” “expect,” “anticipate,” “estimate,” and “intend” or future or conditional verbs such as “will,” “would,” “should,” “could,” or “may.”  While it is not possible to identify all factors, risks and uncertainties that might relate to, affect or arise from the proposed transaction, and which might cause actual results to differ materially from expected results, such factors, risks and uncertainties include delays in completing the transaction, difficulties in integrating operations following the transaction, difficulties in manufacturing and delivering products, potential market rejection of products or services, increased competitive pressures, changes in general economic conditions, legislative and regulatory changes that adversely affect the business in which the parties are engaged, changes in the securities markets and other factors, risks and uncertainties disclosed from time to time in documents that the Company files with the SEC.