UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: ~~April~~October 3031, 2010

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from _________ to _________

WELLSTAR INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Nevada		20-1834908
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

6911 Pilliod Road

Holland, Ohio 43528

(Address of principal executive offices)

419-865-0069

(Registrant’s telephone number, including area code)

Former name, former address, and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

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

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

Large accelerated filer o	Accelerated filer o

Non-accelerated filer o	Smaller reporting company x
(Do not check if smaller reporting company)

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

The number of shares of the registrant's Common Stock, $0.001 par value per share, outstanding as of ~~May~~December 202, 2010 was 18,~~670~~664,~~358~~141,~~234~~758.

Table of Contents

		Page
Part I –	Financial Information
	Item 1. Financial Statements (unaudited)	F-1
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
	Item 3. Quantitative and Qualitative Disclosures about Market Risk	118
	Item 4. Controls and Procedures	118
Part II –	Other Information
	Item 1. Legal Proceedings	129
	Item 1A. Risk Factors	129
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	129
	Item 3. Defaults upon Senior Securities	129
	Item 4. Removed and Reserved	129
	Item 5. Other Information	129
	Item 6. Exhibits	129
Signatures		1310

PART I

FINANCIAL INFORMATION

WELLSTAR INTERNATIONAL, INC.

CONSOLIDATED FINANCIAL STATEMENTS

~~APRIL~~OCTOBER 3031, 2010 AND 2009

SIMONTACCHI, MILLER & DeANGELIS, PA		170 E. MAIN STREET
CERTIFIED PUBLIC ACCOUNTANTS		ROCKAWAY, NEW JERSEY 07866

		TEL: (973) 664-1140
		FAX: (973) 664-1145

To The Board of Directors

Wellstar International, Inc.

Holland, Ohio 43528

Review Report of Independent Registered Public Accounting Firm

We have reviewed the accompanying consolidated balance sheet of Wellstar International, Inc. as of October 31, 2010, and the related statements of operations and cash flows for the three months ended October 31, 2010 and 2009, and the changes in stockholders' deficit for the three months ended October 31, 2010. These interim financial statements are the responsibility of the Company's management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Wellstar International, Inc. as of July 31, 2010, and the related consolidated statements of operations, stockholders' deficit, and cash flows for the year then ended (not represented herein); and in our report dated November 12, 2010, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of July 31, 2010, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Simontacchi, Miller & DeAngelis, PA

Simontacchi, Miller & DeAngelis, PA

Rockaway, NJ 07866

December 9, 2010

MEMBER, AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS

MEMBER, NEW JERSEY SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS

F-i

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

~~APRIL~~OCTOBER 3031, 2010 AND 2009

CONTENTS

	PAGE
CONSOLIDATED BALANCE SHEETS	F-1, F-2
REVIEW REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-i
CONSOLIDATED BALANCE SHEETS	F-1 - F-2
CONSOLIDATED STATEMENTS OF OPERATIONS	F-3
ONSOLIDATED STATEMENT OF CHANGES IN TOCKHOLDERS’ EQUITY (DEFICIT)	F-4
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)	F-4
CONSOLIDATED STATEMENT OF CASH FLOWS	F-5, F-6
CONSOLIDATED STATEMENTS OF CASH FLOWS	F-5, F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENT	F-7 to F-21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	F-7 - F-29

F-ii

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

ASSETS

	April 30, 2010		July 31, 2009
	October 31, 2010 (Unaudited)		July 31, 2010 (Audited)
	(Unaudited)		(Audited)
Current Assets:
Cash	$	~~176~~150,~~044~~681	$	~~29,564~~-
Prepaid Expenses		-		~~5,186~~19.837
Total Current Assets		~~176~~150,~~044~~681		3419,~~750~~837
Fixed Assets:
Imaging Equipment		829,169		~~802~~829,169
Office Equipment and Fixtures		157,.213		~~154,884~~157.213
Subtotal		986,382		~~957~~986,~~053~~382
Less: Accumulated Depreciation		~~699~~799,~~264~~656		~~552,985~~748.925
Net Fixed Assets		~~287,118~~186.726		~~404,068~~237.457
Development of New Medical Camera, in Progress		380,893		380,893
Intangible Assets:
Covenant Not To Compete		-		-
Manufacturing and Distribution Agreement		700,000		700,000
Subtotal		700,000		700,000
Less: Accumulated Amortization		~~554~~618,~~770~~880		~~459~~586,~~577~~849
Net Intangible Assets		~~145~~81,~~230~~120		~~240~~113,~~423~~151
Other Assets:
Loan Acquisition Cost (net of amortization of $333,802
Loan Acquisition Cost (net of amortization of $405,285 @ 10/31/10 and $358,999 @ 7/31/09)		385,240		206,526
@ 4/30/10, and $261,550 @ 7/31/09).
Software and Manuals (net of amortization of $55,400 @ 10/31/09 and $55,372 @ 7/31/10)		-		28
Software and Manuals (net of amortization of $51,674		188,723		110,645
Security Deposit		-		-
@ 4/30/10, and $37,892 @ 7/31/09).		3,726		17,508
Total Other Assets		385,240		206,554
Security Deposit
Total Assets	$	1,184,660	$	957,892
Total Other Assets		-		4,525
		192,449		132,678
Total Assets
	$	800,841	$	811,919

See Accompanying Notes to Consolidated Financial Statements

F-1

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

LIABILITIES LESS SHAREHOLDERS’' DEFICIT

	April 30, 2010			July 31, 2009
	October 31, 2010 (Unaudited)			July 31, 2010 (Audited)
	(Unaudited)			(Audited)
Current Liabilities:
Accounts Payable	$	673,699		$	616,537
Cash Book Overdraft	$	-		$	6,103
Accrued Expenses		3,663,416			2,879,727
Due to Employees		-			7,136
Accounts Payable		809.535			866.615
Accrued Expenses		3,851,198			3,749,839
Note & Loan Payable - Other		63,382			63,382
Notes Payable		~~540~~350,000			~~750~~350,000
Derivative Instrument Liability - Loan		126,667			422,243
Derivative Instrument Liability - Convertible Notes		29,618,756			28,093,659
Derivative Instrument Liability - Convertible Notes		20,814,215			23,072,247
Convertible Debt		4,205,029			3.992 216
Convertible Debt		3,816,081			2,861,918
Total Current Liabilities		38,897,900			37.128,950
Total Current Liabilities		29,697,460			30,666,054
Long Term Liabilities:
Convertible Debt		23,~~382,967~~261.836			2.959,~~697,938~~105
Derivative Instrument Liability - Convertible Notes		1116,~~744~~453,~~802~~223			2015,~~564,516~~902.472
Derivative Instrument Liability - Warrants		~~123~~17			~~15,373~~19
Total Long-Term Liabilities		14,127,892			23,277,827
Contingent Liability		270.000
Total Liabilities		43,825,352			53,943,881
Total Long-Term Liabilities		19,985.076			18,861,596
Stockholders’ Deficit:
Total Liabilities		58,882,976			55,990,546
Stockholders' Deficit:
Preferred Stock
Series A, Authorized 100,000 Shares,
Series A, Authorized 100,000 Shares, par value .001 per share
par value .001 per share
Issued and Outstanding Shares. 60.000		60			60
Issued and Outstanding Shares, 60,000	$	60		$	60
Paid in Surplus		59.940			59.940
Paid in Surplus		59,940			59,940
Series B, Authorized 1,000,000 Shares, par value .001 per share
Series B, Authorized 1,000,000 Shares,
Issued and Outstanding Shares, 200,000 Shares,		200			200
par value .001 per share
Paid in Surplus		199,800			199,800
Issued and Outstanding Shares, 200,000 Shares,		200			-
Series C. Authorized 1,000,000 Shares, par value .001 per share
Paid in Surplus		199,800			-
Issued and Outstanding Shares, 200,000 Shares		200
Paid in Surplus		199,800
Common Stock
Authorized 5,000,000,000 Shares, par value .001 per share
Authorized 15,000,000,000 Shares, par value .001 per share
Issued Shares, 990,828,504 - Outstanding Shares,
Issued Shares. 6,293,999,155 - Outstanding Shares, 6,293,984,155 (10/31/10) and 3.565,354,384 (7/31/10)		6,293,984			3,565,354
990,813,504 (4/30/10) and 39,486,147 (7/31/09)		990,814			39,481
Paid in Surplus		(2,239,823	)		396.351
Paid in Surplus		2,739,956			2,914,448
Retained Earnings (Deficit)		(62,212,477	)		(59,254,359	)
Retained Earnings (Deficit)		(47,015,281	)		(56,145,891	)
Total Shareholders' Deficit		(57,698,316	)		(55,032,654	)
Total Shareholders’ Deficit		(43,024,511	)		(53,131,962	)
Total Liabilities Less Stockholder's Deficit	$	1,184,660		$	957,892
Total Liabilities Less Stockholder’s Deficit	$	800,841		$	811,919

See Accompanying Notes to Consolidated Financial Statements

F-2

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

CONSOLIDATED ~~STATEMENTS~~STATEMENT OF OPERATIONS

(UNAUDITED)

	Three Months April 30,						Nine Months April 30,
	Three Months October 31,
	2010			2009			~~2010~~			~~2009~~
Income:
Revenue from Medical Imaging	$	- ~~0 -~~		$	- ~~0 -~~		$	~~- 0 -~~		$	~~- 0 -~~
Cost of Sales		- ~~0 -~~			- ~~0 -~~			~~- 0 -~~			~~- 0 -~~
Gross Profit (Loss)		- 0 -			- 0 -			- 0 -			- 0 -
Gross Profit		-			-
Operating Expenses:
Selling, General and Administrative		336,999			451,540			1,018,491			1,390,579
Selling. General and dministrative		315,962			409,145
Depreciation and Amortization		~~109~~129,~~131~~076			92104,~~230~~646			~~327,177~~			~~289,244~~
Total Operating Expenses		~~446~~445,~~130~~038			~~543~~513,~~770~~791			~~1,345,668~~			~~1,679,823~~
Loss from Operations		(~~446~~445,~~130~~038	)		(~~543~~513,~~770~~791	)		~~(1,345,668~~	)		~~(1,679,823~~	)
Other Expense (Income):
Interest Income		(52 15	)		(~~106~~ 68	)		~~(233~~	)		~~(168~~	)
Interest Expense		~~222~~437,~~220~~249			~~127~~183,~~039~~169			~~585,827~~			~~377,163~~
Derivative Instrument, Net		16,691,012			(335,072	)		(11,388,572	)		(1,489,397	)
Derivative Instrument (Income) Expense, Net		2,075,846			(7,331,453	)
Delinquent Stock Registration Penalty		108,900			108,900			326,700			326,700
Non-Registration Penalties		-			108,900
Total Other Expenses (Income)		172,~~022~~513,080			(997,~~239~~039,452	)	~~ (10,476,278)~~			~~ (785,702)~~
Income (Loss) before Provision for Taxes		(172,~~468~~958,~~210~~118	)		~~(444~~6,~~531~~525,661	)		~~9,130,610~~			~~(894,121~~	)
Provision for Taxes		-			-			-			-
Net Income (Loss)	$	(172,~~468~~958,~~210~~118	)	$	~~(444~~6,~~531~~525,661	)	$	~~9,130,610~~		$	~~(894,121~~	)
Net Income (Loss) Per Share, Basic and Diluted	$	(.040	)	$	- (.0 -	)	$	~~.03~~		$	~~(.01~~	)
Weighted Average Number of Common Shares
Weighted Average Number of Common Shares Outstanding, Basic and Diluted		5,652,204,864			804,247,516
Outstanding, Basic and Diluted		460,045,424			148,101,993			263,026,423			88,098,884

Note: Effective January 15, 2010, the Company had a reverse ~~split~~Split of their Common ~~Shares~~Stock of 100 -to 1. The above average number of Common Shares Outstanding reflects the split. The ~~three~~3 months ~~and nine months~~ ended ~~April~~October 3031, 2009 have been restated to reflect the split, and the net loss per share has also been restated.

See Accompanying Notes to Consolidated Financial Statements

F-3

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN

STOCKHOLDERS’' EQUITY (DEFICIT)

FOR THE ~~NINE~~THREE MONTHS ENDED ~~APRIL~~OCTOBER 3031, 2010

	Preferred Stock						Common Stock
					Additional						Additional
	Preferred Stock				Paid in		Common Stock				Paid in			Accumulated
	Shares		Amount		Paid in Capital		Shares		Amount		Paid in Capital			Accumulated Deficit			Total
	Shares		Amount		Capital		Shares		Amount		Capital			Deficit			Total
Balance, July 31, 2010		260,000	$	260	$	259,740		3,565,354,384	$	3,565,354	$	396,351		$	(59,254,359	)	$	(55,032,654	)
Balance, July 31, 2009		60,000	$	60	$	59,940		39,481,147	$	39,481	$	2,914,448		$	(56,145,891	)	$	(53,131,962	)
Series C, Preferred		200,000		200		199,800												200,000
Series B, Preferred		100,000		100		99,900												100,000
Conversion of Debentures								2,728,629,771		2,728,630		(2,636,174	)					92,456
Series B, Preferred Additional Shares		100,000		100		99,900												100,000
Net Income for the Period															(2,958,118	)		(2,958,118	)
Conversion of Debentures								951,332,357		951,333		(174,492	)					776,841
Balance, October 31 2010		460,000	$	460	$	459,540		6,293,984,155		6,293,984	$	(2,239,823	)	$	(62,212,477	)	$	(57,698,316	)
Net Income for the Period															9,130,610			9,130,610

Balance,		260,000	$	260	$	259,740		990,813,504	$	990,814	$	2,739,956		$	(47,015,281	)	$	(43,024,511	)

See Accountants' Report and Accompanying Notes to Financial Statements

F-4

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

	Nine MonthsEnded April 30,
	Three Month Ended October 31, 2010 2009
	2010			2009
Cash Flows from Operating Activities:
Net Income (LossZ)	$	9,130,610		$	(894,121	)
Net Income (Loss)	$	(2,958,118	)	$	6,525,661
Adjustments to Reconcile Net Loss to Net Cash used
Adjustments to Reconcile Net Loss to Net Cash used in Operating Activities:
in Operating Activities:
Depreciation and Amortization		129,076			104,646
Depreciation and Amortization		327,176			289,244
Interest Added to Not Payable		207,000
Delinquent Registration Penalty		326,700			326,700
Derivative Instrument (Income) Expense, Net		2,075,846			(7,331,453	)
Services Paid in Stock		200,000			551,372
Delinquent Registration Penalty					108,900
Derivative Instrument Income, Net		(11,388,572	)		(1,489,397	)
Changes in Operating Assets and Liabilities:
Increase (Decrease) In:
Prepaid Expenses		519,~~186~~837			405,186
Accounts Payable		57(63,~~162~~183	)		~~(85~~44,~~6780~~496
Accrued Expenses		~~457~~301,~~022~~359			~~833~~280,~~081~~993
Net Cash Used in Operating Activities		(~~884~~288,~~716~~183	)		(~~468~~261,~~759~~571	)
Cash Flows from Investing Activities:
Purchase of Equipment and Furniture		(29,329	)		(344	)
Purchase of Equipment and Software		-			(27,000	)
Security Deposit - Reduction		~~4,525~~-			-4,525
Net Cash Used in Investing Activities		~~(24,804~~-	)		(~~344~~22,475	)
Cash Flows From Financing Activities:
Proceeds from Issuance of Convertible Notes		1,056,000			-
Loan Payable - Other		(7,136	)
Note and Loans Payable - Other		-			50,382
Proceeds from Issuance of Convertible Notes		176,000			260,000
Note Payable - Officer		-			49,680
Proceeds from Supply Agreement		270,000
Issuance of Stock for Cash		-			343,550
Net Cash Provided by Financing Activities		438,864			260,000
Net Cash Provided by Financing Activities		1,056,000			443,612
Net Increase in Cash		150,681			(24,046	)
Net Decrease in Cash		146,480			(25,491	)
Cash at Beginning of Period		-			29,564
Cash at Beginning of Period		29,564			25,560
Cash at End of Period	$	150,681		$	5,518
Cash at End of Period	$	176,044		$	69
Cash Paid for Interest	$	- 0 -		$	- 0 -
Cash Paid for Taxes	$	- 0 -		$	- 0 -

See Accompanying Notes to Consolidated Financial Statements

F-5

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE ~~NINE~~THREE MONTHS ENDED ~~APRIL~~OCTOBER 3031, 2010 AND 2009

Supplemental Disclosure of Non-Cash Investing and Financing Activities:

1. During the ~~nine~~three months ended ~~April~~October 3031, 2010, convertible debentures in the amount of $~~776~~92,~~841~~456 were converted into ~~951~~2,~~332~~728,~~357~~629,771 shares of Common Stock.

2. During the ~~nine~~three months ended ~~April~~October 3031, 2010, two officers were issued Series BC Preferred Stock in lieu of salaries for a value of $200,000, no cash was expended.

3. ~~There~~During ~~was~~the anthree ~~assignment~~months ofended ~~Convertible~~October ~~Notes~~31, ~~Payable of $210~~2009,~~000~~ ~~from~~convertible ~~one~~debentures ~~Lender~~in tothe ~~new~~amount ~~Lenders~~of $313,553 ~~which~~were ~~had~~converted nointo ~~effect~~9,399,081,801 onshares ~~cash~~of Common Stock.

4. During the ~~nine~~three months ended ~~April~~October 3031, 2009, ~~convertible~~two ~~debentures~~officers inwere ~~the~~issued ~~amount~~Series ofB ~~$293,194~~Preferred ~~were~~Stock ~~converted~~in ~~into~~lieu ~~8,104,000 shares~~ of ~~Common~~salaries ~~Stock~~for ~~after reflecting~~ a ~~reverse~~value ~~split~~ of $100-1,000, onno ~~January~~cash ~~15,~~was ~~2010~~expended.

5. ~~2,300,653~~There ~~shares~~was ofan ~~Common~~assignment ~~Stock~~of ~~after~~Convertible ~~reflecting~~Notes aPayable ~~reverse split~~ of ~~100-1~~$70,000 infrom ~~January~~one ~~2010~~Lender ~~was~~to ~~issued~~new ~~for~~Lenders, ~~services~~which ~~rendered~~had inno ~~the~~effect ~~nine~~on ~~months ended April 30, 2009~~cash. ~~The amount was $551,372.~~

See Accompanying Notes to Consolidated Financial Statements

F-6

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENT

AS OF ~~APRIL~~OCTOBER 3031, 2010

(UNAUDITED)

NOTE 1 Summary of Significant Accounting Policies and Organization

a) Organization and Recent Company History

Wellstar International, Inc. (the “Company”) was incorporated December 15, 1997, under the laws of the State of Nevada. Through its wholly owned subsidiary, Trillennium Medical Imaging, Inc. (“TMI”), it is developing and licensing the use of advanced thermal imaging technology.

b) Principles of Consolidation

The consolidated financial statements include the accounts of Wellstar International, Inc. and its wholly owned subsidiary, Trillennium Medical Imaging, Inc. (collectively, the “Company”).

c) Interim Condensed Consolidated Financial Statements

The consolidated financial statements as of and for the ~~nine~~three months ended ~~April~~October 3031, 2010 and 2009 are unaudited. In the opinion of management, such consolidated financial statements include all adjustments (consisting only of normal recurring accruals) necessary for the fair presentation of the consolidated financial position and the consolidated results of operations. The consolidated results of operations for the ~~nine~~three months ended ~~April~~October 3031, 2010 and 2009 are not necessarily indicative of the results to be expected for the full year. The consolidated balance sheet information as of July 31, ~~2009~~2010 was derived from the audited consolidated financial statements included in the Company’s annual report Form 10-K for the year ended July 31, ~~2009~~2010. The interim consolidated financial statements should be read in conjunction with that report.

d) Revenue Recognition

The Company recognizes revenues utilizing the accrual method of accounting. More specifically, the Company enters into licensing agreements for its advanced thermal imaging technology. Under the licensing agreements, the Company supplies the camera equipment, related software and training for each facility. Once the facility is operational, the licensing agreement provides for a fixed fee monthly fee for the use of the camera. Accordingly, the revenue is recognized in the month that the camera is in use at the customer’s facility, which represents the Company’s right to receive the fixed fee. The Company’s revenue recognition policy is in compliance with the provisions of EITF 00-21.

F-7

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENT

AS OF ~~APRIL~~OCTOBER 3031, 2010

(UNAUDITED)

NOTE 1 Summary of Significant Accounting Policies and Organization (cont’d)

e) Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results.

f) Cash

For the purpose of the Statement of Cash Flows, cash is defined as balances held in corporate checking accounts and money market accounts.

g) Income (Loss) Per Share

Basic and diluted net income (loss) per common share for the ~~nine~~three months ended ~~April~~October 3031, 2010 and 2009 are computed based upon the weighted average number of common shares outstanding. The assumed conversion of Common Stock equivalents was not included in the computation of diluted Income (loss) per share because the assumed conversion and exercise would be anti-dilutive due to the net Income (loss) incurred. Based on the conversion formula in the Agreements (see Note 2, 3 and 4) on the conversion of its convertible notes would have resulted in the issuance of additional common shares in the amount of ~~$60~~308,~~587~~026,~~076~~838,~~265,~~351 on ~~April~~October 3031, 2010.

h) Stock Based Compensation

Stock based compensation will be valued in accordance with ~~SFAS 123(R) under~~ the Fair Valued based method. Compensation cost is measured at the grant date based on the value of the award and is recognized over the service period which is usually the vesting period. Transactions with non-employees shall be accounted for based on the Fair Value of the consideration received or Fair Value of the equity installments issued, whichever is more reliably measurable.

i) Derivative Instruments

In connection with the sale of debt or equity instruments, we may sell options or warrants to purchase our Common Stock. In certain circumstances, these options or warrants may be classified as derivative liabilities, rather than as equity. Additionally, the debt or equity instruments may contain embedded derivative instruments, such as conversion options, which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative instrument liability.

F-8

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENT

AS OF APRIL 30, 2010

(UNAUDITED)

NOTE 1 Summary of Significant Accounting Policies and Organization (cont’d)

i) Derivative Instruments (cont’d)

j) Income Taxes

The Company will provide for income taxes ~~based~~in onaccordance ~~the~~with ~~provisions~~ASC of740 ~~Financial Accounting Standards Board (~~“~~FASB”) Statement of Financial~~ Accounting ~~Standards No. 109 (“SFAS No. 109"), “Accounting~~ for Income Taxes”, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements and tax returns in different years. Under this method, deferred income tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

The Company has had operating losses each year throughout it’s existence. The Company has a Federal loss carry forward in the approximate amount of $12,151,147. Expiring for it’s year end July 31, between 2020 and 2025.

The Company has a potential deferred tax asset due to the operating loss which has been calculated at 35% of the operating loss. A 100% valuation allowance has been set up as management at this time does not anticipate its utilization.

Deferred Tax Asset	$	4,252,000
Reserve		(4,252,000	)
Balance	$	- 0 -

k) Concentration of Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consists of a checking account with a financial institution in excess of insured limits. There was no excess above insured limits at ~~April~~October 3031, 2010. The Company does not anticipate non-performance by the financial institution.

l) Fair Value of Financial Instruments

Carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of their short maturities.

F-9

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENT

AS OF ~~APRIL~~OCTOBER 3031, 2010

(UNAUDITED)

NOTE 1 Summary of Significant Accounting Policies and Organization (cont’d)

Fair Value of Financial Instruments

m) Equipment

Imaging and office equipment are recorded at cost and depreciated on the straight line method with an estimated life of five (5) years. Imaging equipment is at the customers facility where the equipment is used or stored by the Company until placed in use. The Company retains title to the imaging equipment while it is at the customers location. Depreciation expense for the ~~nine~~three months ended ~~April~~October 3031, 2010 and 2009 were $~~146~~50,~~279~~ 731 and $~~148~~48,~~352~~641, respectfully.

n) Intangible Assets

Loan acquisition costs are stated at cost and relate to the costs of acquiring the convertible notes (see Note 2, 3 and 4) ~~and to obtaining the $400,000 Note Payable (see Note 3)~~. Amortization is provided for under the straight line method over three (3) years, which is the term of the convertible notes ~~and nine months for the original term of the Note Payable~~. Total amortization for the ~~nine~~three months ended ~~April~~October 3031, 2010 and 2009 ~~was~~were $7146,~~922~~286 and $3119,~~887~~281, respectfully.

Software and manuals, Covenant Not To Compete and Manufacturing & Distribution Agreement acquired in the acquisition of Micro Health Systems, Inc. (See Note 3) with cost of $80,000, $20,000 and $700,000 respectively are being amortized over a 24 month period for the software and the Covenant and 5 ½ years for the manufacturing and ~~distribution~~distri-ution agreement. The total amortization expense for the ~~nine~~three months ended ~~April~~October 3031, 2010 and 2009 ~~was~~were $~~108~~32,~~976~~059 and $~~109~~36,~~005~~724, respectfully.

Derivative Instruments

Because of the limited trading history of our Common Stock, we have estimated the future volatility of our Common Stock price based on not only the history of our stock price but also the experience of other entities considered comparable to us. The identification of, and accounting for, derivative instruments and the assumptions used to value them can significantly affect our financial statements.

p) Registration Rights Agreements

In connection with the sale of debt or equity instruments, we may enter into Registration Rights Agreements. Generally, these Agreements require us to file registration statements with the Securities and Exchange Commission to register common shares that may be issued on conversion of debt or preferred stock, to permit re-sale of common shares previously sold under an exemption from registration or to register common shares that may be issued on exercise of outstanding options or warrants.

F-10

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL ~~STATEMENT~~STATEMENTS

AS OF ~~APRIL~~OCTOBER 3031, 2010

NOTE 1 Summary of Significant Accounting Policies and Organization (cont’d)

p) Registration Rights Agreements ~~(cont’d)~~

The Agreements usually require us to pay penalties for any time delay in filing the required registration statements, or in the registration statements becoming effective, beyond dates specified in the Agreement. These penalties are usually expressed as a fixed percentage, per month, of the original amount we received on issuance of the debt or preferred stock, common shares, options or warrants. We account for these penalties as a contingent liability and not as a derivative instrument. Accordingly, we recognize the penalties when it becomes probable that they will be incurred. Any penalties are expenses over the period to which they relate.

q) Long-lived Assets

Estimates of future cash flows used to test recoverability of long-lived assets shall be based on the existing service potential of the asset or asset group at the date it is tested. The testing will be done annually prior to July 31st, the Company’s fiscal year end, but will also be tested whenever events or changes in circumstances indicate that its carrying value may not be recoverable.

Management, in reviewing the value, is of the opinion that its carrying values of its imaging equipment are not higher than fair value to sell. It also is of the opinion that it’s exclusive Mikron Manufacture and Distribution Agreement which is at a carrying value below 50% of its cost three years ago, is a low value. Tests of its imaging equipment were completed by a major medical facility and have yielded positive results which management believes will have a beneficial effect on future revenue and cash flow.

NOTE 2 Convertible Notes

On September 5, 2008, The Company and AJW partners, LLC and it’s related entities amended their agreement related to all the notes, which are convertible, into shares of the Company’s Common Stock. The applicable percentage shall be 25% of the computed conversion price and the interest rate, as defined in each of the notes, shall be 13%. All other provisions, as amended from time to time, shall remain in full force and effect.

On October 31, 2005, the Company entered into a Securities Purchase Agreement with AJW Partners, LLC and its related entities for the sale of $3,000,000 of 8% (amended to 13%) secured convertible notes, each advance is evidenced by a note which is due three years from the date of the advance, and for stock purchase warrants exercisable for a total of 5,000,000 shares of Common Stock each issuance of warrants expiring on the fifth anniversary from the date of issue. The warrants are issued at the time funds are advanced at 1,666,667 per $1 million advanced. The notes are convertible, at the holder’s option, into shares of Common Stock, in whole or in part, at any time after the original issue date. No interest shall be due and payable for any month in which the Company’s stock trading price is greater than $0.1125 for each trading day of the month.

F-11

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL ~~STATEMENT~~STATEMENTS

AS OF ~~APRIL~~OCTOBER 3031, 2010

NOTE 2 Convertible Notes (cont’d)

The number of shares of Common Stock issuable upon a conversion is to be determined by dividing the outstanding principal amount of the notes to be converted, plus related accrued interest, by the conversion price. The conversion price in effect on any conversion date will be at the selling stockholder’s option, at the lower of (i) $0.12 or (ii) anas amended 75% discount to the average of the three lowest intraday trading prices for the Common Stock on a principal market for the twenty trading days preceding, but not including, the conversion date for all notes. The total shares available for conversion at ~~April~~October 3031, 2010 were 50231,~~582~~794,~~810~~600,~~815~~000.

The stock purchase warrants have an exercise price of $0.50 per share.

The Company has closed on the entire $3,000,000 of convertible notes contemplated by the Securities Purchase Agreement and issued stock purchase warrants exercisable for 5,000,000 shares of Common Stock in connection therewith. The dates of the advance of the funds of $1 million each were October 31, 2005 and January 20, 2006 and $500,000 each on July 25, 2006 and August 8, 2006. The stock registration was effective August 4, 2006. $270,500 of the $500,000 Notes issued August 8, 2006 have been sold to JMJ Financial by the holder in an agreement dated June 18, 2009 (See Note 4).

On November 30, 2006, the Company entered into an additional securities purchase agreement with AJW Partners, LLC and its related entities for the sale of $400,000 of 8% (amended to 13%) secured convertible notes due November 30, 2009, and for stock purchase warrants of 4,000,000 shares of Common Stock exercisable at anytime at $.08 per share, expiring on the seventh anniversary from the date of issue, November 30, 2013.

The funds were advanced on November 30, 2006, in the amount of $392,500, less a $7,500 charge as a loan acquisition cost, amortized over the loan period of 36 months. The notes are convertible, at the holders option, into shares of Common Stock, in whole or in part, at any time after the original issue date.

No interest shall be due on any payable for any month in which the Company’s stock trading price is greater than $.0775 for each trading day of the month. The notes are secured by all the assets and intellectual property of the Company.

On March 26, 2007, the Company entered into an additional securities purchase agreement with AJW Partners, LLC and its related entities for the sale of $165,000 of 8% (amended to 13%) secured convertible notes due March 26, 2010, and for stock purchase warrants of 1,000,000 shares of Common Stock exercisable at anytime at $.03 per share, expiring on the seventh anniversary from the date of issue, March 26, 2014.

The funds were advanced on March 26, 2007, in the amount of $150,000, less a $15,000 charge as a loan acquisition cost, amortized over the loan period of 36 months. The notes are convertible, at the holders option, into shares of Common Stock, in whole or in part, at any time after the original issue date.

F-12

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENT

AS OF APRIL 30, 2010

NOTE 2 Convertible Notes (cont’d)

On May 30, 2007, the Company entered into an additional securities purchase agreement with AJW Partners, LLC and its related entities for the sale of $435,000 of 8% (amended to 13%) secured convertible notes due May 30, 2010, and for stock purchase warrants of 10,000,000 shares of Common Stock exercisable at anytime at $.02 per share, expiring on the seventh anniversary from the date of issue, May 30, 2014.

The funds were advanced on May 30, 2007, in the amount of $415,000, less a $20,000 charge as a loan acquisition cost, amortized over the loan period of 36 months. The notes are convertible, at the holders option, into shares of Common Stock, in whole or in part, at any time after the original issue date. No interest shall be due on any payable for any month in which the Company’s stock trading price is greater than $.0775 for each trading day of the month. The notes are secured by all the assets and intellectual property of the Company.

On October 12, 2007, the Company entered into an additional securities purchase agreement with AJW Partners, LLC and its related entities for the sale of $175,000 of 8% (amended to 13%) secured convertible notes due October 12, 2010, and for stock purchase warrants of 15,000,000 shares of common stock exercisable at anytime at $ .0001 per share expiring on the seventh anniversary from the date of issue October 12, 2014.

The funds were advanced on October 12, 2007 in the amount of $170,000, less a $5,000 charge as loan acquisition cost, amortized over the loan period of 36 months. The notes are convertible, at the holders option, into shares of common stock, in whole or in part, at any time after the original issue date. No interest shall be due or payable for any month in which the Company’s stock trading price is greater than $ .0775 for each trading day of the month. The notes are secured by all the assets and intellectual property of the Company.

On November 15, 2007, the Company entered into an additional securities purchase agreement with AJW Partners, LLC and its related entities for the sale of $325,000 of 8% (amended to 13%) secured convertible notes due November 15, 2010, and for stock purchase warrants of 10,000,000 shares of common stock exercisable at anytime at $ .0001 per share expiring on the seventh anniversary from the date of issue November 15, 2014.

The funds were advanced on November 15, 2007 in the amount of $310,000, less a $15,000 charge as loan acquisition cost, amortized over the loan period of 36 months. The notes are convertible, at the holders option, into shares of common stock, in whole or in part, at any time after the original issue date. No interest shall be due or payable for any month in which the Company’s stock trading price is greater than $ .0775 for each trading day of the month. The notes are secured by all the assets and intellectual property of the Company.

F-13

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENT

AS OF ~~APRIL~~OCTOBER 3031, 2010

NOTE 2 Convertible Notes (cont’d)

On December 14, 2007, the Company entered into an additional securities purchase agreement with AJW Partners, LLC and its related entities for the sale of $315,000 of 8% (amended to 13%) secured convertible notes due December 14, 2010, and for stock purchase warrants of 10,000,000 shares of common stock exercisable at anytime at $ .0001 per share expiring on the seventh anniversary from the date of issue December 14, 2014.

The funds were advanced on December 14, 2007 in the amount of $300,000, less a $15,000 charge as loan acquisition cost, amortized over the loan period of 36 months. The notes are convertible, at the holders option, into shares of common stock, in whole or in part, at any time after the original issue date. No interest shall be due or payable for any month in which the Company’s stock trading price is greater than $ .0775 for each trading day of the month. The notes are secured by all the assets and intellectual property of the Company.

On December 31, 2007, the Lender issued the Company a new note for all accrued unpaid interest. The Lender applied all of its conversions from convertible notes into stock to the principal of its original note issued October 31, 2005. The Company which had been applying the conversions to interest first then principal made this adjustment to be in agreement with the Lender and will apply all conversion to principal beginning January 1, 2008. The Callable Secured Convertible Note dated December 31, 2007 in the amount of $427,759.61 bears interest at 2% (amended to 13%) per annum, payable quarterly. The note is due December 31, 2010. All of the terms are identical to the above notes, including the conversion options.

On April 22, 2008, the Company entered into an additional securities purchase agreement with AJW Partners, LLC and its related entities for the sale of $190,000 of 8% (amended to 13%) secured convertible notes due April 22, 2011, and for stock purchase warrants of 20,000,000 shares of common stock exercisable at anytime at $ .0001 per share expiring on the seventh anniversary from the date of issue April 22, 2015. On May 19, 2009, $76,000 of these notes were sold to JMJ Financial by the Holder (See Note 4).

The funds were advanced on April 22, 2008 in the amount of $185,000, less a $5,000 charge as loan acquisition cost, amortized over the loan period of 36 months. The notes are convertible, at the holders option, into shares of common stock, in whole or in part, at any time after the original issue date. No interest shall be due or payable for any month in which the Company’s stock trading price is greater than $.0775 for each trading day of the month. The notes are secured by all the assets and intellectual property of the Company.

F-14

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENT

AS OF ~~APRIL~~OCTOBER 3031, 2010

NOTE 2 Convertible Notes (cont’d)

On June 12, 2008, the Company entered into an additional securities purchase agreement with AJW Partners, LLC and its related entities for the sale of $135,000 of 8% (amended to 13%) secured convertible notes due June 12, 2011.

The funds were advanced on June 12, 2008 in the amount of $~~105~~115,000, less a $20,000 charge as loan acquisition cost, amortized over the loan period of 36 months. The notes are convertible, at the holders option, into shares of common stock, in whole or in part, at any time after the original issue date. No interest shall be due or payable for any month in which the Company’s stock trading price is greater than $.0775 for each trading day of the month. The notes are secured by all the assets and intellectual property of the Company.

On August 29, 2008, AJW Partners, LLC and its related entities (the Lender) issued the Company a new Note for all accrued unpaid interest from January 1, 2008 through August 29, 2008. The accrued interest has been reclassified to a convertible note payable. The Callable Secured Convertible Note, dated August 29, 2008, in the amount of $235,113.84, bears interest at 2% (amended to 13%) per annum, payable quarterly. The Note is due on August 29, 2011. The conversion price is the average of the three (3) lowest trading prices in the 20 days prior to conversion (before the conversion date) X 32.5% (amended to X 25%) = conversion price. All other terms are identical with the other Note.

On May 15, 2009, the Company entered into an additional securities purchase agreement with AJW Partners, LLC and its related entities for the sale of $79,500 of 13% secured convertible notes due May 15, 2012.

The funds were advanced on May 15, 2009 in the amount of $79,500. The notes are convertible, at the holders option, into shares of common stock, in whole or in part, at any time after the original issue date. No interest shall be due or payable for any month in which the Company’s stock trading price is greater than $ .045 for each trading day of the month. The notes are secured by all the assets and intellectual property of the Company.

On June 30, 2009, AJW Partners, LLC and its related entities (the Lender) issued the Company a new Note for all accrued unpaid interest from August 30, 2008 through June 30, 2009. The accrued interest has been reclassified to a convertible note payable. The Callable Secured Convertible Note, dated June 30, 2009 in the amount of $551,564.55 bears interest at 2% per annum, payable quarterly. The Note is due on June 30, 2012. The conversion price is the average of the three (3) lowest trading prices in the 20 days prior to conversion (before the conversion date) X 25% = conversion price. All other terms are identical with the other Notes.

F-15

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENT

AS OF ~~APRIL~~OCTOBER 3031, 2010

NOTE 2 Convertible Notes (cont’d)

On December 7, 2009, the Company entered into an additional securities purchase agreement with AJW Partners, LLC and its related entities for the sale of $50,000 of 13% secured convertible notes due December 7, 2012.

The funds were advanced on December 7, 2009 in the amount of $50,000. The notes are convertible, at the holders option, into shares of common stock, in whole or in part, at any time after the original issue date. No interest shall be due or payable for any month in which the Company’s stock trading price is greater than $ 0.00438 for each trading day of the month. The notes are secured by all the assets and intellectual property of the Company.

See Paragraph 2 of this note related to the terms of conversion. The total shares at ~~April~~October 3031, 2010, included in Paragraph 2 above, includes all additional convertible notes.

All notes include a Registration Rights Agreement. The Company was required to register additional shares in relation to all the additional agreements listed above, this was not done. There is a penalty of 2% per month of the note amount, a penalty of $1,~~367~~585,~~974~~774 was accrued through ~~April~~July 3031, 2010. The Company has stopped accruing penalties as of July 31, 2010, as the intent of the penalties is to compensate the lender for the inability to sell shares because of a lack of registration. The lender has been converting shares and conversion of any of the applicable notes could, at this point, be freely sold under Rule 144 without registration.

In connection with the aforementioned issuance of the $1,000,000 of convertible notes, on October 31, 2005, the Company granted a first priority security interest in all the assets of the Company. The issuance of convertible notes resulted in conversion features being accounted for as embedded derivative liabilities in accordance with EITF00-19 and SFAS 133 (see Note 5). The note holder’s have converted notes of $1,055,639 into 215,480,268 shares of Common Stock as of April 30, 2010 after reflecting a 100 - 1 reverse stock split. The balance of the notes are $4,841,799 at April 30, 2010. Interest due of $621,145 is included in Accrued Expenses.

The classification as short-term and long-term derivative instrument liabilities-convertible notes, derivative instrument liabilities warrants and convertible debt is based upon the due date of the notes and the date the warrants expire. Some of the notes have passed their due dates and others are due within one year; these are shown as current liabilities, the other are shown as long-term liabilities. The warrants are shown as long-term as the expiration dates are over one year.

NOTE 3 Notes Payable

a) The Company has borrowed $150,000 from an unrelated individual. The Note is dated August 1, 2005. The outstanding balance of the loan shall bear monetary interest at the fixed rate of six percent (6%) simple, non-compounding interest payable in arrears per annum.

F-16

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENT

AS OF ~~APRIL~~OCTOBER 3031, 2010

NOTE 3 2 Convertible Notes ~~Payable~~ (cont’d)

~~The~~In ~~outstanding~~connection ~~balance~~with ofthe ~~principal~~aforementioned ~~and~~issuance ~~interest~~of isthe ~~due~~$1,000,000 ~~and~~of ~~payable~~convertible onnotes, ~~demand~~ on orOctober ~~after~~31, ~~August 1~~2005, ~~2006. All~~the ~~payments~~Company ~~shall~~granted ~~apply~~a first topriority security interest ~~accrued~~in ~~and~~all ~~then~~the ~~principal~~assets of the Company. The ~~Company~~issuance ~~may~~of ~~prepay~~convertible ~~all~~notes orresulted ~~part~~in ~~without~~conversion afeatures ~~pre-payment~~being ~~penalty~~accounted for as embedded derivative liabilities in accordance with U.S. GAAP (see Note 5). The ~~loan~~note ~~was~~holder’s ~~not~~have ~~paid~~converted onnotes ~~August~~of $1,116,880 ~~2006~~into ~~and~~1,484,722,162 ~~was~~shares ~~extended~~of ~~under~~Common Stock as of October 31, 2010 after reflecting a 100-1 reverse stock split. The balance of the ~~same~~notes ~~terms~~are by$4,780,556 ~~mutual~~at ~~agreement~~October 31, 2010. Interest due of $1,014,307 is included in Accrued Expenses.

ofThe ~~$43~~classification as short-term and long-term derivative instrument liabilities-convertible notes,~~325~~ derivative instrument liabilities warrants and convertible debt is ~~included~~based inupon ~~Accrued~~the ~~Expenses~~due date of the notes and the date the warrants expire. Some of the notes have passed their due dates and others are due within one year; these are shown as current liabilities, the other are shown as long-term liabilities. The warrants are shown as long-term as the expiration dates are over one year.

NOTE 3 Notes Payable

The Company has borrowed $150,000 from an unrelated individual. The Note is dated August 1, 2005. The outstanding balance of the loan shall bear monetary interest at the fixed rate of six percent (6%) simple, non-compounding interest payable in arrears per annum.

The outstanding balance of principal and interest is due and payable on demand on or after August 1, 2006. All payments shall apply first to interest accrued and then principal. The Company may prepay all or part without a pre-payment penalty. The loan was not paid on August 1, 2006 and was extended under the same terms by mutual agreement. Interest due of $47,925 is included in Accrued Expenses.

Default shall occur upon (1) failure to make payment on the note or transfer of stock when due, (2) Company institutes bankruptcy or solvency proceedings or make an assignment for the benefit of creditors.

Note Payable - ~~April~~October 3031, 2010 $150,000

b) The Company has entered into a loan agreement with an unrelated individual. The note is dated October 11, 2005. The note provides for a total loan of $400,000, the Company received $190,000 by October 31, 2005. The balance of $210,000 was subsequently received on November 29, 2005. The note bears interest at a fixed rate of 8%, plus the prevailing variable margin rate charged to the lender. As of April 30, 2010, the margin rate was 7.625%. The lender was paid a loan acquisition cost on December 5, 2005, in Common Stock of 1 million shares. The cost was recorded at market value at the date of the loan which was $ .12 per share, for a total of $120,000. The outstanding balance of principal and accrued interest was due and payable on April 11, 2006. The note has been extended to February 28, 2007 by addendum under the current terms and interest is being accrued. The addendum was signed on November 11, 2006. In consideration of the waiver and extension, the Company, with the signing, paid the lender $20,000. The lender was also issued additional warrants to purchase 400,000 shares of common stock, 200,000 at $0.10 per share and 200,000 at $0.20 per share, which expire on February 28, 2008. As of April 30, 2010, the note has not been paid.

At April 30, 2010, $267,290 of interest expense is included in Accrued Expenses. As security for the loan, the Company has pledged all of its tangible and intangible assets. Commencing on January 1, 2006, the Company shall establish an escrow account and shall deposit 25% of all proceeds generated by the thermal imaging cameras purchased with $210,000 of proceeds from the loan. The funds shall remain in escrow for use in paying all sums due to the lender. To April 30, 2010, no funds have been put into escrow.

In addition, the lender has the option to convert the loan into fully registered, unsecured Common Stock of the Company at a conversion price on the day of conversion, minus 40%. The total shares at April 30, 2010 were 1,088,785,714. The lender shall have the right to convert on the prepayment date or the due date, whichever occurs first. The issuance of the notes and warrants resulted in conversion features being accounted for as embedded derivative liabilities in accordance with EITF00-19 and FASB 133 (see Note 5).

Balance due at April 30, 2010 $190,000

F-17

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENT

AS OF ~~APRIL~~OCTOBER 3031, 2010

NOTE 3 Notes Payable (cont’d)

OnIn ~~August 20~~addition, ~~2009,~~the lender has the ~~Lender~~option ~~assigned~~to ~~$70~~convert the loan into fully registered,~~000~~ ofunsecured ~~its~~Common ~~Notes~~Stock ~~Receivable~~of tothe ~~two~~Company ~~individuals~~at ~~for~~a ~~$30,000~~conversion ~~and~~price ~~$40,000~~on ~~and~~the ~~assigned~~day ~~$80~~of conversion,~~000~~ inminus ~~December~~40%. The ~~2009~~lender toshall ahave ~~company~~the ~~and~~right anto ~~individual~~convert ~~and~~on ~~$60,000~~the inprepayment ~~March~~date ~~2010~~or tothe adue ~~different~~date, ~~company~~whichever ~~and~~occurs ~~individual~~first. The ~~Company~~issuance ~~accepted~~of the ~~assignment~~notes ofand ~~the~~warrants ~~Notes~~resulted ~~and~~in ~~drew~~conversion anfeatures ~~agreement~~being ~~with~~accounted ~~the~~for ~~New~~as ~~Lenders,~~embedded ~~(see~~derivative ~~Note~~liabilities ~~3-E~~in ~~and~~accordance with U.S. GAAP (see Note 45).

On August 20, 2009, the Lender assigned $70,000 of its Notes Receivable to two individuals for $30,000 and $40,000 and assigned $80,000 in December 2009 to a company and an individual and $60,000 in March 2010 to a different company and individual. In May and July 2010, he assigned $80,000 to an individual and a company. The balance of the Notes of $110,000 and accrued interest of $245,344 was assigned to another company. The Company accepted the assignment of the Notes and drew an agreement with the New Lenders, (see Note 3-E and Note 4).

Balance due at October 31, 2010 $ - 0 -

On December 21, 2005, the Company completed the purchase of certain assets of Micro Health Systems, Inc. (“MHS”) under a definitive agreement.

Total consideration paid by the Company was $600,000, plus 2,000,000 shares of Restricted Common Stock. The Company paid $400,000 at closing. A promissory note was executed for $200,000 with interest at 8% per annum. $100,000 was due with accrued interest on or before the 180th day following the date of the Note which is June 19, 2006, with the balance of principal and interest due and payable on or before the 365th day following the date of the note.

The 2,000,000 shares of Restricted Common Stock were issued on December 21, 2005 and priced at the market price of $ .10 per share for a total value of $200,000. The cost was allocated as follows:

Mikron Manufacturing Distribution Agreement
Customer List and Intangible Assets	$	700,000
Tangible Assets		80,000
Covenant Not-To-Compete		20,000
Total	$	800,000

In addition, 115,~~500,~~000 shares of Restricted Common Stock reflecting a 1 for 100 reverse split are being held in escrow as security for the note payable of $200,000. These shares have been shown as issued but not outstanding. The Company is in default on $200,000 of the Note Payable and interest of $4,000 which was due June 19, 2006 on the first $100,000 of notes due. Due to the default, the interest charged from June 19, 2006 is 18% on the $200,000 Note Payable. Interest expense of $~~141~~169,~~170~~320 is included in Accrued Expenses at October 31, 2010.

On November 28, 2006, the Company received a letter due to the default, giving it ten (10) days to pay the note and accrued interest or the 1,500,000 shares held in escrow will be issued to the shareholder of Micro Health Systems, Inc. As of April 30, 2010 and through February 18, 2010, nothing has transpired.

Balance due at April 30, 2010 $200,000

F-18

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENT

AS OF ~~APRIL~~OCTOBER 3031, 2010

NOTE 3 Notes Payable (cont’d)

d)On ~~The~~November ~~Company has borrowed $16~~28,~~912~~ ~~from an unrelated party. The note is dated January 16~~2006, ~~2009, and was due on February 16, 2009 (maturity date). The note has an interest rate of 12% per annum. Per~~ the ~~terms of the note, the~~ Company isreceived ina ~~default~~letter asdue ~~it failed~~ to ~~pay~~ the ~~principal and interest due upon the maturity date. In the event of~~ default, ~~the~~giving ~~lender,~~it byten ~~notice~~(10) ~~given~~days to ~~the~~pay ~~borrower, may declare~~ the ~~unpaid~~note ~~principal~~ and accrued interest ~~owing~~or tothe ~~be paid. The Company (borrower) has not received any demand for payment as of May 26~~15,000 ~~2010.~~shares ~~The~~held ~~note is included as a current liability~~ in ~~Notes~~escrow ~~and~~will ~~Loans~~be ~~Payable~~issued -to ~~Other in~~ the ~~amount~~shareholder of ~~$16~~Micro Health Systems,~~912~~ Inc.

e)“On ~~See~~September ~~Note~~20, ~~3(b)~~2010, ~~this~~Micro ~~Lender~~Health ~~assigned~~Systems, ~~$210~~Inc. (“Micro”),~~000~~ ofa ~~his~~dissolved ~~Notes~~Florida ~~Receivable~~Corporation, tofiled ~~two~~a ~~individuals~~certified summons and ~~two~~complaint ~~Companies~~with ~~and~~the ~~entered~~Circuit ~~into~~Court anon ~~agreements~~the ~~with~~17th ~~them.~~Judicial ~~The~~Circuit ~~Notes~~in ~~are~~Broward ~~convertible~~County, ~~into~~Florida, naming the Company’s ~~Common~~as ~~Stock~~the ~~and~~sole ~~are~~Defendant. Micro ~~being~~alleges ~~accounted~~in ~~for~~the asComplaint ~~Embedded~~that ~~Derivative~~on ~~Liabilities~~December in21, ~~accordance~~2005, ~~with~~the ~~EITF~~Company ~~00-19~~executed and ~~SFAS~~delivered ~~133~~a ~~(See~~promissory ~~Note~~note ~~5).~~in ~~The~~the ~~Lenders~~amount ~~have~~of ~~converted~~ $~~184~~200,~~540~~000 ofto ~~these~~Micro. Further, ~~Notes~~Micro ~~into~~alleges ~~231,679,081~~that ~~shares~~Wellstar ofhas ~~Common~~failed ~~Stock~~to ~~after~~make ~~reflecting~~ a ~~reverse~~payment ~~split~~on ofthe ~~100~~Note -and 1Continues into ~~January~~owe ~~2010.~~the ~~The~~principal ~~Notes~~and ~~have an~~ interest ~~rate of 0~~.0% The ~~and~~Company ~~mature~~intends ~~August~~to ~~20,~~vigorously ~~2011.~~defend ~~Total~~against ~~shares~~the ~~available~~allegations ~~for~~stated ~~conversion~~in atthe ~~April 30, 2010 are 153,710,000~~Complaint”.

~~NOTE~~Balance ~~4 Convertible~~due ~~Notes~~at -October ~~Other~~31, 2010 $200,000

ad) OnThe ~~June~~Company ~~18,~~has ~~2009,~~borrowed ~~JMJ Financial purchased~~ $~~270~~16,~~500~~912 ~~of certain Convertible Notes~~ from ~~AJW~~an ~~Partner~~unrelated ~~and~~party. ~~related~~The ~~entities~~note ~~(see~~is ~~Note~~dated ~~2).~~January ~~Through April 30~~16, ~~2010~~2009, ~~$270,500~~and ofwas ~~these~~due ~~Notes~~on ~~were~~February ~~converted~~16, to2009 ~~Common~~(maturity ~~Stock~~date). ~~These~~The ~~Notes~~note ~~bear~~has an interest atrate 8of 12% per annum. ~~The~~Per ~~Company~~the ~~has~~terms ~~consented~~of tothe note, the ~~sale~~Company ofis ~~these~~in ~~Notes.~~default ~~The~~as ~~Notes~~it ~~bear~~failed to pay the ~~same~~principal ~~terms~~and asinterest indue upon the ~~hands~~maturity date. In the event of default, the ~~seller~~lender, ~~AJW~~by ~~Partners~~notice given to the borrower, may declare the unpaid principal and ~~related~~accrued ~~entities~~interest owing to be paid. $5The Company (borrower) has not received any demand for payment as of November 30,~~334~~ 2010. The note is included as a current liability in ~~Accrued~~Notes ~~Interest~~and atLoans ~~April~~Payable ~~30,~~- ~~2010~~Other in the amount of $16,912.

~~Balance~~e) ~~Due~~See atNote ~~April~~3(b), 30this Lender assigned $290,000 ~~2010~~ of his Notes Receivable to two individuals and two Companies and entered into agreements with them. The Notes are convertible into the Company’s Common Stock and are being accounted for as Embedded Derivative Liabilities in accordance with U.S. GAAP (See Note 5). The Lenders have converted $ 234,465 of these Notes into 749,162,474 shares of Common Stock after reflecting a reverse split of 100 - 1 in January 2010. The Notes have an interest rate of 0.0% -and mature August 20, 2011. Total shares available for conversion at October 31, 2010 are 1,662,645,020.

b)On ~~The~~July ~~Company~~13, ~~has~~2010, ~~entered~~the ~~into~~Lender anassigned ~~agreement~~the ~~with~~balance ~~JMJ~~of ~~Financial,~~ the ~~Lender,~~Notes ~~and~~due ~~the~~him ~~Company~~of as$110,000 ~~the~~and ~~Borrower.~~accrued ~~They~~interest ~~will~~of ~~loan~~$245,344 to ~~the~~Aguna ~~Company~~Networks, ~~the~~Inc. The ~~principal~~total ~~sum~~due of $~~575~~355,~~000~~344 ofplus ~~which~~ $7540,000 ~~has been recorded as a~~ loan acquisition cost, ~~and~~equaling $395,345 is ~~being amortized over 36 months. The loan has~~ a ~~12%~~convertible ~~one~~debenture ~~time~~into ~~interest charge on~~ the ~~principal~~Company’s ~~sum~~Common Stock. The NoConversion ~~interest~~price orshall ~~principal~~be ~~payments~~35% ~~are~~of ~~required until~~ the ~~maturity~~lowest ~~date~~trading ~~three~~price ~~(3)~~in ~~years~~20 ~~from~~days ~~the~~previous ~~effective~~to ~~date (May 22, 2009)~~conversion. In ~~Both~~order ~~principal and interest may be included in conversion prior~~ to ~~maturity~~determine ~~date. The conversion formula,~~ the number of shares ~~issued through conversion~~issuable, is the conversion amount, shall be divided by the conversion price. The ~~which~~issuance ~~is 70% which was amended to 35% on March 9, 2010~~ of ~~the~~notes ~~lowest~~resulted ~~trading price~~ in ~~the~~conversion 20features ~~trading~~being ~~days~~accounted ~~previous~~for toas ~~the~~Embedded ~~conversion,~~Derivative asLiabilities ~~applied~~in toaccordance ~~the~~with ~~Company’s~~U.S. ~~voting~~GAAP ~~Common~~(See ~~Stock~~Note 5). Total ~~Prepayment~~shares ofavailable ~~the~~for ~~loan~~conversion isat ~~not~~October ~~permitted~~31, ~~unless~~2010 ~~approved~~are ~~by Holder~~11,234,485,714.

F-19

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENT

AS OF ~~APRIL~~OCTOBER 3031, 2010

NOTE 4 Convertible Notes - Other

On June 18, 2009, JMJ Financial purchased $270,500 of certain Convertible Notes from AJW Partner and related entities (see Note 2). Through April 30, 2010, $270,500 of these Notes were converted to Common Stock. These Notes bear interest at 8% per annum. The Company has consented to the sale of these Notes. The Notes bear the same terms as in the hands of the seller, AJW Partners, and related entities.

Balance Due at July 31, 2010 $ - 0 -

The Company has entered into an agreement with JMJ Financial, the Lender, and the Company as the Borrower. They will loan to the Company the principal sum of $575,000 of which $75,000 has been recorded as a loan acquisition cost and is being amortized over 36 months. The loan has a 12% one time interest charge on the principal sum of $69,000 which is included in the balance due. No interest or principal payments are required until the maturity date three (3) years from the effective date (May 22, 2009). Both principal and interest may be included in conversion prior to maturity date. The conversion formula, the number of shares issued through conversion, is the conversion amount, divided by the conversion price which is 70% which was amended to 35% on March 9, 2010 of the lowest trading price in the 20 trading days previous to the conversion, as applied to the Company’s voting Common Stock. Prepayment of the loan is not permitted, unless approved by Holder.

The Company entered into an additional agreement to borrow up to $1,150,000 from JMJ Financial of which $150,000 has been recorded as a loan acquisition cost and is being amortized over 36 months. The interest rate will be 12% one time interest charge on the principal sum of $138,000 which is included in the balance due. No interest or principal payments are required until the maturity date, but both principal and interest may be included in the conversion prior to maturity. Maturity is three (3) years from the effective date (August 19, 2009). The loan is convertible into voting common stock of the Company. The conversion formula, the number of shares issued through conversion is the conversion amount, divided by the conversion price which is 70% amended to 35% on March 9, 2010 of the lowest trading price in the 20 trading days previous to the conversion. Prepayment of the loan is not permitted, unless approved by holder.

The Company has an additional commitment to borrow up to $1,725,000 from JMJ Financial of which $225,000 will be recorded as a loan acquisition cost and will be amortized over 36 months. The interest rate will be 12% one time interest charge on the principal sum of $207,000 interest. No interest or principal payments are required until the maturity date, but both principal and interest may be included in the conversion prior to maturity. Maturity is three (3) years from the effective date of August 3, 2010. The loan is convertible into voting common stock of the Company. The conversion formula, the number of shares issued through conversion is the conversion amount, divided by the conversion price which is 70% amended to 35% on March 9, 2010 of the lowest trading price in the 20 trading days previous to the conversion. Prepayment of the loan is not permitted unless approved by holder.

Balance Due at October 31, 2010 $2,127,054

F-20

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENT

AS OF OCTOBER 31, 2010

NOTE 4 Convertible Notes - Other (cont’d)

~~The~~d) ~~Company~~On ~~entered~~July ~~into~~26, an2010, ~~additional~~JMJ ~~agreement~~assigned ~~to borrow up to~~ $125,~~150000~~000 ~~from JMJ Financial~~ of ~~which~~its $1,150,000 ~~has~~convertible ~~been~~notes ~~recorded~~receivable as a loan acquisition cost and is being amortized over 36 months. The interest rate will be 12% one time interest charge on the principal sum. No interest or principal payments are required until the maturity date, but both principal and interest may be included in the conversion prior to ~~maturity. Maturity~~Redwood ~~is three (3) years from the effective date (August 19~~Management, ~~2009)~~LLC. ~~The~~ ~~loan is convertible into voting common stock of the Company.~~ The ~~conversion~~assignment ~~formula,~~was ~~the~~accepted ~~number of shares issued through conversion is the conversion amount, divided~~ by the ~~conversion price which is 70% amended to 35% on March 9, 2010 of the lowest trading price in the 20 trading days previous to the conversion~~Company. ~~Prepayment of the loan is not permitted, unless approved by holder.~~

~~Balance~~e) ~~Due~~On atJuly ~~April 30~~28, 2010 , JMJ assigned $75,000 of its $1,~~331~~150,~~789~~000 convertible notes receivable to Black Mountain Equities, Inc. The terms of conversion are the same as JMJ Financial. There is no interest on this note. The assignment was accepted by the Company.

c)Black InMountain ~~December~~Equities, ~~2009~~Inc. has converted $14,490 ~~this~~of ~~Lender~~its ~~was~~notes ~~assigned~~to astock ~~note~~as of ~~$40~~October 31,~~000~~ ~~from~~2010. ~~another~~The ~~lender~~conversion ~~(see~~features ~~Note~~are 3being ~~(b).~~accounted ~~The~~for ~~Lender~~as ~~converted~~Embedded ~~$40,000~~Derivative ~~into~~Liabilities ~~Common~~in ~~Stock,~~accordance ~~there~~with isU.S. aGAAP ~~balance~~(see ~~due~~Note as5). ofTotal ~~April~~shares ~~30,~~available ~~2010~~for isconversion $-are 01,728,857,142 -at October 31, 2010.

~~The~~f) ~~issuance~~In ofDecember ~~convertible~~2009, ~~notes~~JMJ ~~resulted~~Financial inwas ~~conversion~~assigned ~~features~~a ~~being~~note ~~accounted~~of ~~for~~$40,000 asfrom ~~Embedded~~another ~~Derivative~~lender ~~Liabilities in accordance with EITF00-19 and SFAS 133~~ (~~See~~see Note 53 (b). ~~Total~~ ~~shares~~The ~~available~~Lender ~~for~~converted ~~conversion on all Notes A~~$40,000 Binto &Common ~~C above~~Stock, ~~are~~there ~~8,761,769,736~~is atno ~~April~~balance ~~30, 2010~~due.

The issuance of convertible notes resulted in conversion features being accounted for as Embedded Derivative Liabilities in accordance with U.S. GAAP (See Note 5).

Total shares available for conversion on all Notes A, B & C above, are 60,772,917,142 at October 31, 2010.

The Company entered into an agreement to borrow $50,000 from Asher Enterprises, Inc. The loan is dated May 5, 2010, and has an interest rate of 8%. The Company promises to pay the accrued and unpaid interest and the balance of principal due on the maturity date of February 5, 2011. Any amount not paid when due shall bear an interest rate of 22%, the default rate.

The holder may convert principal and interest into shares of the Company’s Common Stock at any time to the maturity date. The conversion price means the average of the lowest three (3) trading prices for the Common Stock in the ten (10) trading day period ending one trading day prior to the conversion date X 60%.

Events of default are (1) failure to pay principal or interest at maturity, and (2) failure to issue stock upon conversion.

The Company has instructed the stock transfer agent to reserve a sufficient number of shares of Common Stock for the conversion, initially 441,176,471 shares.

There were no conversions through October 31, 2010. The conversion features are accounted for as Embedded Derivative Liabilities (See Note 5).

Total shares available for conversion are 833,333,333 at October 31, 2010.

Balance due at October 31, 2010 $50,000

F-21

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENT

AS OF OCTOBER 31, 2010

NOTE 4 Convertible Notes - Other (cont’d)

On July 26, 2010, JMJ Financial assigned $25,000 of its convertible note receivable to Redwood Management, LLC (See Note 4(d)). The terms are the same as the assigner. Redwood has converted $25,000 of the notes for 714,285,713 shares of the Company’s Common Stock. The conversion features are being accounted for as Embedded Derivative Liabilities in accordance with U.S. GAAP (See Note 5) total shares available for conversion are - 0 - at October 31, 2010.

Balance due at October 31, 2010 $ - 0 -

NOTE 5 Derivative Financial Instrument Liabilities

We use the Black-Scholes option pricing model to value options and warrants, and the embedded conversion option components of any bifurcated embedded derivative instruments that are recorded as derivative liabilities. See Note 1, related to embedded derivative instruments accounting policy.

In valuing the options and warrants and the embedded conversion option components of the bifurcated embedded derivative instruments, at the time they were issued and at April 30, 2010, we used the market price of our Common Stock on the date of valuation, an expected dividend yield of 0% and the remaining period to the expiration date of the options or warrants or repayment date of the convertible debt instrument. All options, warrants and conversion options can be exercised by the holder at any time.

Because of the limited historical trading period of our Common Stock, the expected volatility of our Common Stock over the remaining life of the options and warrants has been estimated at 123%, based on a review of the historical volatility and of entities considered by management as comparable. The risk-free rates of return used ranged from 0.03% to 0.15%, based on constant maturity rates published by the U.S. ~~Federal~~Treasury ~~Reserve~~Department, applicable to the remaining life of the options or warrants.

F-2022

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENT

AS OF ~~APRIL~~OCTOBER 3031, 2010

NOTE 5 Derivative Financial Instrument Liabilities (cont’d)

At ~~April~~October 3031, 2010, the following derivative liabilities related to Common Stock options and warrants and embedded derivative instruments were outstanding (see Notes 2, 3 and 4):

	IssueDate	Expiry Date	No. of Warrants	Issued To	Exercise Price Per Share	Value - Issue Date	Value - April 30, 2010
Issue Date	Expiry Date		No. of Warrants			Issued To		Exercise Price Per Share		Value - Issue Date		Value - October 31, 2010
	10/11/05 11/19/06 11/19/06 10/31/05 01/20/06 07/25/06 08/04/06 11/30/06 03/26/07 05/30/07 10/12/07 11/15/07 12/14/07 04/22/08	04/11/06 02/18/08 02/18/08 10/31/10 01/20/11 07/25/11 08/04/11 11/30/13 03/26/14 05/30/14 10/12/14 11/15/14 12/14/14 04/22/15	10,000 2,000 2,000 16,667 16,667 8,333 8,333 40,000 10,000 100,000 150,000 100,000 100,000 200,000	Thompson Thompson Thompson AJW Partners AJW Partners AJW Partners AJW Partners AJW Partners AJW Partners AJW Partners AJW Partners AJW Partners AJW Partners AJW Partners	$ .50 $ .10 $ .20 $ .50 $ .50 $ .50 $ .50 $ .08 $ .03 $ .02 $ .0001 $.0001 $.0001 $.0001	$ 41,526 3,845 2,276 169,629 81,321 146,197 102,816 158,741 25,433 163,409 179,353 39,649 24,000 17,540	$ 0 0 0 0 0 0 0 0 0 1 50 34 35 3
10/31/2005	10/31/2010			16,667		AJW Partners		$	0.50	$	169,629	$	0
1/20/2006	1/20/2011			16,667		AJW Partners		$	0.50		81,321		0
7/25/2006	7/25/2011			8,333		AJW Partners		$	0.50		146,197		0
8/4/2006	8/4/2011			8,333		AJW Partners		$	0.50		102,816		0
11/30/2006	11/30/2013			40,000		AJW Partners		$	0.08		158,741		0
3/26/2007	3/26/2014			10,000		AJW Partners		$	0.03		25,433		0
5/30/2007	5/30/2014			100,000		AJW Partners		$	0.02		163,409		0
10/12/2007	10/12/2014			150,000		AJW Partners		$	0.00		179,353		7
11/15/2007	11/15/2014			100,000		AJW Partners		$	0.00		39,649		5
12/14/2007	12/14/2014			100,000		AJW Partners		$	0.00		24,000		5
4/22/2008	4/22/2015			200,000		AJW Partners		$	0.00		17,540		0
Fair value of derivative instrument liabilities for warrants										$	1,108,088	$	17

Fair value of derivative instrument liabilities for warrants $1,155,735 $ 123

The number of shares have been adjusted to reflect the 100 - 1 reverse split.

F-2123

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENT

AS OF ~~APRIL~~OCTOBER 3031, 2010

NOTE 5 Derivative Financial Instrument Liabilities (cont’d)

Issue Date	~~Issue~~Due Date	~~Due Date~~	Note Amount	~~Instrument~~	~~Exercise Price Per Share~~	~~Value - Issue Date~~Instrument	~~Value~~Exercise -Price ~~April~~Per ~~30, 2010~~Share	Value - Issue Date		Value - October 31, 2010
	10/11/05 10/31/05 01/20/06 07/25/06 08/04/06 11/30/06 03/26/07 05/30/07 10/12/07 11/15/07 12/14/07 12/31/07 04/22/08 06/12/08 08/29/08	04/11/06 10/31/08 01/20/09 07/25/09 08/04/09 11/30/09 03/26/10 05/30/10 10/12/10 11/15/10 12/14/07 12/31/10 04/22/11 06/12/11 08/29/11	$ 400,000 1,000,000 1,000,000 500,000 500,000 400,000 165,000 435,000 175,000 325,000 315,000 427,760 190,000 135,000 235,114	Loan Convertible Notes Convertible Notes Convertible Notes Convertible Notes Convertible Notes Convertible Notes Convertible Notes Convertible Notes Convertible Notes Convertible Notes Convertible Notes Convertible Notes Convertible Notes Convertible Notes	Various Various Various Various Various Various Various Various Various Various Various Various Various Various Various	$ 370,189 2,681,204 1,363,058 791,994 616,127 523,047 274,500 825,801 711,289 465,052 631,254 894,835 569,394 555,374 875,919	$ 126,667 0 5,143,135 2,723,077 1,249,892 1,851,692 179,723 2,113,660 957,544 1,780,468 1,728,778 2,349,192 631,314 750,882 1,316,905
10/31/2005	10/31/2008		$	1,000,000		Convertible Notes	Various	$	2,681,204	$	0
1/20/2006	1/20/2009			1,000,000		Convertible Notes	Various		1,363,058		6,358,464
7/25/2006	7/25/2009			500,000		Convertible Notes	Various		791,994		3,600,000
8/4/2006	8/4/2009			500,000		Convertible Notes	Various		616,127		1,652,400
11/30/2006	11/30/2009			400,000		Convertible Notes	Various		523,047		2,448,000
3/26/2007	3/26/2010			165,000		Convertible Notes	Various		274,500		237,600
5/30/2007	5/30/2010			435,000		Convertible Notes	Various		825,801		2,786,400
10/12/2007	10/12/2010			175,000		Convertible Notes	Various		711,289		1,260,000
11/15/2007	11/15/2010			325,000		Convertible Notes	Various		465,052		2,275,019
12/14/2007	12/14/2007			315,000		Convertible Notes	Various		631,254		2,205,059
12/31/2007	12/31/2010			427,760		Convertible Notes	Various		894,835		2,994,422
4/22/2008	4/22/2011			190,000		Convertible Notes	Various		569,394		798,662
6/12/2008	6/12/2011			135,000		Convertible Notes	Various		555,374		946,969
8/29/2008	8/29/2011			235,114			Various		875,919		1,654,188
Fair value of bifurcated embedded derivative instrument liabilities carry forward								$	12,149,037	$	29,217,183

~~Fair value of bifurcated embedded derivative instrument liabilities carry forward $12,149,037 $22,902,929~~F-24

F-2224

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENT

AS OF ~~APRIL~~OCTOBER 3031, 2010

NOTE 5 Derivative Financial Instrument Liabilities (cont’d)

	Issue Date	Due Date	Note Amount	Instrument	Exercise Price Per Share	Value - Issue Date	Value - April 30, 2010
Carry Forward	Issue Date	Due Date		Note Amount			Instrument	Exercise Price Per Share	Value - Issue Date		Value - October 31, 2010
Carry Forward	05/15/09 06/30/09 08/04/06 05/27/09 08/20/09 12/07/09 08/19/09	05/15/12 06/30/12 08/04/09 05/27/12 08/20/11 12/07/12 08/19/12	$ 79,500 551,565 270,500 575,000 70,000 50,000 921,/846	Convertible Notes Convertible Notes Convertible Notes Convertible Notes Convertible Notes Convertible Notes Convertible Notes	Various Various Various Various Various Various Various	$12,149,037 79,500 551,565 270,500 575,000 70,000 177,486 921,846	$22,902,929 455,684 3,173,103 0 1,774,586 105,740 291,320 3,982,322
	5/15/2009	5/15/2012		$	79,500		Convertible Notes	Various		79,500		567,912
	6/30/2009	6/30/2012			551,565		Convertible Notes	Various		551,565		3,951,699
	5/27/2009	5/27/2012			575,000		Convertible Notes	Various		575,000		1,528,036
	8/20/2009	8/20/2011			70,000		Convertible Notes	Various		70,000		55,817
	12/7/2009	12/7/2012			50,000		Convertible Notes	Various		177,486		361,903
	8/19/2009	8/19/2012			1,188,000		Convertible Notes	Various		1,188,000		5,835,987
	5/5/2010	2/5/2011			50,000		Convertible Notes	Various		165,721		117,298
	5/19/2010	5/19/2012			40,000		Convertible Notes	Various		40,000		150,049
	7/13/2010	7/13/2012			395,344		Convertible Notes	Various		395,344		1,869,360
	7/26/2010	8/19/2012			25,000		Convertible Notes	Various		25,000		- 0 -
	7/27/2010	7/27/2012			40,000		Convertible Notes	Various		40,000		78,411
	7/28/2010	7/28/2012			75,000		Convertible Notes	Various		75,000		270,185
	7/25/2010	7/25/2013			421,000		Convertible Notes	Various		421,000		2,068,140
	Fair value of bifurcated embedded derivative instrument liabilities								$	15,952,653	$	46,071,980
	Total derivative financial instruments								$	17,060,741	$	46,071,997

~~Fair value of bifurcated embedded derivative instrument liabilities $14,794,934 $32,685,684~~F-25

Total derivative financial instruments $15,950,669 $32,685,807

F-23

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL ~~STATEMENT~~STATEMENTS

AS OF ~~APRIL~~OCTOBER 3031, 2010

NOTE 6 Accrued Expenses

The following are the components of Accrued Expenses:

	Apr. 30, 2010		July 31, 2009
	Oct. 31, 2010		31-Jul-10
Penalties - Registrations	$	1,~~476~~585,~~874~~774	$	1,~~150~~585,~~174~~774
Interest on Debt		1,~~078~~223,~~264~~514		~~495~~993,~~313~~977
Payroll and Payroll Taxes		1,~~099~~026,~~189~~057		1,~~222~~158,~~486~~835
Professional Fees		815,600		1011,000
Accrued Trade Payables		~~489~~253		~~1,754~~253
	$	3,~~663~~851,~~416~~198	$	23,~~879~~749,~~727~~839

NOTE 7 Stockholders’ Equity (Deficit)

~~The~~On ~~following~~August ~~resolutions~~18, ~~were~~2010, ~~duly~~the ~~adopted~~Company amended its certificate of incorporation to increase its authorized shares of common stock from 5,000,000,000 to 15,000,000,000 (the “Increase Amendment”). The Increase Amendment was approved by the ~~Board~~board of ~~Directors~~directors as well as the shareholders holding a majority of the ~~Corporation~~issued byand ~~unanimous~~outstanding shares of common stock pursuant to a written consent ondated ~~September~~August 1018, ~~2009:~~2010.

~~WHEREAS~~On August 17, 2010, the Board of Directors is authorized ~~within~~filing ~~the limitations and restrictions stated in the Articles~~ of ~~Incorporation~~a ofCertificate ~~the Corporation, to provide by resolution or resolutions for the issuance~~ of 10Designation,~~000,000~~ ~~shares of Preferred Stock of the Corporation~~Powers, inPreferences ~~such series~~ and ~~with~~Right ~~such designations and such powers, preferences, rights, qualifications, limitations and restrictions thereof as the Corporation’s Board~~ of ~~Directors~~Series ~~shall~~C ~~fix~~Preferred ~~by resolution or resolutions providing for the issuance thereof duly adopted by the Board of Directors; and~~Stock.

~~WHEREAS,~~The itSeries isC ~~the~~Preferred ~~desire~~Stock ofdoes ~~the~~not ~~Board~~pay dividends but each holder of ~~Directors~~Series C Preferred Stock shall be entitled to 1000 votes for each share of common stock that the ~~Corporation,~~Series ~~pursuant~~C toPreferred ~~its~~Stock ~~authority~~shall asbe ~~aforesaid,~~convertible tointo. The ~~designate~~Series C Preferred Stock has a conversion price of $0.001 (the ~~terms~~“Conversion Price”) and a stated value of $1.00 (the “Stated Value”). Each share of Series BC Preferred Stock ~~and~~is convertible, at the option of the holder, into such number of shares ~~constituting~~of ~~such~~common ~~series;~~stock of the Company as determined by dividing the Stated Value by the Conversion Price. The Series C Preferred Stock has no liquidation preference.

~~NOW,~~The ~~THEREFORE,~~issuance BEof ITthe ~~RESOLVED,~~Series ~~that~~C Preferred Stock was made in reliance upon exemptions from registration pursuant to Section 4(2) under the ~~certificate~~Securities Act of ~~designation~~1933 ~~for~~and ~~the~~Rule 506 promulgated under Regulation D, Thereunder. The holders of Series BC Preferred Stock ofare ~~the~~accredited ~~Corporation~~investors beas ~~amended~~defined ~~and~~in ~~restated~~Rule in501 ~~its~~of ~~entirety~~Regulation asD ~~follows:~~promulgated under the Securities Act of 1933.

~~(1)~~On ~~Designation~~August 17, 2010, the Company entered into conversion agreements with John Antonio and ~~Authorized~~Kenneth ~~Shares.~~McCoppen ~~The~~both ~~Corporation~~executive ~~shall~~officers beand ~~authorized~~directors of the Company, pursuant to ~~issue~~which 1the Company agreed to convert $150,000 in outstanding wages owed to McCoppen and $50,000 in outstanding wages owed to Antonio into a total of 200,000 shares of Series BC Preferred Stock,. The ~~par~~above ~~value~~transactions ~~$.001~~were ~~per~~approved ~~share~~by (the ~~“Series~~Board Bof ~~Preferred~~Directors ~~Stock”)~~of the Company.

~~(2) Stated Value. The stated value of each issued share of Series B Preferred Stock shall be deemed to be $1.00 (the “Stated Value”).~~F-26

F-24

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL ~~STATEMENT~~STATEMENTS

AS OF ~~APRIL~~OCTOBER 3031, 2010

NOTE 7 Stockholders’ Equity (Deficit) (cont’d)

~~(3)~~On ~~Voting.~~September ~~Except~~10, as2009, ~~otherwise~~the ~~expressly~~Board ~~required~~of byDirectors ~~law,~~authorized ~~each~~the ~~holder~~filing of ~~Series~~a BCertificate ~~Preferred~~of ~~Stock~~Designation, ~~shall~~Powers, bePreferences, ~~entitled~~and toRight ~~vote~~of onSeries ~~all~~B ~~matters~~Preferred ~~submitted~~Stock. The toSeries ~~shareholder~~B ofPreferred ~~the~~Stock ~~Corporation~~does ~~and~~not ~~shall~~pay bedividends ~~entitled~~but toeach ~~one~~holder ~~hundred~~is (entitled to 100) votes for each ~~share~~ of ~~Common~~common ~~Stock~~stock that ~~each~~the ~~holder~~Series isB ~~entitled~~Preferred toStock ~~receive~~shall ~~upon~~be ~~conversion~~convertible ~~of the~~ into. Series B Preferred Stock inhas ~~full~~a atconversion ~~the~~price ~~record~~of ~~date~~$0.001 ~~for~~ (the ~~determination~~“Conversion ofPrice”) ~~shareholders~~and ~~entitled~~a tostated ~~vote~~value onof ~~such~~$1.00 ~~matter~~(the ~~or,~~“Stated ifValue”). Each noshare ~~such~~of ~~record~~Series ~~date~~B isPreferred ~~established,~~Stock atis ~~the~~convertible ~~date~~into ~~such~~shares ~~vote~~of iscommon ~~taken~~stock, orat ~~any~~the ~~written~~option ~~consent~~ of ~~shareholders~~the isholder, ~~solicited.~~determined ~~The~~by ~~holders~~dividing ofthe ~~shares~~Stated ofValue ~~Series~~by Bthe ~~Preferred~~Conversion ~~Stock~~Price. There ~~shall~~is ~~vote~~no ~~together~~liquidation preference associated with the ~~holders~~Series ofB ~~Common~~Preferred Stock ~~on all matters~~.

(4) Liquidation. The holders of Series B Preferred Stock shall not be entitled to receive any preference upon the liquidation, dissolution or winding up of the business of the Corporation, whether voluntary or involuntary, each holder of Series B Preferred Stock shall share ratably with the holders of the common stock of the Corporation.

(5) Conversion. The holder of Series B Preferred Stock shall have the following conversion rights (the “Conversion Rights”):

5.1 Right to Convert. Each share of Series B Preferred Stock shall be convertible at the option of the Holder thereof, at any time and from time to time from and after the Original Issue Date into that number of shares of Common Stock determined by dividing the Stated Value by the Conversion Price. For purposes of this Section, the conversion price for the Series B Preferred Stock shall equal $0.001 (the “Conversion Price”).

On October 1, 2009, with the unanimous written consent of the Directors, the Chief Executive Officer John Antonio and the Vice President Ken McCopper, each converted $50,000 of accrued salary owed to them into shares of the Company’s Series B Preferred Stock. Each received 50,000 shares of Series B Preferred Stock, par value $.001 per share, $1.00 stated value.

On October 2, 2009, the Company amended its Certificate of Incorporation to increase its authorized shares of common stock from 10 billion to 20 billion. The increase amendment was approved by the Board of Directors as well as the Shareholders holding a majority of the issued and outstanding voting shares of the Company.

~~F-25~~NOTE 8 Contingent Liability

On October 1, 2010, the Company entered into a supply agreement with CAS Resources, Inc. (“CAS”). The Company is in need of financing resources capable of meeting camera manufacturer requirements which the Company cannot independently fulfill and which CAS has the ability to fulfill.

In consideration of the mutual covenants and agreements herein contained, Mikron and distributor agree as follows:

a)	CAS agrees that it shall pay to the Company $300,000. Through October 31, 2010, the amount of $270,000 has been advanced, the balance of $30,000 was received by the Company in November 2010.

AGREEMENT TO FINANCE CAMERA PURCHASES. The parties agree that the Company shall place purchase orders for cameras with such manufacturers or suppliers as the Company in its sole discretion shall determine. The Company agrees that it shall contemporaneous with payment for each camera delivered per the Company’s orders, pay to CAS the principal sum of $2,000 per camera. The Company agrees that it shall pay said $2,000 per camera to CAS’s order until such time as the Company exercises its option to pay CAS, and completes payment to CAS of its return on purchase funds. The Company can terminate the agreement by payment to CAS of the principal sum of $900,000, exclusive of any payments made or accrued per camera prior to the date of such $900,000 payment.

F-27

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL ~~STATEMENT~~STATEMENTS

AS OF ~~APRIL~~OCTOBER 3031, 2010

NOTE ~~7 Stockholders’~~8 Contingent ~~Equity~~Liability (~~Deficit) (~~cont’d)

~~The~~c) ~~Board~~OPTION ofTO ~~Directors~~PURCHASE ~~has~~AND ~~adopted~~SELL aCAMERAS. ~~resolution~~The ~~pursuant~~Company agrees that if the Company ceases to ~~NRS~~do ~~78.209~~business, offiles ~~Nevada~~bankruptcy ~~Regulations~~or ~~and~~is ~~have~~involuntarily ~~obtained~~placed ~~required~~into ~~approval~~any receivership or bankruptcy, files for reorganization of debts or in the ~~Stockholders. The~~event ~~number~~that the Company, after a period of ~~shares~~four months next following the month of ~~Common~~execution ~~Stock~~hereof ~~authorized~~does not commence ordering and continue to order a minimum average of 20 cameras per month,~~000~~ then and upon the occurrence of any such event(s),~~000~~ CAS shall be entitled to purchase such cameras as Company was purchasing pursuant hereto for use and/or sale by CAS as CAS shall in its sole discretion determine; provided further,~~000~~ ~~par~~that ~~value~~the ~~.001~~Company ~~per~~shall ~~share~~sign such documents and/or transfer such proprietary information to CAS as is ~~changed~~reasonable or necessary for CAS to ~~200~~purchase cameras directly from such manufacturers and/or suppliers as were being utilized by the Company. Nothing set forth herein shall be construed as prohibiting the Company from continuing to purchase cameras for its own account,~~000~~ however,~~000~~ ~~shares~~any ofsuch ~~Common~~purchases ~~Stock,~~shall ~~par~~continue ~~value~~to ~~.001~~be subject to the obligation to pay CAS $2,000 per ~~share~~camera until such time as the Return on Purchase Funds as set forth hereinabove is paid in full. ~~One~~ ~~share~~Further, ofnothing ~~Common~~set ~~Stock~~forth herein shall be ~~issued~~construed ~~after~~as obligating the ~~exchange~~Company ~~for~~to ~~each~~release ~~100~~to, ~~shares~~provide ofto ~~Common~~or ~~Stock~~otherwise ~~issued. This~~license isauthorize ~~effective~~CAS ~~January~~to 15utilize the Company’s proprietary and/or patented technology, ~~2010~~software, system or system components.

~~Effective~~NOTE ~~January~~9 Derivative ~~21,~~Instruments ~~2010~~Income, by a vote of a majority of the outstanding shares the Company is hereby authorized and directed to amend the Articles of Incorporation to increase the Company’s authorized shares of Common Stock from 200,000,000 shares to 5,000,000,000 shares. This was done and effective January 21, 2010.Net

OnDerivative ~~January~~instruments ~~19,~~expense ~~2010~~of $2,075,846 ~~with~~represents the ~~unanimous~~net ~~written~~unrealized ~~consent~~(non-cash) ofchange during the ~~Directors,~~three ~~the~~months ~~Chief~~ended ~~Executive~~October ~~Officer~~31, ~~John Antonio~~2009, ~~and~~in the ~~Vice~~fair ~~President,~~value ~~Ken~~of ~~McCopper,~~our ~~each~~derivative ~~converted~~instrument ~~$50,000~~liabilities ofrelated ~~accrued salary owed~~ to ~~them~~certain ~~into~~warrants ~~shares~~and ofembedded ~~the~~derivatives ~~Company’s~~in ~~Series~~our Bconvertible ~~Preferred~~debt ~~Stock. Each~~that ~~received~~have ~~50,000~~been ~~shares~~bifurcated ofand ~~Series~~accounted Bfor ~~Preferred Stock, par value $~~separately.~~001 per share, $1.00 stated value.~~

NOTE ~~8 Derivative~~10 Going ~~Instruments Income, Net~~Concern

Derivative instruments income of $11,388,572 represents the net unrealized (non-cash) change during the nine months ended April 30, 2010, in the fair value of our derivative instrument liabilities related to certain warrants and embedded derivatives in our convertible debt that have been bifurcated and accounted for separately.

NOTE 9 Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.

As reflected in the accompanying consolidated financial statements, the Company had a net loss of $2,~~257~~958,~~962~~118 ~~before~~including a derivative ~~income~~loss of $112,~~388~~075,~~572~~846 and a negative cash flow from operations of $~~884~~288,~~716~~183 for the ~~nine~~three months ended ~~April~~October 3031, 2010, negative working capital of $2938,~~521~~747,~~416~~217, and a stockholders’ deficiency of $4357,~~024~~698,~~511~~316 at ~~April~~October 3031, 2010.

The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional funds and implement its business plan. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

F-26

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENT

AS OF APRIL 30, 2010

NOTE 9 Going Concern

Management’s plans include the raising of additional capital through private or public transactions and implementation of its business and marketing plan to increase revenues.

~~NOTE 10 Subsequent Events~~F-28

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

~~AJW~~NOTES ~~Partners,~~TO ~~LLC~~CONSOLIDATED ~~and~~FINANCIAL related entities converted a portion of their notes (See Note 2) into 267,704,800 shares of Common Stock during the period May 1, 2010 through June 15, 2010. During the same period, JMJ Financial converted a portion of their notes in 671,500,000 shares of Common Stock (see Note 4).STATEMENTS

OnAS ~~May~~OF 5,OCTOBER ~~2010~~31, the Company entered into a loan agreement with a different outside party and borrowed $50,000 with interest at 8% per annum, and a maturity date of February 5, 2011. The lender may convert principal and interest in shares of the Company’s Common Stock at any time up to the maturity date. The conversion price is the average of the three (3) lowest trading prices for the Common Stock in the ten (10) trading days prior to conversion X 60%.2010

~~F-27~~NOTE 11 Subsequent Events

AJW Partners, LLC and related entities converted a portion of their notes (See Note 2) into 612,068,001 shares of Common Stock during the period November 1, 2010 through December 2, 2010. From November 1, 2010 through December 2, 2010, JMJ Financial converted a portion of their notes in 320,000,000 shares of Common Stock (see Note 4). During the period November 1, 2010 through December 2, 2010, 2,370,242,603 shares of Common Stock were issued through conversion of Convertible Notes Payable.

F-29

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

Special Note on Forward-Looking Statements

Certain statements in Management's Discussion and Analysis ("MD&A"), other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are "forward-looking statements". These forward-looking statements generally are identified by the words "believe," "will," "would," "will be," "will continue," "will likely result," and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. These statements are subject to a number of risks, uncertainties and developments beyond our control or foresight including changes in the trends of the mobile computing industry, formation of competitors, changes in governmental regulation or taxation, changes in our personnel and other such factors. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers should carefully review the risk factors and related notes included in the Company’s Form 10-K and other SEC filings.

Overview

The following MD&A is intended to help the reader understand the results of operations, financial condition, and cash flows of Wellstar International, Inc. MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and the accompanying notes to the financial statements ("Notes").

Background

Wellstar International Inc. (“Wellstar”), through its wholly owned subsidiary, Trillennium Medical Imaging, Inc. (“Trillennium,” “TMI” or “the Company”), has developed an innovative thermal imaging system designed for the evaluation and early detection of heat patterns within the body that indicate the presence of physiological changes such as pressure ulcers, referred pain and metabolic changes within the breast. The Company’s infrared imaging involves the detection and recording of skin temperature and injury patterns, providing visual and quantitative documentation to accurately capture body temperature data. The Company’s system map changes in skin blood flow by translating temperature data into pictures. The interpretation of these temperatures and thermal patterns can play an important role in the development of a diagnosis. The Company’s system consists of proprietary imagers (“TMI 7800 Imager”), operating software (“Image MHS 5.0 Software”) and a comprehensive data transmission and collection network, for which TMI has patents pending. The Company seeks to be the first-to-market in deep tissue injury and pressure ulcer detection using its proprietary infrared imaging system. Thermal Imaging is a low cost, noncontact, non-radioactive diagnostic screening procedure designed for clinical evaluation. In addition, thermal imaging provides an ability to track the progress of therapies being utilized in a low cost, non-invasive manner. Thermal Imaging can detect signs of pressure ulcers before they are visible with the naked eye through detection of temperature changes at the site which allows for treatment of the pressure ulcer before it erupts. The TMI system can be used to scan all new patients into hospitals and long-term care facilities prior admittance and begin treating existing wounds before they are visible. The TMI technology and software is approved by the FDA as an Adjunctive Diagnostic screening procedure for early breast cancer detection, differential diagnosis of pain dysfunctions, (such as Reflex Sympathetic Dystrophy, Neuromuscular Skeletal Syndromes and Neurological disorders), the early detection of pressure ulcers, deep tissue injuries, and bed sores, as well as orthopedic applications. The Company’s imaging research concurrently looks to initiate consideration of thermography as a viable tool and a medical standard for predicting and preventing pressure ulcers in the medical community.

TMI is currently seeking financing to complete the necessary changes to the TMI System and to bring the TMI System to market. The company will initially focus is efforts on Hospitals and long term care facilities.

TMI currently has had their study completed at Duke University and the results have been submitted for publication. TMI has also started a Beta Test at a nursing home. The purpose of the Beta Test is to show the ease of use of the TMI system within the work environment. TMI has expanded their Beta Test to have an installation in a Long Term Acute Care Center.

Plan of Operation and Financing Needs

We are seeking financing in different amounts and up to 12 million dollars. Currently the company has exhausted its funding from past agreements with JMJ Financial and is actively trying to secure financing to continue operations. Currently, the company has no available options for financing and may cease operations in the near future.

If the company is successful in securing financing the company will continue to develop its camera and complete the Beta Test that is currently in operation in a long term care facility.

We presently do not have any available credit, bank financing or other external sources of liquidity. Due to our brief history and historical operating losses, our operations have not been a source of liquidity. We will need to obtain additional capital in order to expand operations and become profitable. In order to obtain capital, we may need to sell additional shares of our common stock or borrow funds from private lenders. There can be no assurance that we will be successful in obtaining additional funding.

We will still need additional capital in order to continue operations until we are able to achieve positive operating cash flow. Additional capital is being sought, but we cannot guarantee that we will be able to obtain such investments. This money would be used for the roll out of our TMI System to the long term care market and for the development and production of a new camera that will save the company money as well as be more effective in its diagnosis.

Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and a downturn in the North American stock and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations.

If we are unable to obtain additional funding, our business operations will be harmed. In addition, section 4e of the October 2005 Securities Purchase Agreements contain certain restrictions and limitations on our ability to seek additional financing. If we do obtain additional financing, our then existing shareholders will suffer substantial dilution.

Results of Operations

Quarter Ended ~~April~~October 3031, 2010 compared to Quarter Ended ~~April~~October 3031, 2009 (all references are to the Quarter Ended ~~April~~October 3031)

Revenue: We did not have revenue during the quarters ended ~~April~~October 3031, 2010 and ~~April~~October 3031, 2009.

Cost of Sales and Gross Profit: There was no Cost of Sales for the quarters ended ~~April~~October 3031, 2010 and ~~April~~October 3031, 2009 as we did not generate revenue during these periods.

Operating, Selling, General and Administrative Expenses: Operating, selling, general and administrative expenses decreased by $9768,~~640~~753, or 1813% in the 2010 ~~third~~first fiscal quarter to $~~446~~445,~~130~~038 from $~~543~~513,~~770~~791 in 2009. This decrease reflects a decrease in ~~stockholder relations expenses by $45,975. In addition,~~ salaries ~~decreased~~ by $9860,~~200~~900 from $~~225~~182,~~000~~700 to $~~126~~121,800.

Loss from Operations: Loss from operations for the quarter ended ~~April~~October 3031, 2010 was $~~446~~445,~~130~~038, a decrease of $9768,~~640~~753 or 1813% from the loss from operations in the same period in 2009 of $~~543~~513,~~770~~791 as a result of the aforementioned decreases in operating, sales and administrative expenses.

Other Income and Expense: Total other expenses of $172,~~022~~513,080 in the quarter ended ~~April~~October 3031, 2010 represent an increase in other expenses of $179,~~121~~552,~~319~~532 from the income of $997,~~239~~039,452 in 2009 as a result of a greater expense from derivative instrument expense for the period related to a increase in derivative instrument liabilities caused by a ~~change~~decrease in our stock prices.

3Net Loss: Net loss of $2,958,118 for the quarter ended October 31, 2010 was $9,483,779 greater than the net income of $6,525,661 for the same period in 2009 due to the greater amount of derivative instrument expense.

Net Loss: Net loss of $17,468,210 for the quarter ended April 30, 2010 was $17,023,679 greater than the net loss of $444,531 for the same period in 2009 due to the greater amount of derivative instrument expense.

Liquidity and Capital Resources

It is Management’s opinion that the current financial position of the company is in dire straits and the Company will need to obtain additional funding to continue operations. The Company expects that it will not be able to continue operating ~~through July 2010~~. If the Company does not obtain financing ~~at this time~~immediately, it will be required to cease operations.

As of ~~April~~October 3031, 2010, we had a working capital deficit of approximately $2938,~~521~~747,~~416~~219, and cash of $~~176~~150,~~044~~681. We do not have the funds necessary to maintain our operations for the coming fiscal year, and will need to raise additional funding.

The liquidity impact of our outstanding debt is as follows:

Our ~~secured~~unsecured ~~convertible~~demand note with ~~Andrew~~Michael W.Sweeney ~~Thompson~~ (the "~~Thompson~~Sweeney Note"), in the principal amount of $~~400~~150,000, matured on ~~April~~August 111, 2006 and remains outstanding. We are in default pursuant to the terms of the Thompson Note, although we have not received a notice of default from Mr. Thompson, nor has Mr. Thompson indicated to the Company that he intends to place the Company in default under the loan agreement. Interest on the Thompson Note is at the rate of 8% plus the prevailing margin rate charged to the lender, which is currently 7.625%. In addition to the outstanding principal, we also owe accrued interest in the amount of $~~267~~47,~~290~~925. ~~The~~We ~~lender~~are ~~has~~in ~~the~~default ~~option~~pursuant ofto ~~converting~~ the ~~loan~~terms ~~into fully registered common stock at a discount~~ of ~~40% on~~ the ~~day~~Sweeney ofNote ~~conversion,~~and ~~which~~we ishave ~~the~~not ~~prepayment date or the due date, whichever occurs first. Additionally, the lender also~~ received ~~warrants~~a tonotice ~~purchase 1,000,000 shares~~ of ~~the~~default ~~company's~~from ~~fully registered common stock at an exercise price of $0~~Mr.50 ~~per share. If the lender converts~~Sweeney, ~~the~~nor ~~Company~~has ~~will~~Mr. ~~issue~~Sweeney ~~the~~indicated ~~appropriate number of shares and will not be required~~ to ~~use cash to liquidate~~ the ~~debt. Additionally, the~~ Company ~~will receive the cash proceeds in the amount of $500,000 if the lender exercises the $0.50 warrants. On November 10, 2006, the Thompson Note was amended to include a provision stipulating~~ that ~~the~~he ~~holder~~intends ~~may not convert the secured convertible note if such conversion or exercise would cause him~~ to ~~own~~place ~~more than 9.99% of our outstanding common stock. However, this restriction does not prevent~~ the ~~holder~~Company ~~from~~in ~~converting~~default aunder ~~portion of~~ the note ~~and then converting the rest of the note~~. ~~In this way, the holder could sell more than this limit while never holding more than this limit.~~

Our unsecured demand note with Michael Sweeney (the "Sweeney Note"), in the principal amount of $150,000, matured on August 1, 2006 and remains outstanding. In addition to the outstanding principal, we also owe accrued interest in the amount of $43,325. We are in default pursuant to the terms of the Sweeney Note and we have not received a notice of default from Mr. Sweeney, nor has Mr. Sweeney indicated to the Company that he intends to place the Company in default under the note.2

Our unsecured demand note with Micro Health Systems (the "MHS Note"), dated December 21, 2005 in the principal amount of $200,000, with interest at 8% per annum, has two maturity dates: at the 180th day and the 365th day following issuance. A payment of $100,000.00 is due at each maturity date. We did not make the first or second payment. There is an acceleration provision in the MHS Note stipulating that the entire $200,000.00 was due upon non-payment of the first $100,000. The interest rate then goes to the highest rate allowed by Florida law. We received a notice of default from MHS on November 28, 2006 ~~but~~and noon ~~further~~September ~~action~~20, ~~has~~2010 ~~been~~MHS ~~taken~~filed a summons and complaint with the Circuit Court in Broward County, Florida demanding full payment of principal and accrued interest. The MHS Note is secured by a pledge of ~~1.5~~150,000 ~~million~~ shares of the Company's treasury stock.

To obtain funding for our ongoing operations, we entered into a Securities Purchase Agreement with four accredited investors - AJW Partners, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd. and New Millennium Partners II, LLC on October 31, 2005 for the sale of (i) $3,000,000 in secured convertible notes and (ii) warrants to buy 5,000,000 shares of our common stock. The gross financing proceeds were paid to the Company in three separate tranches of $1,000,000 each. The first tranche of the financing, in the amount of $1,000,000, was received by the Company upon closing. The second tranche was received on January 20, 2006. The third tranche of $50,000 was received in August 2006. The secured convertible notes issued pursuant to our October 2005 through June 2008 Securities Purchase Agreements bear interest originally at 8% but increasing to 13% effective September 8, 2009, mature three years from the date of issuance, and are convertible into our common stock, at the selling stockholders' option, at the lower of (i) $0.12 or (ii) generally a 75% discount to the average of the three lowest intraday trading prices for the common stock on a principal market for the 20 trading days before but not including the conversion date. As of November 10, 2010, the average of the three lowest intraday trading prices for our common stock during the preceding 20 trading days as reported on the Over-The-Counter Bulletin Board was $ .0001 and, therefore, the conversion price for the secured convertible notes was $ .000025. Based on this conversion price, the $4,780,557 outstanding principal amount of the secured convertible notes, excluding interest, were convertible into approximately 191,222,280,000 shares of our common stock. The stock purchase warrants have an exercise price of $0.0001 and $0.50 per share. If the lender converts, the Company will issue the appropriate number of shares and will not be required to use cash to liquidate the debt. Additionally, the Company will receive cash proceeds in the amount of $3,055,000 if the lender exercises the warrants. If the lender converts, the Company will issue the appropriate number of shares and will not be required to use the cash to liquidate the debt.

To obtain funding for our ongoing operations, we entered into a Securities Purchase Agreement with four accredited investors - AJW Partners, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd. and New Millennium Partners II, LLC on October 31, 2005 for the sale of (i) $3,000,000 in secured convertible notes and (ii) warrants to buy 5,000,000 shares of our common stock. The gross financing proceeds were paid to the Company in three separate tranches of $1,000,000 each. The first tranche of the financing, in the amount of $1,000,000, was received by the Company upon closing. The second tranche was received on January 20, 2006. The third tranche of $50,000 was received in August 2006. The secured convertible notes issued pursuant to our October 2005 through June 2008 Securities Purchase Agreements bear interest originally at 8% but increasing to 13% effective September 8, 2009, mature three years from the date of issuance, and are convertible into our common stock, at the selling stockholders' option, at the lower of (i) $0.12 or (ii) generally a 75% discount to the average of the three lowest intraday trading prices for the common stock on a principal market for the 20 trading days before but not including the conversion date. As of May 20, 2010, the average of the three lowest intraday trading prices for our common stock during the preceding 20 trading days as reported on the Over-The-Counter Bulletin Board was $ .0006 and, therefore, the conversion price for the secured convertible notes was $ .00015. Based on this conversion price, the $4,841,799 outstanding principal amount of the secured convertible notes, excluding interest, were convertible into approximately 32,278,660,000 shares of our common stock. The stock purchase warrants have an exercise price of $0.0001 and $0.50 per share. If the lender converts, the Company will issue the appropriate number of shares and will not be required to use cash to liquidate the debt. Additionally, the Company will receive cash proceeds in the amount of $3,055,000 if the lender exercises the warrants. If the lender converts, the Company will issue the appropriate number of shares and will not be required to use the cash to liquidate the debt.

To obtain additional funding for our ongoing operations, we entered into a loan agreement with JMJ Financial a loan in the principal sum of $ 575,000, of which $ 75,000 is a loan acquisition cost. The note provides for a one time 12% interest charge on the principal sum. The convertible note is convertible into our common stock, at the selling stockholders' option, at 70% of the average of the three lowest intraday trading prices for the common stock on a principal market for the 20 trading days before but not including the conversion date. As of July 31, 2009 the principal balance of the loan is $ 750,000.

On May 15, 2009, the Company entered into a Securities Purchase Agreement with AJW Partners, LLC ("Partners"), AJW Partners II, LLC ("Partners II "), AJW Master Fund, Ltd. ("Master"), AJW Master Fund II, Ltd. ("Master II") and New Millennium Capital Partners, II, LLC ("Millennium" and collectively with Partners, Partners II, Master and Maser II, the “Purchasers”) for the sale of 13% secured convertible notes in an aggregate principal amount of up to $79,500 (the "Notes"). The Purchasers closed on $22,000 in Notes on May 18, 2009.

The Notes bear interest at the rate of 13% per annum. Interest is payable monthly, unless the Company's common stock is greater than $0.045 per share for each trading day of a month, in which event no interest is payable during such month. Any interest not paid when due shall bear interest of 15% per annum from the date due until the same is paid. The Notes mature three years from the date of issuance, and are convertible into common stock, at the Purchasers' option, at the lesser of (i) $0.12 or (ii) a 75% discount to the average of the three lowest trading prices of the common stock during the 20 trading day period prior to conversion. The Notes contain a call option whereby, if the Company's stock price is below $0.045, the Company may prepay the outstanding principal amount of the Notes, subject to the conditions set forth in the call option. The Notes also contain a partial call option whereby, if the Company's stock price is below $0.045, the Company may prepay a portion of the outstanding principal amount of the Note, subject to the conditions set forth in the partial call option.

The full principal amount of the Notes are due upon a default under the terms of the secured convertible notes. In addition, the Company granted the Purchasers a security interest in substantially all of the Company's assets and intellectual property. The Company is required to file a registration statement with the Securities and Exchange Commission upon demand, which will include the common stock underlying the Notes.

The conversion price of the Notes may be adjusted in certain circumstances such as if the Company pays a stock dividend, subdivides or combines outstanding shares of common stock into a greater or lesser number of shares, or takes such other action as would otherwise result in dilution of the selling stockholder's position.

The Purchasers have agreed to restrict their ability to convert their Notes and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock.

JMJ Financing

On May 22, 2009, the Company issued a Convertible Promissory Note to JMJ Financial (“JMJ”) in aggregate principal amounts of $575,000 (the “Initial JMJ Note”). In consideration for Wellstar’s issuing of the Initial JMJ Note, JMJ issued Wellstar a Secured and Collateralized Promissory Note in the principle amount of $500,000 (the “Initial Wellstar Note”).

In addition, on August 19, 2009 Wellstar issued a Convertible Promissory Note to JMJ in aggregate principal amounts of $1,150,000 (the “Second JMJ Note” and together with the Initial JMJ Note, the “JMJ Notes”). In consideration for Wellstar’s issuing of the Second JMJ Note, JMJ issued Wellstar a Secured and Collateralized Promissory Note in the principle ~~amouns~~amounts of $1,000,000 (the “Second Wellstar Note” and together with the Initial Wellstar Note, the “Wellstar Notes”).

~~The JMJ Notes bear interest at 12%~~Also, ~~mature~~on ~~three~~August ~~years from the date of issuance~~19, ~~and~~2009 ~~are~~Wellstar ~~convertible~~issued ~~into~~a ~~our~~Convertible ~~common~~Promissory ~~stock,~~Note atto JMJ’s ~~option,~~in ataggregate aprincipal ~~conversion~~amounts ~~price, equal to 70%~~ of ~~the~~$1,725,000 ~~lowest trade for our common stock during~~ (the 20“Third ~~trading~~JMJ ~~days~~Note” ~~prior~~and totogether ~~the~~with ~~conversion. Prior to~~ the ~~conversion~~Initial ~~of the~~ JMJ Notes, ~~JMJ must make a payment to Wellstar reducing~~ the ~~amount~~“JMJ ~~owed to Wellstar under the Wellstar~~ Notes”). AsIn ofconsideration ~~May 20, 2010, the lowest trade~~ for ~~our~~Wellstar’s ~~common~~issuing ~~stock~~of ~~during~~ the 20Second ~~trading~~JMJ ~~days as reported on the Over-The-Counter Bulletin Board was $.0006 and~~Note, ~~therefore, the conversion price for the~~ JMJ ~~Notes~~issued ~~was~~Wellstar a ~~$.00047.~~Secured ~~Based~~and onCollateralized ~~this~~Promissory ~~conversion~~Note ~~price, the JMJ Notes~~ in the ~~aggregate~~principle ~~amount~~amounts of $1,~~3321~~500,~~789,~~000 ~~excluding~~(the ~~interest,~~“Third ~~are~~Wellstar ~~convertible~~Note” ~~into~~and ~~2,833,593,617~~together ~~shares~~with ofthe ~~our~~Initial ~~common~~Wellstar ~~stock~~Note, the “Wellstar Notes”).

6The JMJ Notes bear interest at 12%, mature three years from the date of issuance, and are convertible into our common stock, at JMJ’s option, at a conversion price, equal to 35% of the lowest trade for our common stock during the 20 trading days prior to the conversion. Prior to the conversion of the JMJ Notes, JMJ must make a payment to Wellstar reducing the amount owed to Wellstar under the Wellstar Notes. As of November 10, 2010, the lowest trade for our common stock during the 20 trading days as reported on the Over-The-Counter Bulletin Board was $.0001 and, therefore, the conversion price for the JMJ Notes was $.000035. Based on this conversion price, the JMJ Notes in the aggregate amount of $2,127,054, excluding interest, are convertible into 60,772,971,429 shares of our common stock.

JMJ has agreed to restrict their ability to convert the JMJ Notes and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock.

The Wellstar Notes bear interest at the rate of 13.8% per annum and mature three years from the date of issuance. No interest or principal payments are required until the maturity date, but both principal and interest may be prepaid prior to Maturity Date. The Wellstar Notes are secured by units of STIC AIM Liquidity Portfolio Select Investment Select Investment Fund (the “JMJ Collateral”). On each of the Wellstar Notes, JMJ has agreed to pay down the principal of the Wellstar Notes commencing 210 days after the original issuance of the Wellstar Notes, however, JMJ may adjust the payment schedule within its sole discretion. In the event that JMJ defaults on the Wellstar Notes, Wellstar may take possession of the JMJ Collateral.

We presently do not have any additional available credit, bank financing or other external sources of liquidity. Due to our brief operating history as a start up company, our operations have not been a source of liquidity. We will need to obtain additional capital in order to maintain and expand our operations. We are currently investigating other financial alternatives, including additional equity and/or debt financing. In order to obtain capital, we may need to sell additional shares of our common stock or borrow funds from private lenders. However, there can be no assurance that that any additional financing will become available to us, and if available, on terms acceptable to us.4

We presently do not have any additional available credit, bank financing or other external sources of liquidity. Due to our brief operating history as a start-up company, our operations have not been a source of liquidity. We will need to obtain additional capital in order to maintain and expand our operations. We are currently investigating other financial alternatives, including additional equity and/or debt financing. In order to obtain capital, we may need to sell additional shares of our common stock or borrow funds from private lenders. However, there can be no assurance that that any additional financing will become available to us, and if available, on terms acceptable to us.

Sources and Uses of Cash

	Nine Months Ended April 30,
	Nine Months Ended November 30,
(In thousands)	2010			2009
Cash flow data:
Net cash (used in) operating activities		(~~885~~288	)		(~~469~~262	)
Net cash (used in) investing activities		(250	)		(022	)
Net cash provided (used) by financing activities		~~1056~~439			~~444~~260
Net increase (decrease) in cash and cash equivalents		~~146~~151			(2624	)
Cash and cash equivalents, beginning of period		300			2630
Cash and cash equivalents, end of period		~~176~~151			06

Operating Activities

Net cash used in operating activities for the ~~nine~~three months ended ~~April~~October 3031, 2010 was $~~884~~288,~~716~~183, an increase of $~~415~~26,~~957~~612 from the same period in 2009 reflecting the change in operating expenses.

Investing Activities

Cash used in investing activities for the ~~nine~~three months ended ~~April~~October 3031, 2010 was ~~$24~~zero,~~804,~~ ana ~~increase~~decrease of $2422,~~460~~475 from the same period in 2009 representing ana ~~increase~~decrease in the purchase of ~~office~~ equipment.

Financing Activities

Net cash provided by financing activities for the ~~nine~~three months ended ~~April~~October 3031, 2010 was $1438,~~056,000~~864 as compared with $~~443~~260,~~612~~000 for the same period last year. The increase is attributed to the proceeds from the issuance of convertible notes.

As of ~~April~~October 3031, 2010 the Company had cash and cash equivalents in the amount of $~~176~~150,~~044~~681 as compared with $695,518 at ~~April~~October 3031, 2009.

Critical Accounting Policies

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires that management make a number of assumptions and estimates that affect the reported amounts of assets, liabilities, revenues and expenses in our consolidated financial statements and accompanying notes. Management bases its estimates on historical information and assumptions believed to be reasonable. Although these estimates are based on management's best knowledge of current events and circumstances that may impact the Company in the future, actual results may differ from these estimates.

Our critical accounting policies are those that affect our financial statements materially and involve a significant level of judgment by management.

The Company has adopted the policy of capitalizing the cost of its imaging equipment and depreciating the cost against earnings over the straight line method using an estimated useful life of five years. Because the useful life of any new technology is difficult to estimate due to factors such as competition, obsolescence, government regulations, etc., this accounting estimate is reasonably likely to change from period to period with a material impact on our financial statements. The significance of the accounting estimate to the Company's financial statements is that the equipment on the balance sheet is stated at cost less accumulated amortization and the corresponding depreciation is an expense on the statement of operations. The estimate as to the useful life of these assets will directly affect the carrying amount on the balance sheet and the expense for depreciation recorded in the statement of operations. Accordingly, shareholders' equity and earnings will be materially affected.

Revenue Recognition

Revenue will be recognized as earned per the licensing agreements which provide for a fixed fee for each thermal imaging camera we install. The revenue is recognized in the month that the camera is in use at the customer's facility.

Derivative Instruments

In connection with the sale of debt or equity instruments, we may sell options or warrants to purchase our common stock. In certain circumstances, these options or warrants may be classified as derivative liabilities, rather than as equity. Additionally, the debt or equity instruments may contain embedded derivative instruments, such as conversion options, which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative instrument liability.

The identification of, and accounting for, derivative instruments is complex. Our derivative instrument liabilities are re-valued at the end of each reporting period, with changes in the fair value of the derivative liability recorded as charges or credits to income, in the period in which the changes occur. For options, warrants and bifurcated conversion options that are accounted for as derivative instrument liabilities, we determine the fair value of these instruments using the Black-Scholes option pricing model. That model requires assumptions related to the remaining term of the instruments and risk-free rates of return, our current common stock price and expected dividend yield, and the expected volatility of our common stock price over the life of the option. Because of the limited trading history for our common stock, we have estimated the future volatility of our common stock price based on not only the history of our stock price but also the experience of other entities considered comparable to us. The identification of, and accounting for, derivative instruments and the assumptions used to value them can significantly affect our financial statements.

Registration Rights Agreements

In connection with the sale of debt or equity instruments, we may enter into registration rights agreements. Generally, these registration rights agreements require us to file registration statements with the Securities and Exchange Commission to register common shares that may be issued on conversion of debt or preferred stock, to permit re-sale of common shares previously sold under an exemption from registration or to register common shares that may be issued on exercise of outstanding options or warrants.

The registration rights agreements usually require us to pay penalties for any time delay in filing the required registration statements, or in the registration statements becoming effective, beyond dates specified in the registration rights agreement. These penalties are usually expressed as a fixed percentage, per month, of the original amount we received on issuance of the debt or preferred stock, common shares, options or warrants. We account for these penalties as a contingent liability and not as a derivative instrument. Accordingly, we recognize the penalties when it becomes probable that they will be incurred. Any penalties are expensed over the period to which they relate.

Recent Accounting Pronouncements

~~Emerging~~In ~~Issues~~June ~~Task~~2009, ~~Force~~the ~~Pronouncement~~FASB ~~00-27,~~issued ~~relating~~an amendment to ~~certain~~the ~~convertible~~accounting ~~instruments~~and disclosure requirements for transfers of financial assets, ~~requires~~which is effective January 1, 2010. The amendment eliminates the ~~discounting~~concept of ~~certain~~a ~~debt~~qualifying ~~instruments~~special-purpose ~~when~~entity, changes the ~~conversion~~requirements ~~feature~~for ~~meets~~derecognizing ~~certain~~financial ~~criteria.~~assets ~~FASB~~and ~~123R~~requires enhanced disclosures to provide financial statement users with greater transparency about transfers of financial assets, ~~Stock~~including ~~Options~~securitization Totransactions, ~~Employees~~and ~~And~~an ~~Consultants.~~entity’s ~~This~~continuing ~~pronouncement~~involvement ~~relates~~in and exposure to ~~employees~~the risks related to transferred financial assets. The effect of adoption on the Company’s financial position and ~~consultants~~results ~~who~~of ~~receive~~operations ~~stock~~is ~~based~~not ~~pay~~expected to be material.

~~The~~Also ~~Company~~in ~~will~~June ~~account~~2009, ~~for~~ the ~~fair~~FASB ~~value~~amended ofthe ~~employee~~existing ~~and~~accounting ~~non-employee options~~ and ~~warrants~~disclosure inguidance ~~accordance~~for ~~with~~the ~~SFAS~~consolidation ~~No.~~of ~~123R,~~variable ~~"Share-Based~~interest ~~Payment"~~entities, which is effective ~~for~~January ~~options and warrants during the annual reporting period beginning after December 15~~1, ~~2005~~2010. The ~~compensation~~amended ~~cost~~guidance ~~will~~requires beenhanced ~~measured~~disclosures ~~after~~intended ~~the~~to ~~grant~~provide ~~date~~users ~~based on the value~~ of ~~the~~financial ~~reward~~statements ~~and~~with ismore ~~recognized~~transparent ~~over~~information ~~the~~about ~~service~~an ~~period. The~~enterprise’s ~~fair~~involvement ~~value~~in ofa ~~each~~variable ~~option~~interest ~~grant is estimated on the date of the grant using the Black-Scholes stock option pricing model~~entity. The ~~Company~~effect ~~has not yet adopted a stock option plan but is evaluating the affect~~ of aadoption ~~stock option plan~~ on ~~its~~the Company’s financial position and results of operations inis ~~future~~not ~~periods~~expected to be material.

In ~~September,~~October ~~2006~~2009, the ~~Financial~~FASB ~~Accounting~~issued ~~Standards~~new ~~Board~~guidance ~~(FASB)~~for ~~issued~~revenue ~~SFAS~~recognition ~~No.~~with ~~157~~multiple deliverables, ~~“Fair~~which ~~Value~~is ~~Measurements”.~~effective ~~SFAS~~for ~~No.~~revenue ~~157~~arrangements ~~provides~~entered ainto ~~new~~or ~~single~~materially ~~authoritative~~modified ~~definition~~in offiscal ~~fair~~years ~~value~~beginning ~~and~~on ~~enhanced~~or ~~guidance~~after inJune ~~measuring~~15, ~~the~~2010, ~~fair~~although ~~value~~early ofadoption ~~assets~~is ~~and liabilities~~permitted. ItThis ~~requires~~guidance ~~additional~~eliminates ~~disclosures related to~~ the ~~extent~~residual tomethod ~~which~~under ~~companies~~the ~~measure~~current ~~assets~~guidance and ~~liabilities~~replaces atit ~~fair~~with ~~value,~~ the ~~information~~“relative ~~used~~selling toprice” ~~measure~~method ~~fair~~when ~~value,~~allocating ~~and~~revenue ~~the~~in ~~effect~~a ofmultiple ~~fair~~deliverable ~~value~~arrangement. The ~~measurement~~selling onprice ~~earnings.~~for ~~SFAS~~each ~~No.~~deliverable ~~157~~shall isbe ~~effective~~determined ~~for~~using ~~fiscal~~vendor ~~years~~specific ~~beginning~~objective ~~after~~evidence ~~November~~of 15selling price, ~~2007~~if it exists, ~~and~~otherwise ~~interim~~third-party ~~periods~~evidence ~~within~~of ~~those~~selling ~~fiscal~~price ~~years~~shall be used. OnIf ~~August~~neither 1,exists ~~2008~~for a deliverable, the ~~company~~vendor ~~adopted~~shall ~~SFAS~~use ~~157~~its best estimate of the selling price for that deliverable. After adoption, ~~which~~this ~~did~~guidance ~~not~~will ~~have~~also arequire ~~material~~expanded qualitative and quantitative disclosures. The Company is currently assessing any future impact of adoption on its financial ~~statements~~position and results of operations.

OnIn ~~December~~January 212010, ~~2006,~~ the ~~Financial~~FASB ~~Accounting~~amended ~~Standards~~the ~~Board~~existing ~~(FASB)~~disclosure ~~posted~~guidance ~~FASB~~on ~~Staff~~fair ~~Position~~value ~~(FSP) FSPEITF00-19-2~~measurements, ~~Accounting~~which ~~For~~is ~~Registration~~effective ~~Payment~~January ~~Arrangements. The~~1, ~~FSP~~2010, ~~specifies~~except ~~that~~for ~~the~~disclosures ~~contingent~~about ~~obligation~~purchases, tosales, ~~make future payments or otherwise transfer consideration under a registration payment arrangement~~issuances, ~~whether~~and ~~issued~~settlements asin athe ~~separate~~roll ~~agreement~~forward ~~or included as a provision~~ of aactivity ~~financial~~in ~~instrument~~Level or3 ~~other~~fair ~~agreement~~value measurements, ~~should~~which beis ~~separately~~effective ~~recognized~~January ~~and measured in accordance with FASB Statement No. 5~~1, ~~Accounting For Contingencies~~2011. ~~This~~Among ~~FSP~~other ~~further~~things, ~~clarifies that~~ the ~~financial~~updated ~~instrument~~guidance ~~subject~~requires toadditional adisclosure ~~registration payment arrangement should be accounted~~ for ~~in accordance with other applicable generally accepted accounting principles (GAAP) without regard to~~ the ~~contingent~~amounts ~~obligation~~of tosignificant ~~transfer~~transfers ~~consideration~~in ~~pursuant~~and toout ~~the~~of ~~registration~~Level ~~payment~~1 ~~arrangement. We~~and ~~have~~Level ~~accounted~~2 ~~for~~measurements ~~registration payments as required under its securities purchase agreement~~ and ~~will~~require ~~follow~~certain ~~this~~Level ~~pronouncement~~3 ~~effect~~disclosures ~~from~~on ~~date~~a ofgross ~~issue~~basis.

107

~~In February 2007~~Additionally, the ~~FASB~~updates ~~issued~~amend ~~SFAS No. 159, “The Fair Value Option For Financial Assets And Financial Liabilities” (SFAS 159). SFAS 159 expands the use of fair value accounting, but does not affect the~~ existing ~~standards~~guidance ~~that~~to require ~~assets or liabilities to be carried at fair value. Under SFAS 159,~~ a ~~company~~greater ~~may~~level ~~elect to use fair value to measure accounts and loans receivable, available-for-sale and held-to-maturity securities, accounts payable and issued debt. If the use~~ of ~~fair~~disaggregated ~~value~~information ~~is elected, any up-front costs~~ and ~~fees~~more ~~related~~robust todisclosures ~~the~~about ~~item~~valuation ~~must~~techniques ~~be recognized in earnings~~ and ~~can~~inputs ~~not be deferred. The fair value election is irrevocable and generally made on an instrument-by-instrument basis, even if a company has similar instruments that it elects not~~ to ~~measure based on~~ fair value. ~~At the adoption date, unrealized gains and losses on existing items for which fair value has been elected are reported as a cumulative adjustment to beginning retained earnings~~measurements. ~~Subsequent~~Since to the ~~adoption~~amended ofguidance ~~SFAS~~requires ~~159,~~only ~~changes~~additional indisclosures ~~fair~~and ~~value~~the ~~are~~Company ~~recognized~~currently indoes ~~earnings. SFAS~~not ~~159~~have isany ~~effective~~assets ~~for~~requiring ~~fiscal years beginning after November 15~~disclosure, ~~2007. We are currently assessing~~ the ~~impact~~adoption ~~of SFAS 159~~ will ~~have~~not onaffect ~~our~~the Company’s financial position ~~and~~or results of operations.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this Item.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

We maintain "disclosure controls and procedures," as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

As of ~~April~~October 3031, 2010, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in our periodic reports is recorded, processed, summarized and reported, within the time periods specified for each report and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls.

There was no change in our internal controls or in other factors that could affect these controls during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

118

PART II

OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time we may be a defendant and plaintiff in various legal proceedings arising in the normal course of our business. We are currently not a party to any material pending legal proceedings or government actions, including any bankruptcy, receivership, or similar proceedings. In addition, management is not aware of any known litigation or liabilities involving the operators of our properties that could affect our operations. Should any liabilities be incurred in the future, they will be accrued based on management’s best estimate of the potential loss. As such, there is no adverse effect on our consolidated financial position, results of operations or cash flow at this time. Furthermore, Management of the Company does not believe that there are any proceedings to which any director, officer, or affiliate of the Company, any owner of record of the beneficially owned more than five percent of the common stock of the Company, or any associate of any such director, officer, affiliate of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company.

Item 1A. Risk Factors.

As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this Item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On May 5, 2010, the Company entered into a Securities Purchase Agreement with Asher Enterprises, Inc. ("Asher"), for the sale of an 8% convertible note in the principal amount of $50,000 (the "Note"). The financing closed on May 5, 2010.

The Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on February 5, 2011. The Note is convertible into common stock, at Asher’s option, at a 40% discount to the average of the three lowest trading prices of the common stock during the 10 trading day period prior to conversion. The Note contains a prepayment option whereby the Company may make a payment to Asher equal to 150% of all amounts owed under the Note. The Company is required to provide Asher with 30 days notice of such prepayment.

Asher agreed to restrict its ability to convert the Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock.

Item 3. Defaults Upon Senior Securities.

~~None~~The Company presently is in default under its financing agreements with Michael Sweeney and with AJW Partners LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd. and New Millenium Partners, LLC for failure to pay such notes upon maturity.

Item 4.Removed and Reserved

Not Applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

31.1	Certificate of Chief Executive Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, promulgated pursuant to the Section 302 of the Sarbanes Oxley Act of 2002
31.2	Certificate of Chief Financial Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as amended, promulgated pursuant to the Section 302 of the Sarbanes Oxley Act of 2002
32.1	Certificate of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certificate of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

129

SIGNATURES

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

	WELLSTAR INTERNATIONAL, INC.
Date: June 21, 2010	By:	/s/ John Antonio
Date: December 14 , 2010	By:	/s/ John Antonio
		John Antonio
		Chief Executive Officer
Date: June 21, 2010	By:	/s/ Howard Bielski
Date: December 14, 2010	By:	/s/ Howard Bielski
		Howard Bielski
		Chief Financial Officer

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