- Quarterly Report (10-Q)

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 30, 2009

¨	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

(State or other jurisdiction of incorporation or organization)

20-1834908

(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 ¨

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 ¨	Accelerated filer ¨

Non-accelerated filer ¨	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 ¨ No x

The number of shares of the registrant's Common Stock, $0.001 par value per share, outstanding as of May 21, 2009 was 1,689,092,864.

Table of Contents

		Page
Part I –	Financial Information	3
	Item 1. Financial Statements (unaudited)	4
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	5
	Item 3. Quantitative and Qualitative Disclosures about Market Risk	11
	Item 4. Controls and Procedures	11
Part II –	Other Information	12
	Item 1. Legal Proceedings	12
	Item 1A. Risk Factors	12
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	12
	Item 3. Defaults upon Senior Securities	12
	Item 4. Submission of Matters to a Vote of Security Holders	12
	Item 5. Other Information	12
	Item 6. Exhibits	12
Signatures		13
Exhibit Index
Rule 13a-14(a) Certification executed by John Antonio
Rule 13a-14(a) Certification executed by Howard Bielski
Section 1350 Certification

PART I

FINANCIAL INFORMATION

WELLSTAR INTERNATIONAL, INC.

CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2009 AND 2008

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2009 AND 2008

CONTENTS

	PAGE

CONSOLIDATED BALANCE SHEETS	F-1, F-2

CONSOLIDATED STATEMENTS OF OPERATIONS	F-3

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)	F-4

CONSOLIDATED STATEMENT OF CASH FLOWS	F-5, F-6

NOTES TO CONSOLIDATED FINANCIAL STATEMENT	F-7 to F-23

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

ASSETS

	April 30		July 31
	2009		2008
	(Unaudited)		(Audited)
Current Assets:
Cash	$	69	$	25,560
Prepaid Expenses		-		40
Rent Refund Receivable		1,580		1,580
Total Current Assets		1,649		27,180

Fixed Assets:
Imaging Equipment		837,874		837,874
Office Equipment and Fixtures		154,884		154,540
Subtotal		992,758		992,414

Less: Accumulated Depreciation		522,766		374,414
Net Fixed Assets		469,992		618,000

Intangible Assets:
Covenant Not To Compete		20,000		20,000
Manufacturing and Distribution Agreement		700,000		700,000
Subtotal		720,000		720,000

Less: Accumulated Amortization		447,497		352,304
Net Intangible Assets		272,503		367,696

Other Assets:
Loan Acquisition Cost (net of amortization of $248,748 @ 4/30/09 and $216,861 @ 7/31/08)		48,777		80,664
Software and Manuals (net of amortization of $113,237
@ 4/30/09 and $99,425 @ 7/31/08)		22,163		35,975
Security Deposit
Total Other Assets		4,525		4,525
		75,465		121,164
Total Assets
	$	819,609	$	1,134,040

See Accompanying Notes to Consolidated Financial Statements

F-1

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

LIABILITIES LESS SHAREHOLDERS’ DEFICIT

	April 30			July 31
	2009			2008
	(Unaudited)			(Audited)
Current Liabilities:
Accounts Payable	$	613,617		$	699,295
Accrued Expenses		2,842,748			1,915,925
Note & Loan Payable - Other		63,382			13,000
Note and Loan Payable - Officer		49,680			-
Notes Payable		750,000			750,000
Derivative Instrument Liability - Loan		411,741			374,952
Derivative Instrument Liability - Convertible Notes		2,732,281			2,525,027
Convertible Debt		1,679,961			530,452
Total Current Liabilities		9,143,410			6,808,651

Long Term Liabilities:
Convertible Debt		53,887			85,499
Derivative Instrument Liability - Convertible Notes		4,048,699			5,841,505
Derivative Instrument Liability - Warrants		34,687			1,153,454
Total Long-Term Liabilities		4,137,273			7,080,458

Total Liabilities		13,280,683			13,889,109

Stockholders’ Deficit:
Common Stock
Authorized 1,700,000,000 Shares, par value .001 per
Share Issued Shares, 1,689,092,864 - Outstanding
Shares, 1,687,592,864 (4/30/09) and 460,040,217 (7/31/08)		1,687,594			460,041
Paid in Surplus		1,058,823			1,098,260
Retained Earnings (Deficit)		(15,207,491	)		(14,313,370	)
Total Shareholders’ Deficit		(12,461,074	)		(12,755,069	)

Total Liabilities Less Stockholder’s Deficit	$	819,609		$	1,134,040

See Accompanying Notes to Consolidated Financial Statements

F-2

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months April 30,						Nine Months April 30,
	2009			2008			2009			2008
Income :
Revenue from Medical Imaging	$	- 0 -		$	- 0 -		$	- 0 -		$	- 0 -
Cost of Sales		- 0 -			- 0 -			- 0 -			- 0 -
Gross Profit (Loss)		- 0 -			- 0 -			- 0 -			- 0 -

Operating Expenses:
Selling, General and Administrative		451,540			552,815			1,390,579			1,638,296
Depreciation and Amortization		92,230			87,163			289,244			290,039
Total Operating Expenses		543,770			639,978			1,679,823			1,928,335

Loss from Operations		(543,770	)		(639,978	)		(1,679,823	)		(1,928,335	)

Other Expense (Income):
Interest Income		(106	)		(321	)		(168	)		(2,172	)
Interest Expense		127,039			117,721			377,163			344,796
Derivative Instrument, Net		(335,072	)		2,130,894			(1,489,397	)		(202,867	)
Delinquent Stock Registration Penalty		108,900			120,300			326,700			302,700
Total Other Expenses (Income)		(99,239	)		2,368,594			(785,702	)		442,457

Income (Loss) before Provision for Taxes		(444,531	)		(3,008,572	)		(894,121	)		(2,370,792	)
Provision for Taxes		-			-			-			-
Net Income (Loss)	$	(444,531	)	$	(3,008,572	)	$	(894,121	)	$	(2,370,792	)

Net Income (Loss) Per Share, Basic and Diluted	$	- 0 -		$	(.01	)	$	- 0 -		$	(.01	)

Weighted Average Number of Common Shares
Outstanding, Basic and Diluted		1,481,019,930			271,161,961			880,988,840			189,709,238

See Accompanying Notes to Consolidated Financial Statements

F-3

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CHANGES IN

STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE NINE MONTHS ENDED APRIL 30, 2009

	Common Stock
	Shares			Amount			Additional Paid in Capital			Accumulated Deficit			Total
Balance, August 1, 2008		460,040,217		$	460,041		$	1,098,260		$	(14,313,370	)	$	(12,755,069	)

Stock Issued to Consultants and Others for Services and Expenses		230,065,339			230,065			321,307						551,372

Conversion of Debentures		810,400,000			810,400			(517,206	)					293,194

Stock Issued for Cash		203,200,000			203,200			140,350						343,550

Company Stock Donated		(16,112,500	)		(16,112	)		16,112

Net (Loss) for the Period											(894,121	)		(894,121	)

Balance, April 30, 2009		1,687,593,056		$	1,687,594		$	1,058,823		$	(15,207,491	)	$	(12,461,074	)

See Accompanying Notes to Consolidated Financial Statements

F-4

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended April 30,
	2009			2008
Cash Flows from Operating Activities:
Net Loss	$	(894,121	)	$	(2,370,792	)
Adjustments to Reconcile Net Loss to Net Cash used
in Operating Activities:
Depreciation and Amortization		289,244			290,039
Delinquent Registration Penalty		326,700			302,700
Services Paid in Stock		551,372			95,082
Derivative Instrument Expense, Net		(1,489,397	)		(202,867	)
Changes in Operating Assets and Liabilities:
Increase (Decrease) In:
Accounts Receivable		-			50,000
Prepaid Expenses		40			7,470
Accounts Payable		(85,678	)		247,517
Accrued Expenses		833,081			623,044
Net Cash Used in Operating Activities		(468,759	)		(957,807	)

Cash Flows from Investing Activities:
Purchase of Equipment		(344	)		(51,698	)
Net Cash Used in Investing Activities		(344	)		(51,698	)

Cash Flows From Financing Activities:
Payments of Financing Costs		-			(40,000	)
Proceeds from Issuance of Convertible Notes		-			1,005,000
Note and Loans Payable - Other		50,382			14,300
Note Payable - Officer		49,680			-
Issuance of Stock for Cash		343,550			-
Net Cash Provided by Financing Activities		443,612			979,300

Net Decrease in Cash		(25,491	)		(30,205	)

Cash at Beginning of Period		25,560			64,791
Cash at End of Period	$	69		$	34,586

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 MONTHS ENDED APRIL 30, 2009 AND 2008

Supplemental Disclosure of Non-Cash Investing and Financing Activities:

1.	During the nine months ended April 30, 2009, convertible debentures in the amount of $293,194 were converted into 810,400,000 shares of Common Stock.

2.	230,065,339 shares of Common Stock was issued for services rendered in the nine months ended April 30, 2009. The amount was $551,372.

3.	During the nine months ended April 30, 2008, two officer/stockholders donated 16,112,500 shares of the Company stock they owned to the Company. This transaction has no effect on cash.

4.	During the nine months ended April 30, 2008, stock purchase warrants exercisable for 45,000,000 shares of Common Stock were issued in connection with closings on $690,000 of convertible notes had no cash effect.

5.	During the nine months ended April 30, 2008, 40,682,142 shares of Common Stock was issued for services rendered. The amount was $95,082.

6.	During the nine months ended April 30, 2008, convertible debentures in the amount of $228,531 were converted into 238,674,100 shares of Common Stock.

7.	During the nine months ended April 30, 2008, the Company acquired software for cameras in the amount of $300,000, which was not paid for, as such, has no effect on cash in this period.

8.	During the nine months ended April 30, 2009 and 2008, delinquent registration penalties of $326,700 and $302,700, respectively, were recorded, no cash was expended.

See Accompanying Notes to Consolidated Financial Statements

F-6

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENT

AS OF APRIL 30, 2009

(UNAUDITED)

NOTE 1 Summary of Significant Accounting Policies and Organization

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.

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”).

Interim Condensed Consolidated Financial Statements

The consolidated financial statements as of and for the nine months ended April 30, 2009 and 2008 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 months ended April 30, 2009 and 2008 are not necessarily indicative of the results to be expected for the full year. The consolidated balance sheet information as of July 31, 2008 was derived from the audited consolidated financial statements included in the Company’s annual report Form 10-KSB for the year ended July 31, 2008. 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 30, 2009

(UNAUDITED)

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

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 months ended April 30, 2009 and 2008 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 and 3) on the conversion of its convertible notes would have resulted in the issuance of additional common shares in the amount of 169,443,419,444, on April 30, 2009.

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.

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, 2009

(UNAUDITED)

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

Derivative Instruments (cont’d)

Income Taxes

The Company will provide for income taxes based on the provisions of 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.

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 which may be in excess of insured limits. There was no excess above insured limits at April 30, 2009. The Company does not anticipate non-performance by the financial institution.

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 30, 2009

(UNAUDITED)

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

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 months ended April 30, 2009 and 2008 were $148,352 and $126,561, respectfully.

n) Intangible Assets

Loan acquisition costs are stated at cost and relate to the costs of acquiring the convertible notes (see Note 2) 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 months ended April 30, 2009 and 2008 were $31,887 and $34,949, 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 agreement. The total amortization expense for the nine months ended April 30, 2009 and 2008 were $109,005 and $128,529, respectfully.

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 31 st , 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. Current tests of its imaging equipment are currently under way by a major medical facility and management is of the opinion the tests will yield positive results to effect future revenue and cash flow.

F-10

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENT

AS OF APRIL 30, 2009

(UNAUDITED)

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

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.

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.

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.

NOTE 2 Convertible Notes

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% 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

AS OF APRIL 30, 2009

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) a 40% 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 except a discount of 67.50% relates to stock conversions for the convertible debentures dated April 22, 2008, June 12, 2008 and August 29, 2008. The total possible shares available for conversion at April 30, 2009 were 152,287,558,333.

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.

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% 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% 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 STATEMENTS

AS OF APRIL 30, 2009

NOTE 2 Convertible Notes (cont’d)

No interest shall be due or 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 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% 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 or 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% 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% 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.

F-13

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF APRIL 30, 2009

NOTE 2 Convertible Notes (cont’d)

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 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% 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% 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% 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.

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 STATEMENTS

AS OF APRIL 30, 2009

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% secured convertible notes due June 12, 2011.

The funds were advanced on June 12, 2008 in the amount of $105,000, 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% 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% = conversion price. All other terms are identical with the other Note.

See Paragraph 2 of this note related to the terms of conversion. The total shares at April 30, 2009, 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 $1,022,274 was accrued through April 30, 2009.

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 4). The note holder’s have converted notes of $1,001,786 into 1,135,748,200 shares of Common Stock as of April 30, 2009. The balance of the notes are $4,804,872, at April 30, 2009. Interest due of $237,747 is included in Accrued Expenses.

F-15

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF APRIL 30, 2009

NOTE 2 Convertible Notes (cont’d)

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

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 $34,200 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 - Current

150,000

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, 2009, 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 expired on February 28, 2008. As of April 30, 2009, the note has not been paid.

F-16

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF APRIL 30, 2009

NOTE 3 Notes Payable (cont’d)

At April 30, 2009, $217,611 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, 2009, 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, 2009 were 17,155,861,111. 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 4 ).

Balance due at April 30, 2009

400,000

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 is due with accrued interest on or before the 180 th 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 365 th 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

F-17

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF APRIL 30, 2009

NOTE 3 Notes Payable (cont’d)

In addition, 1,500,000 shares of Restricted Common Stock 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 $105,265 is included in Accrued Expenses.

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, 2009 and through June 3, 2009 nothing has transpired.

Balance due at October 31, 2008

200,000

The Company has borrowed $16,912 from an unrelated party. The note is dated January 16, 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 is in default as it failed to pay the principal and interest due upon the maturity date. In the event of default, the lender, by notice given to the borrower, may declare the unpaid principal and accrued interest owing to be paid. The Company (borrower) has not received any demand for payment as of June 3, 2009. The note is included as a current liability in Notes and Loans Payable - Other in the amount of $16,912 and $598 of interest is included in accrued expenses.

On December 3, 2008, the President of the Company issued Promissory Notes to AJW Partners, LLC, and related entities, in the amount of $57,500. $50,000 was loaned to the Company and $7,500 was paid as Loan Acquisition Costs. The Notes bear no interest unless and until an event of default occurs, as specified in the Notes. The Notes are due December 31, 2009. The $50,000 is included as a Current Liability in Note and Loan Payable - Officer.

F-18

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF APRIL 30, 2009

NOTE 4 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, 2009, 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 0.04% to 1.23%, based on constant maturity rates published by the U.S. Federal Reserve, applicable to the remaining life of the options or warrants.

F-19

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF APRIL 30, 2009

NOTE 4 Derivative Financial Instrument Liabilities (cont’d)

At April 30, 2009, the following derivative liabilities related to Common Stock options and warrants and embedded derivative instruments were outstanding (see Notes 2 and 3):

Issue Date	Expiry Date	No. of Warrants		Issued To	Exercise Price Per Share		Value - Issue Date		Value - Apr. 30, 2009

10/11/05	04/11/06		1,000,000	Thompson	$	.50	$	41,526	$	0

11/19/06	02/18/08		200,000	Thompson	$	.10		3,845		0

11/19/06	02/18/08		200,000	Thompson	$	.20		2,276		0

10/31/05	10/31/10		1,666,667	AJW Partners	$	.50		169,629		0

01/20/06	01/20/11		1,666,667	AJW Partners	$	.50		81,321		0

07/25/06	07/25/11		833,333	AJW Partners	$	.50		146,197		1

08/04/06	08/04/11		833,333	AJW Partners	$	.50		102,816		1

11/30/06	11/30/13		4,000,000	AJW Partners	$	.08		158,741		483

03/26/07	03/26/14		1,000,000	AJW Partners	$	.03		25,433		212

05/30/07	05/30/14		10,000,000	AJW Partners	$	.02		163,409		2,560

10/12/07	10/12/14		15,000,000	AJW Partners	$	.0001		179,353		8,546

11/15/07	11/15/10		10,000,000	AJW Partners	$	.0001		39,649		5,704

12/14/07	12/14/10		10,000,000	AJW Partners	$	.0001		24,000		5,710

04/22/08	04/22/15		20,000,000	AJW Partners	$	.0001		17,540		11,470

Fair value of derivative instrument liabilities for warrants							$	1,155,735	$	34,687

F-20

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF APRIL 30, 2009

NOTE 4 Derivative Financial Instrument Liabilities (cont’d)

Issue Date	Due Date	Note Amount		Instrument	Exercise Price Per Share	Value - Issue Date		Value - Apr. 30, 2009

10/11/05	04/11/06	$	400,000	Loan	Various	$	370,189	$	411,741

10/31/05	10/31/08		1,000,000	Convertible
				Notes	Various		2,681,204		0
01/20/06	01/20/09		1,000,000	Convertible
				Notes	Various		1,363,058		1,000,000
07/25/06	07/25/09		500,000	Convertible
				Notes	Various		791,994		525,008
08/04/06	08/04/09		500,000	Convertible
				Notes	Various		616,127		531,730
11/30/06	11/30/09		400,000	Convertible
				Notes	Various		523,047		467,658
03/26/07	03/26/10		165,000	Convertible
				Notes	Various		274,500		207,885
05/30/07	05/30/10		435,000	Convertible
				Notes	Various		825,801		567,343
10/12/07	10/12/10		175,000	Convertible
				Notes	Various		711,289		242,886
11/15/07	11/15/10		325,000	Convertible
				Notes	Various		465,052		455,982
12/14/07	12/14/07		315,000	Convertible
				Notes	Various		631,254		446,577
12/31/07	12/31/10		427,760	Convertible
				Notes	Various		894,835		610,001
04/22/08	04/22/11		190,000	Convertible
				Notes	Various		569,394		579,549
06/12/08	06/12/11		135,000	Convertible
				Notes	Various		555,374		414,987
08/29/08	08/29/11		235,114	Convertible
				Notes	Various		875,919		731,374

Fair value of bifurcated embedded derivative instrument liabilities						$	12,149,037	$	7,192,721
Total derivative financial instruments						$	13,304,772	$	7,227,408

F-21

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF APRIL 30, 2009

NOTE 5 Accrued Expenses

The following are the components of Accrued Expenses:

	April 30, 2009		July 31, 2008

Penalties - Registrations	$	1,022,274	$	695,574
Interest on Debt		647,137		512,488
Payroll and Payroll Taxes		1,165,559		682,133
Professional Fees		4,600		24,530
Accrued Trade Payables		3,178		1,200
	$	2,842,748	$	1,915,925

NOTE 6 Stockholders’ Equity (Deficit)

During the nine months ended April 30, 2009, the Company issued the following shares of restricted common stock for services rendered; for Public Relations/Marketing services 70,900,000 shares, at market value, for computer software design 3,500,000 shares at 70% of market value and for unreimbursed expenses 8,050,000 shares at 70% of market value, for legal fees 5,726,458 and financial consulting 4,000,000 at market value and medical consulting and medical consulting 138,888,889 shares at 60% of market value. The total was recorded as common stock $230,065 and additional paid-in capital of $321,307. The total of $551,372 is reflected as an expense in the Statement of Operations.

NOTE 7 Derivative Instruments Income, Net

Derivative instruments income of $1,489,397 represents the net unrealized (non-cash) change during the nine months ended April 30, 2009, 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 8 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 $(894,121) after derivative instrument income of $1,489,397, and a loss from operations of ($1,679,823) and a negative cash flow from operations of $(468,759) for the nine months ended April 30, 2009, negative working capital of $9,141,761 and a stockholders’ deficiency of $12,461,074 at April 30, 2009.

F-22

WELLSTAR INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF APRIL 30, 2009

NOTE 8 Going Concern (cont’d)

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.

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 9 Lease Agreement

On July 17, 2007, Trillenium Medical Imaging, Inc., a wholly owned subsidiary, entered into a lease agreement with an unrelated party for a facility in New York City. The lease replaced a prior lease in the same facility. The lease is for a period of one year with a monthly rent of $4,435. The lease expires July 16, 2009. The Company incurred a rent expense of approximately $39,915 for the nine months ended April 30, 2009. Future rental payments under the lease for the year ended July 31, 2009 is $13,305.

NOTE 10 Subsequent Events

AJW Partners, LLC and related entities converted a portion of their notes (See Note 2) into 140,814,000 shares of Common Stock during the period May 1, 2009 through June 5, 2009.

F-23

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" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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 S-1 and Form S-1a filed with the Securities and Exchange Commission.

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 through it’s 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 System and bring the System to market. The company will initially focus is efforts on Hospitals and long term care facilities.

Plan of Operation and Financing Needs

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.

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.

Results of Operations

Quarter Ended April 30, 2009 compared to Quarter Ended April 30, 2008 (all references are to the Quarter Ended April 30)

Total Net Sales: Total Net Sales were none in the quarter ended April 30, 2009 and none for the same period in 2008.

Cost of Sales and Gross Profit: Cost of Sales for the quarter ended April 30, 2009 was none and none for the same period in 2008.

Operating, Selling, General and Administrative Expenses: Operating, selling, general and administrative expenses decreased by $96,208, or 15% in the 2009 third quarter to $543,770 from $639,978 in 2008. This decrease reflects increases in stockholder relations expenses by $45,975. In addition, salaries increased by $ 35,529 to $ 225,000 from $ 189,471, professional fees decreased by $ 11,679 from $ 73,562 to $ 61,883 and research and development expense decreased by $ 172,800 from $ 172,800 in 2008 to none for the same period in 2009.

Loss from Operations: Loss from operations for the third quarter of 2009 was $543,770, a decrease of $96,208 or 15% from the loss from operations in 2008 of $639,978 as a result of the aforementioned decrease in operating, sales and administrative expenses.

Other Income and Expense: Total other income of $99,239 in 2009 represented an increase of $2,467,833 from the expense of $2,368,594 in 2008 as a result of higher income from derivative instrument income for the period related to a decrease in derivative instrument liabilities caused by higher stock prices.

Net Income: Net loss of $444,531 for the third quarter of 2009 was $3,453,103 lower than the net loss of $3,008,572 for the same period in 2008 due to other income from derivative instrument income.

Nine Months Ended April 30, 2009 compared to Nine Months Ended April 30, 2008 (all references are to the Nine Months Ended April 30)

Total Net Sales: Total Net Sales were none for the nine months ended April 30, 2009 and none for the same period in 2008.

Cost of Sales and Gross Profit: Cost of Sales for the nine months ended April 30, 2009 was none and none for the same period in 2008.

Operating, Selling, General and Administrative Expenses: Operating, selling, general and administrative expenses decreased by $248,512, or 13% for the nine months ended April 30, 2009 to $1,679,823 from $1,928,335 in 2008. The decrease is primarily due to a decrease in research and development expense of $ 259,200 to none for the nine months ended April 30, 2009 from $ 259,200 in 2008.

Loss from Operations: Loss from operations for the nine months ended April 30, 2009 was $ 1,679,823, a decrease of $248,512 or 13% from the loss from operations in 2008 of $1,928,335 as a result of the aforementioned decrease in sales and administrative expenses.

Other Income and Expense: Total other income of $785,702 for the nine months ended April 30, 2009 represents a decrease of $1,228,159 from the expense of $442,457 in 2008 as a result of a higher income from derivative instrument income for the period due to a decrease in derivative instrument liabilities caused by higher stock prices.

Net Loss: Net loss of $894,121 for the nine months ended April 30, 2009 was $1,476,671 lower than the net loss of $2,370,792 for the same period in 2008 due to the increase in income from derivative instruments.

Liquidity and Capital Resources

As of April 30, 2009, we had a working capital deficit of approximately $9,141,761, and cash of $69. We do not have the funds necessary to maintain our operations for the remainder of our fiscal year, and will need to raise additional funding.

The liquidity impact of our outstanding debt is as follows:

Our secured convertible note with Andrew W. Thompson (the "Thompson Note"), in the principal amount of $400,000, matured on April 11, 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%. If these rates remain at these levels, the accrued interest at maturity will exceed $108,365. The lender has the option of converting the loan into fully registered common stock at a discount of 40% on the day of conversion, which is the prepayment date or the due date, whichever occurs first. Additionally, the lender also received warrants to purchase 1,000,000 shares of the company's fully registered common stock at an exercise price of $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 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 holder may not convert the secured convertible note if such conversion or exercise would cause him to own more than 9.99% of our outstanding common stock. However, this restriction does not prevent the holder from converting a 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 $18,250. 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.

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 no further action has been taken. The MHS Note is secured by a pledge of 1.5 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 was received as follows:

$500,000 in July 2006 and $500,000 in August 2006.

The secured convertible notes issued pursuant to our October 2005 through June 2008 Securities Purchase Agreements bear interest at 8%, 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 40% 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 28, 2008, 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 $ .0012 and, therefore, the conversion price for the secured convertible notes was $ .0007. Based on this conversion price, the $5,064,048 outstanding principal amount of the secured convertible notes, excluding interest, were convertible into approximately 7,234,354,285 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.

The registration statement we filed to register the shares underlying the convertible notes and warrants was declared effective by the Securities & Exchange Commission on August 4, 2006 (File No. 333-130295).

Sources and Uses of Cash

	Nine Months Ended April 30,
(In thousands)	2009			2008
Cash flow data:
Net cash provided by (used in) operating activities		(469	)		(958	)
Net cash (used in) investing activities		(0	)		(52	)
Net cash provided (used) by financing activities		444			979
Net increase (decrease) in cash and cash equivalents		(25	)		(30	)
Cash and cash equivalents, beginning of period		25			65
Cash and cash equivalents, end of period		0			35

Operating Activities

Net cash used in operating activities for the Nine Months ended April 30, 2009 was $468,759, a decrease of $489,048 from the same period in 2008 reflecting the decrease in operating expenses.

Investing Activities

Cash used in investing activities for the Nine Months ended April 30, 2009 was $344, down $51,354 from the same period in 2008 represented principally in a decrease in the purchase of imaging equipment.

Financing Activities

Net cash provided by financing activities for the Nine Months ended April 30, 2009 was $443,612 as compared with $979,300 for the same period last year. The decrease is attributed to a decrease in the prodeeds from the issuance of convertible notes.

As of April 30, 2009 the Company had cash and cash equivalents in the amount of $69 as compared with $34,586 at April 30, 2008.

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 Issues Task Force Pronouncement 00-27, relating to certain convertible instruments, requires the discounting of certain debt instruments when the conversion feature meets certain criteria. FASB 123R, Stock Options To Employees And Consultants. This pronouncement relates to employees and consultants who receive stock based pay.

The Company will account for the fair value of employee and non-employee options and warrants in accordance with SFAS No. 123R, "Share-Based Payment", which is effective for options and warrants during the annual reporting period beginning after December 15, 2005. The compensation cost will be measured after the grant date based on the value of the reward and is recognized over the service period. The fair value of each option grant is estimated on the date of the grant using the Black-Scholes stock option pricing model. The Company has not yet adopted a stock option plan but is evaluating the affect of a stock option plan on its financial position and results of operations in future periods.

In September, 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, “Fair Value Measurements”. SFAS No. 157 provides a new single authoritative definition of fair value and enhanced guidance in measuring the fair value of assets and liabilities. It requires additional disclosures related to the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value , and the effect of fair value measurement on earnings. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We have adopted SFAS No. 157 effective August 2008 and this does not have any material effect on our financial statements.

On December 21, 2006, the Financial Accounting Standards Board (FASB) posted FASB Staff Position (FSP) FSPEITF00-19-2, Accounting For Registration Payment Arrangements. The FSP specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement, should be separately recognized and measured in accordance with FASB Statement No. 5, Accounting For Contingencies. This FSP further clarifies that the financial instrument subject to a registration payment arrangement should be accounted for in accordance with other applicable generally accepted accounting principles (GAAP) without regard to the contingent obligation to transfer consideration pursuant to the registration payment arrangement. We have accounted for registration payments as required under its securities purchase agreement and will follow this pronouncement effect from date of issue.

In February 2007, the FASB issued 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 that require assets or liabilities to be carried at fair value. Under SFAS 159, a company may 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 value is elected, any up-front costs and fees related to the item must be recognized in earnings and can 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. Subsequent to the adoption of SFAS 159, changes in fair value are recognized in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We have adopted SFAS No. 159 effective August 2008 and this does not have any material effect on our financial statements.

Off-Balance Sheet Arrangements

We have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivative instruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest in an unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.

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 30, 2009, 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.

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.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

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

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 12, 2009	By:	/s/ John Antonio
		John Antonio
		Chief Executive Officer


Date: June 12, 2009	By:	/s/ Howard Bielski
		Howard Bielski
		Chief Financial Officer