UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-KSB




[X]
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF


1934




For the
fiscal year ended: July 31, 2008




[_]
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT


OF
1934




For the
transition period from _____ to ______




Commission File Number
333-130295




WELLSTAR
INTERNATIONAL, INC.


(Name
of small business issuer in its charter)








Nevada
            20-1834908(State
      of incorporation)
            (IRS
      Employer Identification No.)




6911
      Pilliod Road
            43528Holland,
      Ohio
            (Zip
      Code)(Address
      of principal executive offices)




Issuer's
telephone number: (419) 865-0069




Copies
to:


Darrin
Ocasio


Sichenzia
Ross Friedman Ference LLP


61
Broadway, 32nd
Fl.


New
York, NY 10006






Securities
registered under Section 12(b) of the Exchange Act: NONE




Securities
registered under Section 12(g) of the Exchange Act: NONE




Check
whether the issuer (1) has filed all reports required to be filed
by




Section
13 or 15(d) of the Exchange Act during the past 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 shell company (as defined in Rule
12b-2 of the Exchange Act). Yes [_] No [X]




Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X] -




State the
issuer's revenues for the most recent fiscal year: $0.




The
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the average bid and asked price of such common equity, as of October
27, 2008 was approximately $3,059,640.




State the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date:509,940,017shares of common stock, $.001 par
value per share, as of October 27, 2008.




Transitional
Small Business Disclosure Format (check one): Yes [_] No [X]




1




TABLE
OF CONTENTS




PART
      I
              PageItem
      1.              DESCRIPTION
      OF BUSINESS
              4Item
      2.            
       DESCRIPTION OF PROPERTY
              11Item
      3.              LEGAL
      PROCEEDINGS
              11Item
      4.              SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
              11PART
      IIItem
      5.              MARKET
      FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
              12Item
      6.            
       MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION
              13Item
      7.            
       FINANCIAL STATEMENTS
              24Item
      8.            
       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
      FINANCIAL DISCLOSURE
              25Item
      8A.          CONTROLS AND
      PROCEDURES
              25PART
      IIIItem
      9.            
       DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
      COMPLIANCE WITH SECTION 16(b) OF THE EXCHANGE ACT
              25Item
      10.            EXECUTIVE
      COMPENSATION
              27Item
      11.          
       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
      MANAGEMENT
              28Item
      12.            CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS
              29Item
      13.         
        EXHIBITS AND REPORTS ON FORM 8-K
              29Item
      14.            PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
              31SIGNATURES
              32




2






PART
I




Item
1.




DESCRIPTION
OF BUSINESS




Corporate
History




Wellstar
International, Inc. ("Wellstar" or the "Company") was formed in the State of
Nevada on December 5, 1997. Wellstar was a development stage company with no
operating activities. On July 12, 2005, Wellstar entered into a share exchange
agreement with Trillennium Medical Imaging, Inc. ("Trillennium" or "TMI"), a
development stage company formed in June of 2005. As a result of the share
exchange agreement, Trillennium became a subsidiary of Wellstar.




Wellstar
International, Inc., through its Trillennium subsidiary, is dedicated to
developing and licensing the use of advanced thermal imaging technology in the
consumer health care and veterinary markets throughout the United
States.




Introduction




Trillennium
Medical Imaging, Inc. (TMI) is dedicated to placing cameras for a monthly charge
in hospitals, clinical and care facilities throughout the United States. The
company’s current competitive advantage is derived from the state of the art
technology of the camera and software it is utilizing, combined with an intimate
knowledge and relationships in the markets. It plans to grow in these markets by
expanding its imaging capabilities by the constant acquisitions of new imaging
technologies. In addition to the Human Imaging, TMI is positioned and ready to
penetrate the equine market with the support of the leading experts in the
thoroughbred industry.






The TMI
Infrared 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), detection of
pressure ulcers, deep tissue injuries, and bed sores, as well as orthopedic
applications.  This screening modality provides a differential
diagnosis to justify additional screening procedures to ensure successful
patient outcome assessment. Thermal Imaging is a low cost, non-contact,
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.




The TMI
Infrared Technology fills a need that currently exists in diagnostic medicine
today. Thermal imaging provides information that is specific to the
physiological and functional activity in the body. This information becomes
invaluable in that conventional diagnostic screening utilizes tests such as
X-Ray, MRI and CT Scans. All aspects of these tests are concerned with the
anatomical and structural problems of the body. Many problems arise from not
combining both diagnostic modalities of structure and physiology, in that people
are missed diagnosed and considered healthy and well when the physiological
information provides an earlier outcome or risk assessment of future health
predictors than the structural modalities.




3




Major
markets such as University Research Centers, hospitals, multidisciplinary
physician practices, pain centers, long term care facilities, home health care,
and rehabilitation centers support the need for this type of screening
modality.




In
summary, Trillennium Medical Imaging has created an innovative new business
model that gives it early market advantage.




History
and Future of Medical Infrared Applications




The
detection and estimation or measurement of heat released by the body has been a
cornerstone of medicine since its beginning.  The earliest physicians
knew the presence of excessive heat signaled illness.  For centuries
the measurement of heat, either present in or being released by the body,
required contact.  Temperature was physically felt and much later was
measured with various devices such as the thermometer.




In the
1800’s Herschel demonstrated the presence of heat energy as an invisible wave,
much like light.  Heat could be reflected and refracted under the
right conditions.  Understanding of this heat energy wave would
require years of investigation. Much later, as all with all scientific advances,
these studies would provide more finite measurements of heat
energy.




In the
1940’s, the electronic detector of infrared energy was developed for use in
military applications.  Night vision scopes were the first
applications.  The science of infrared detection owes its current
development and sophistication to demands from military and industrial
applications.




Medical
use of infrared detection lagged behind military application due to government
classification of the infrared detectors and technologies.  Only when
scientific advances are released from such government restrictions are they open
to general use and applications.  Once available, the
scientific/medical application of the heat detector was made simultaneously by
the British, the Canadians and Americans. These scientists and physicians used
thermal imaging as a measurement of human physiology; the most common
applications being the evaluation of cancerous tumors. The level of heat emitted
was correlated to the presence and type of disease, as well as a prognostic
indicator.  Many tumors were hot, and the hotter the tumor the worse
the outcome.




These
first infrared applications were both costly and cumbersome, therefore the
infrared detection units were found mostly in research.  Like all
early electronics the infrared detection systems were physically large, costly
to produce and challenging to operate. These restrictions meant exposure to
general medicine use was limited.




Today,
through the advances in all levels of science, and driven by military funding,
infrared detection devices are state-of-the art electronics.  Like all
electronic components, the infrared detector has come down in cost, size and has
significantly improved in general applicability.




The
continued refinement of infrared systems, both in image acquisition and data
collection, has brought the use of infrared energy analysis to a new
level.  Together with a better understanding of human and animal
physiological thermoregulatory mechanisms, the use of infrared detection in
health and illness provides a new mechanism for early disease
detection.




Trillennium
Medical Imaging recognized the medical need for cost-effective, non-contact
physiological monitoring – and embraced the use of infrared
imaging.  Trillennium is dedicated to the advancement of infrared
detection in medicine. Trillennium has forged relationships with well-know
manufacturers of infrared detection systems, major players in multiple medical
specialties, and highly skilled computer analysts – and together are developing
state-of the art infrared imaging systems, as well as investigating new
uses/applications in medicine.




The focus
of medicine and health care today means technology must be “faster, better, and
more cost-effective.” Trillennium Medical Imaging and its partners are working
to make infrared detection systems the easiest to use, applicable in the
every-day clinical setting and cost-effective in its application.




The use
of infrared analysis has historically been limited in clinical
application.  With improved science comes improve equipment
development and with computerization – the analytical evaluation of infrared
information is moving to new levels.  Today’s computerization of
infrared systems is overcoming the limitations of the past
applications.   Trillennium Medical Imaging systems incorporate,
not only objective temperature data analysis, but TMI has also taken data
collection to a new level.  Today, medical device development and use
is based on evidence of efficacy.  Application data collected from all
TMI systems is compiled into a single database that will continue to provide the
statistical analysis needed to demonstrate the efficacy of this technology in
all current and future applications. TMI is currently the only company to
incorporate this data collection component into their systems.




The first
records of physical observation demonstrate that physiological temperature
variations have signaled the presence of disease.  Today the
importance of this vital physical parameter is of no less significance.
Together, scientific advancements and technological improvements will
demonstrate that temperature shifts can signal the earliest stages of
physiological change. Through non-contact temperature analysis, Trillennium
Medical Imaging and partners will continue to demonstrate the efficacy of
infrared analysis in disease detection and to drive the use of infrared analysis
in new medical applications.




4




The
Future of Disease Detection




Trillennium
Medical Imaging sees the future of infrared imaging moving to critical positions
in early phase disease detection and monitoring.  Although currently
not a diagnostic modality, infrared analysis still provides key information in
health monitoring. The development of objective data analysis and proof of
efficacy will catapult infrared detection to key positions and
prominence.  Trillennium’s current research project, early detection
of tissue breakdown, will provide the initial data demonstrating IR’s ability to
detect damage prior to visible evidence.  This capability – in a
non-contact device – will save patients from potential disabling conditions, as
well as generate a sizeable cost-savings in health care.




Trillennium
believes translation of the ‘early tissue damage detection’ application to other
previously untried medical areas- such as early detection of infection – will
reduce the associated costs and potential spread of treatment-resistant super
bugs. Super drugs have created super bugs and today the spread of
treatment-resistant disease is a major concern.  Both community spread
and in-hospital presence of these organisms is a detection
nightmare.  In spite of improved hygiene – transmission and
containment of various diseases is still of critical importance.




Additionally,
cost-effective, non-contact detection of circulatory compromise in surgical
applications will improve the success of many tissue transplants, reducing the
need for additional surgeries. And non-contact evaluation of tissue changes may
help categorize potentially malignant conditions demanding greater intervention
from those that are currently benign.  However, these arenas are all
in the invention phase, and as all research, requires large capital investments
to translate the research findings to clinical
application.  Trillennium believes these areas hold huge potential in
both dollars spent in health care delivery as well as corporate
return-on-investment and strives to keep these investigations
on-going.






Markets




Skin
Assessment




The early
visualization of tissue damage that can lead to development of pressure ulcers
and or deep tissue injury is paramount to the reduction of open sores and the
deadly complications that accompany them. Currently no method of detection is
used that can identify tissue breakdown prior to the visible and palpable
changes that take place.




Trillennium
Medical Imaging began investigation of this health care issue shortly after the
company was formed. The ability of infrared to detect blood flow changes is well
documented and the key benefit of the technology.  Association of
blood flow changes to both pressure ulcers and deep tissue injury has been
documented since the 1970’s when early imaging units were used to image
suspicious damage. One of the original studies of pressure sores by thermal
detection was conducted by Barton and Barton in 1973.  Studying
existing ulcers they determined the temperature variations present with their
classification of ‘indolent’ and normal pressure sores. The category of indolent
was associated with a longer healing time (approximately four months) and a
temperature difference of 1°C or less.  A classification of normal
demonstrated a higher temperature differential of approximately 2.5oC and healed
more quickly than indolent sores and the patients generally displayed a better
outcome. This ‘normal’ classification of ulcer was generally attributed to the
‘otherwise healthy person’ whose pressure sore was either post operative from
extended times in one position or from incorrect use of a prosthetic device.
This wound usually resolved in six weeks.  This thermal evaluation has
been substantiated by Hansen et al in a 1996 study.




The size,
cost and availability of infrared was a limiting factor in its use for many
years.  The most cost effective detection was contact thermography,
and the question was if the contact alone was increasing the possible artifact
of damage.  Electronic imaging provided the benefit of non-contact
evaluation, but thermal artifact induced in uncontrolled environments was still
a question.




Trillennium
Medical Imaging began the process of incorporating computerized analysis of
images to eliminate the subjective influence of previous infrared
analysis.  Changes introduced in the analytical phase reduced the
influence of environmental shifts.  This proprietary approach is
currently undergoing evaluation and data will be presented following completion
of the anticipated Duke University study.




Market
Opportunities




Functional
or physiological evaluation conducted with infrared imaging has applications in
many areas of medicine. Initially, Trillennium Medical Imaging focused on three
key markets with our current imaging system: Breast Health Monitoring, Pain
Evaluation; and Sports Medicine applications.  However recent
developments indicate significant economic gains can be realized with a revised
plan.




Trillennium
Medical has begun investigating the use of infrared detection in early stage
pressure ulcer development. Trillennium is proposing a unique approach for early
detection of tissue changes that will significantly impact the wound care
market.  TMI is in the initial phase for design and application of a
new imaging device that incorporates software and data collection that is
separate and apart from its current clinical markets.




5




While
Trillennium Medical Imaging will continue to prove the viability of IR through
its ongoing trials in existing markets (outlined under existing market profile),
it is evident that a method of early detection of tissue changes related to
pressure ulcers is not currently available.




Pressure
ulcers have always been an area of concern for healthcare providers due to the
degradation of the patient’s condition and the increased care required when
pressure ulcers occur.   Pressure ulcers are responsible for over
65,000 deaths per year in the United States alone.  Aside from the
human toll, the costs involved in treating this problem are enormous and
escalating at an alarming rate annually.   Taking into
consideration all direct, indirect and peripheral costs, it is conservatively
estimated that currently over $25 billion is spent annually on wound care in the
United States (Columbia Surgery, Department of Surgery, H. Brem, M.D., 2006).
The urgency of this situation is not lost on those in the medical field,
associated industries and the government as well.




Each year
the government spends on average over $3 billion on wound treatment and care for
pressure sores and bedsores.  Insurance companies pay out millions
annually for this same treatment, directly affecting premiums to increase
annually for healthcare facilities.  Inflationary effects add to this
escalation.




New
regulation recently imposed by the Center for Medicare and Medicaid will reshape
the approach by all health care facilities and
practitioners.  Beginning in 2008, reimbursement for the care of
individuals incurring pressure ulcers during hospitalization will no longer be
reimbursed.  It is managements opinion that this edict from the
government will be followed by third party payers.  This loss of
revenue will cripple many health care facilities if not checked.




Additionally,
the potential of fines incurred for the occurrence of pressure ulcers in the
long term care facilities will drive these markets with burden of
proof.




Trillennium
Medical Imaging will be ideally poised to provide a cost-effective, non-contact
method to identify the presence of early or existing tissue damage.




Breast
Health Monitoring




Current
Testing/Screening Methods




The
medically accepted tool (gold standard) for breast cancer screening is x-ray
mammography.  Mammography detects structural changes present in the
breast tissue, indicating either the presence of dead cell structures
(calcifications) or a shift in tissue density. Mammography was established as
the test of choice following the Breast Cancer Detection Demonstration Project
(BCDDP) study and as a result of the Health Insurance Plan (HIP) study of
1974.




According
to the National Cancer Institute Fact Sheet on Mammography, “Several large
studies conducted around the world show that breast cancer screening with
mammograms reduces the number of deaths from breast cancer for women ages 40 to
69, especially those over age 50. Studies conducted to date have not shown a
benefit from regular screening mammograms, or from a baseline screening
mammogram (a mammogram used for comparison), in women under age
40.”  Regardless, it is the only medically accepted screening test
to-date.




With the
evolution in technology, proposals have been made to implement other modalities
in the screening process. Due to associated cost, and or sensitivity and
specificity of the exams (Ultrasound/MRI/PET) recommendations for screening have
not changed. These tests are used as ‘adjunctive’ or in addition to mammography
following a positive or questionable test.




Limitations
of Current Methods




Contact,
compression, ionizing radiation, limited or no options for screening other than
mammography (physician restricted access) and cost are some of the primary
reasons women list for limited or non-participation in breast health
evaluation.




Current
statistics demonstrating the number of women who participate in mammography are
not readily available. 2002 studies estimated approx 60% of women over the age
of 40 participated in mammography within the year.  Studies show that
for the uninsured it (screening mammography) is a low priority procedure,
because few programs exist to assist in the payment for or toward mammography
for women less than 50 years of age as are for those who are older
(Medicare).




“Women
over the ages of 50 and 60 are not getting mammograms as frequently as women in
their 40s, yet mammograms are more effective in reducing deaths from breast
cancer as women age.”




Women
reject or delay mammography for many reasons.  Fear appears to be the
primary factor.  Fear of discomfort, fear of radiation and fear of
finding cancer are only a few reasons that women site.




Many
women falsely believe that if there is no known breast cancer within their
family that there is no reason to be concerned. Few women know that
approximately 75% of breast cancers found occur in women who have no known
history.




Studies
indicate that 40% or more of the population eligible for screening mammography
do not participate in testing.  Reasons listed are economic, cultural
and perception of increased harm (radiation / compression) from the exam –
whether real or imagined.  These factors contribute to
late-stage




6




Importance
of Infrared Imaging for Breast Cancer




Management
defines risk as the likelihood that harm will arise coupled with
consequence.  Medical assessment of ‘risk’ for developing breast
cancer is linked with time/cost and effort to arrive at the benefit of risk
assessment.  Risk/benefit studies determine that screening for breast
cancer should begin at 40 years of age.  The cost of screening the
female population younger than 40 years of age provides no reduction in
life-years saved compared to costs incurred.




Although
mammography screening is an effective tool for detecting the presence of breast
cancer, it has inherent and well described limitations.  In addition,
mathematical models such as the Gail Model have been developed to predictbreast
cancerrisk, but such models are better at assessing population-based risk
rather than individual risk.




Monitoring individuals
with infrared imaging provides for improved individual assessment to determine
the ‘at-risk’ person as indicated by physiology (versus mathematical), and
therefore in a screening scenario, the ‘at-risk’ population.




Infrared
imaging is a non-contact, non-invasive, non-ionizing imaging tool and poses no
physical risk. It displays information regarding breast blood
flow.  Temperature assessment of breast tissue provides for a profile
as it relates to homeostasis within the breast tissue.  Any
alterations are attributed to imbalance.  The presence of structural
changes or tissue is not visible on the infrared image. But neither is the
vascular information displayed on the mammogram.  Screening the breast
with infrared provides the individual and practitioner with information not
currently available as a screening modality.  Other functional imaging
is prohibited by availability and cost. (fMRI/ PET/f CT). Additionally other
functional modalities are most often incorporated into structural exams such as
computed tomography and MRI.




Infrared
study parameters have been identified as consistent repeatable and independent
markers that identify those patients at risk for breast disease.  Ease
of implementation (non-ionizing), low comparative cost and appeal to the general
population (non-contact) make it an ideal test for screening in the younger
patient (not a candidate for mammography), the woman with dense breasts or
implants, those who have surgically altered breasts that add to mammography
distortion (biopsies, lumpectomies, mastectomies) and those that refuse to
participate in screening mammography.




Market
Opportunities




Breast
Health Monitoring/Screening




Today the
U.S population is roughly 300 million (projection based on 2000 Census Data) and
of this 150 million individuals are female. According to the Census Bureau,
currently the largest segments of females are 40-44 (11.35M), 35-39 (11.34M) and
45-49 (10.27M) years of age respectively. These are closely followed by the
30-34 (10.21M) and the 10-14 (10M) years of age.




These
numbers become significant when we consider the disease of breast
cancer.  It is the second leading cause of cancer deaths in the female
population. 1 in 8 women will be diagnosed with cancer of the breast during
their lifetime.




The
probability of breast cancer occurrence increases with age.  Fifty
percent of all breast cancers will occur in women under 61 -- the median age of
occurrence. But roughly 1/3 of all breast cancers will occur in women under the
age of 50 (20 to 50 years of age.)  In the total population of breast
cancers the largest percentage are found in women over 50 years of
age.  The average projected growth rate (disease development prior to
detection) for breast cancer is approximately 8 to 10 years.  For this
reason, mammography is recommended as a screening procedure beginning at 40
years of age.




U.S
Government statistics in 2005, show an estimated 2 million women diagnosed with
or living with breast cancer.  2006 estimates projected 212,920 new
cases of invasive breast cancer diagnosed, along with 61,980 new cases of
non-invasive breast cancer. The current medical paradigm with breast imaging is
demonstrated in the inability of mammography to reduce the mortality statistics
of those women found with invasive breast lesions.  Structural
studies, and mammography in particular, are detecting the presence of tumors and
tissue changes, but missing the functional or metabolic activity presented by
the disease. Infrared has continued to demonstrate underlying metabolic changes
present in tissue years in advance of mammography.  Slow growing,
metabolically inactive cancers such as those with low IR signals can easily be
detected with mammography. The issue of early detection is key for the women
with dense breasts, especially the younger woman who would be missed by never
participating in mammography until a palpable lesion is found.




Sports
Medicine




Sports
medicine or sport medicine is an interdisciplinary subspecialty of medicine
which deals with the treatment and preventive care of athletes, both amateur and
professional. The team includes specialty physicians and surgeons, athletic
trainers, physical therapists, coaches, other personnel, and, of course, the
athlete.




7




There has
been a tendency for many to assume that sport-related problems are by default
musculoskeletal and that sports medicine is an orthopedic specialty. It is
commonly understood that there is much more to sports medicine than just
musculoskeletal diagnosis and treatment. Illness or injury in sport can be
caused by many factors – from environmental to physiological and psychological.
Consequently, sports medicinecan
encompass an array of specialties, including cardiology, pulmonology, orthopedic
surgery, exercise physiology, biomechanics, and traumatology.




The risk
of injury in athletic practice will never be entirely eliminated, but
modifications in training techniques, equipment, sports venues and rules, based
on outcomes of meaningful research have shown that it can be lowered. For these
reasons sports medicine will make its most significant future contributions in
the area of prevention.




Market
Opportunities




When all
the inclusive markets are considered, the total revenue projections for the
sports medicine market are vast but illusive. Costs are measured in billions of
dollars when both treatment cost and indirect costs of loss (wage and
productivity) are considered.




Differential diagnosis
related to sports injuries is complicated by the fact thatsoft tissue injuries are
some of the most common and clinically challenging musculoskeletal disorders in
patients presenting for treatment. Therefore, establishing clear-cut diagnostic
and therapeutic objectives for these injuries is important. Current imaging
methods of evaluation are structural. Flat plane x-ray, computed tomography
(CT), ultrasound, and MRI are the most common examinations.  This
leaves the assessment of soft tissue injury to visual, palpable and indirect
visualization via the structural image.




Complication
of evaluation (structure vs. tissue) results in inappropriate or ill-timed
care.  Oversight of the magnitude of soft tissue injuries may result
in a failure to expeditiously consider vascular injury or compartment syndrome
and its resultant complications, including loss of a
limb.  Misdiagnosis or mismanagement of damage may lead to chronic
problems with subsequent development of degenerative joint disease and/or loss
of function, including but not limited to an inability to bear weight or
ambulate.




Like all
areas of pain, the number of those afflicted by joint and connective tissue
disorders seems to be increasing rather than under control.


Statistics
taken from the U.S. government website on arthritis provides the following
numbers related to occurrence.An estimated 46 million adults in the United
States reported being told by a doctor that they have some form of arthritis,
rheumatoid arthritis, gout, lupus, or fibromyalgia. By 2030, an estimated 67
million of Americans aged 18 years or older are projected to have
doctor-diagnosed arthritis. Arthritis & Rheumatism 2006;54(1):226-229 [Data
Source: 2003 NHIS]




Importance
of TMI Infrared Monitoring System




Until
recently, sports medicine has been a little-explored market for infrared
technology as an adjunctive to diagnostics.  Infrared imaging provides
an indirect measurement of skin blood flow and a temperature measurement of the
physiological response controlled by the body’s autonomic nervous
system.  This information has broad application in the world of sports
medicine.  Infrared evaluation can provide a new dimension to
diagnostic capabilities in an adjunctive capacity (physiology vs.
anatomy).  Some of these applications are:  providing a
monitor for hyperthermic and hypothermic responses associated with nerve
irritation, acute injuries, swelling, inflammation, infection, and
atrophy.  Provide physicians and trainers with a visual and measurable
reference for differential diagnosis, and a visual and objective reference
relating to treatment efficacy.




TMI
Solution in Sports Medicine Applications




TMI is
currently involved in a pilot study with Duke University Sports Medicine
evaluating infrared technology for spot-checking of core body temperatures of
athletes in the field.  The preliminary study of this non-invasive
technology has demonstrated temperature readings that are directly correlated
with the core body temperature in a small population.  A more
extensive study is being planned. The value will be an easy to use, non-invasive
tool for monitoring heat exhaustion in athletics that can be easily used in the
field.  All levels and types of sports organizations (schools, teams
and professionals) could all benefit from using this technology.  TMI
is working to develop a portable, cost-effective, handheld solution that will
fit the need of this extensive market.




TMI is
also exploring the use of this same assessment tool for immediate trauma
evaluation on the field or in emergency rooms for monitoring deep tissue injury
and assist with fast evaluation of potential compartment syndrome.




TMI
Market Approach




With
significant relationships in the medical industry, our initial marketing
approach will be to hospitals for the early detection of pressure ulcers. The
study at Duke Medical Center has been completed. The results will
be  available once the outstanding invoice to Duke is
satisfied.




8




Rheumatology




For over
forty years infrared measurement has been used in the evaluation of
rheumatological disease.  Initially identified and analyzed in the
1970’s by Abernathy, Ring, and many others, joint and connective tissue
disorders were an undisputed area in which infrared detection provided a
non-ionizing and non-contact method of detection.




Infrared
evaluation provides both an indication of abnormal blood flow in the area of
pain, and as a monitoring device for the efficacy of various
therapies.  Additionally infrared imaging is an ideal tool for
evaluation of this peripheral blood flow and vasospastic disorders of peripheral
digital vessels is often an indication of connective tissue
disorders.




Research
and Development




Equipment
Development




We
continue to interface with equipment manufacturers and medical device research
and development firms to seek out state of the art thermal imaging
technology.




In
addition, we are in the process of creating a Data Collection division. This
will enable us to keep data and compare results of images taken from all of our
cameras. This will then lead to definitive conclusions for the medical
community. Through a HIPPA-compliant database we plan to gather a
statistically-verifiable data set from our patient population from all of our
participating facilities. This information will be compared to currently known
statistics and provide additional verification regarding the efficacy of
infrared imaging in a variety of applications. The medical community requires
"evidence" to back the use or implementation of all technologies. TMI expects
that its thermal imaging operations will yield significant data. This will
supply the data needed to support evidenced-based practice. This data can then
be compared to the patient outcome-information held by each
practitioner.




Future Market Research/Medical




Grafts
and Flaps




The use
of skin grafts and local flaps can help solve some difficult wound closure
problems.  Postoperative flap failure is a devastating complication
that surgeons occasionally encounter when using plastic surgery
techniques.




Intraoperative
monitoring of flap perfusion has shown to prevent flap
failure.  Infrared imaging can be used to evaluate and monitor
reperfusion, and is a fast, non-contact, reliable method.




Infrared
can be used preoperatively to trace perforators in the skin to be excised for
reconstruction, as well as postoperatively to monitor the rewarming following
attachment.




Amputation




Infrared
has proven to be valuable in the area of amputation of tissue as
well.  Evaluation of digits or limbs of persons undergoing amputation
has improved the success by proving or disproving the viability of tissue
present.  In instances of lower limb amputation due to peripheral
vascular disease, amputation can often be preformed below the knee, improving
the rehabilitation and mobility of the patient and therefore quality of life
issues. Selection of amputation level made on the basis of laboratory criteria
using skin blood flow and infrared thermography data proves to be more
successful.




Diabetic
Neuropathy




Diabetic
peripheral neuropathy (DPN) is a condition secondary to the disease and can
result in ulceration.  Of the diabetic population 0.6 % eventually
require lower limb amputation.  However of those with peripheral
neuropathy roughly 40% require amputation of a toe, 12% a foot, and 47%
The total
annual cost of DPN and its complications in the U.S. wasestimated
to be between $4.6 and $13.7 billion. Up to 27% of the direct medical cost of
diabetes




Dermatology




“The skin is the largest organ in the body, and it is
therefore not surprising that cancer of the skin is the most common of all
cancers. Basal cell carcinoma and squamous cell carcinoma make up the vast
majority of cases. Melanoma is the least common but the most deadly skin cancer,
accounting for only about 4% of all cases but 79% of skin cancer deaths. For
2002, the American Cancer Society estimates there will be 53,600 new cases of
melanoma in the United States and 7,400 deaths from the disease. The United
States has experienced a dramatic increase in the number of melanoma cases over
the past few decades. According to the American Cancer Society, the incidence
rate for melanoma (number of new cases of melanoma per 100,000 people each year)
has more than doubled since 1973. The mortality rate for melanoma (number of
deaths per 100,000 people each year) has increased at a much slower pace and has
remained stable over the past 10 years. During this same time period, there has
been a significant rise in overall five-year survival in patients with melanoma.
This may be due to thinner depth of tumors at time of diagnosis and improved
surgical techniques to treat the disease. “




9




The study
of skin and skin lesions is an area of infrared that has waxed and waned since
the early studies of thermography conducted in the 1980’s by the
French.  Evaluation of the thermal flare presented by the increased
vascularity present in melanomas was thermally mapped prior to
radiotherapy.  Infrared mapping provided information that demonstrated
that the underlying vascular bed related to the visible lesion was usually
significantly larger than assumed, and if not included in the area of radiation,
may remain as a pathway of metastasis.




With the
increase in melanoma occurrence, the use of infrared imaging in screening
evaluations could add to number of cases found in the early
stages.  Additionally, the use to map the underlying vascularity could
again aid in mapping the underlying angiogenic blood supply to the
tumor.




Pharmaceuticals/Vaccines




The use
of infrared detection for adverse reactions resulting from administration of
drugs and vaccines is an area of potential investigation.


Trillennium
Medical Imaging anticipates that investigation of adverse reactions with
infrared imaging may provide a non-contact, cost-effective way to monitor for
adverse reactions prior to their occurrence.  Through is affiliation
with Duke University, TMI plans to participate in research projects that are
first isolating these drug-reaction potentials in mice.  Participation
in this and other research projects will require capital investment to provide
various lens and other adaptations to the existing infrared imaging device, as
well as the possible development of other specific IR optical imaging devices
that could revolutionize this arena.




Trillennium,
through its advisors and affiliates will continue to investigate areas of
medical concern where infrared imaging will possibly benefit the
survival-outcome, the cost-effective delivery of non-invasive diagnostic and
adjunctive imaging, as well the return-on-investment from development of such
products.




FDA
Regulations




Changes
in Approved Devices -  The FD&C Act requires device manufacturers
to obtain a new FDA 510(k) clearance when there is a substantial change or
modification in the intended use of a legally marketed device or a change or
modification, including product enhancements and, in some cases, manufacturing
changes, to a legally marketed device that could significantly affect its safety
or effectiveness. Supplements for approved PMA devices are required for device
changes, including some manufacturing changes that affect safety or
effectiveness. For devices marketed pursuant to 510(k) determinations of
substantial equivalence, the manufacturer must obtain FDA clearance of a new
510(k) notification prior to marketing the modified device. For devices marketed
with PMA, the manufacturer must obtain FDA approval of a supplement to the PMA
prior to marketing the modified device.




Good
Manufacturing Practices and Reporting. TMI does not manufacture the infrared
cameras used in its thermal imaging system. Nevertheless, the FD&C Act
requires device manufacturers to comply with Good Manufacturing Practices
regulations. The regulations require that medical device manufacturers comply
with various quality control requirements pertaining to design controls,
purchasing contracts, organization and personnel, including device and
manufacturing process design, buildings, environmental control, cleaning and
sanitation; equipment and calibration of equipment; medical device components;
manufacturing specifications and processes; reprocessing of devices; labeling
and packaging; in-process and finished device inspection and acceptance; device
failure investigations; and record keeping requirements including complaint
files and device tracking. We are in compliance with the above
requirements.




10




Current
Regulatory Status-  The FDA found that the cameras utilized in the TMI
thermal imaging system are substantially equivalent to an existing legally
marketed device, thus permitting them to be marketed as an adjunct
(supplemental) screening/diagnostic device. The cameras utilized in our system
first received 510(k) clearance in September 2001 and subsequently in March
2003. Together with our proprietary software we, are marketing the TMI thermal
imaging system as an adjunct (supplemental) method for the diagnosis of breast
cancer and other diseases affecting the perfusion or reperfusion of blood in
tissue or organs.




Permits
and Inspections




The
manufacturer of the thermal imaging cameras utilized in the TMI thermal imaging
system is subject to compliance with Good Manufacturing Practices under the
FD&C Act, as described above. The manufacturer is subject to government
inspection and failure to comply with all applicable standards can result in
suspension or termination of its ability to manufacture cameras for use in our
system. In that event we would be compelled to seek thermal imaging cameras from
other manufacturers.




Users of
the TMI thermal imaging system are required to utilize protocols for accurate
thermal imaging such as the "Technical Protocols for High Resolution Infrared
Imaging" approved by the ACCII 5-15-99. Failure to comply with these
requirements can result in suspension or termination of the facilities'
authority to utilize our thermal imaging system. In that event we would
experience a disruption in revenue while we removed our equipment and sought to
install it in another location.




Item
2. DESCRIPTION OF PROPERTY




We
maintain our principal office at 6911 Pilliod Road, Holland OH 43528. Our
telephone number at that office is (419) 865-0069 and our facsimile number is
(419) 867-0829.




Item
3. LEGAL PROCEEDINGS




We may
become involved in a lawsuit or legal proceeding at any time in the ordinary
course of business. Litigation is subject to inherent uncertainties, and an
unexpected adverse result may arise that may adversely affect our business. We
are currently not aware of any litigation pending or threatened for any reason.
We are not aware of any additional legal proceeding or claims that we believe
will have, individually or in the aggregate, a material adverse affect on our
business, financial condition or operating results.




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




By
Special Meeting held on July 22,2008 the security holders of the Company
approved the following:




(i) An
amendment to the Company’s Articles of Incorporation to increase the number of
authorized shares of common stock, par value $.001 per share, of the Company
from 500,000,000 shares to 1,000,000,000 shares; (ii) an amendment to the
Company’s Articles of Incorporation to create 10,000,000 shares of blank check
preferred stock, $.001 par value per share; and (iii) and authorized the
Company's Board of Directors, in its discretion, to amend the Company's Articles
of Incorporation to effect a reverse stock split of the outstanding shares of
the Company's common stock at a ratio of one-for-30.




11




PART II




Item
5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS




Market
Information




Our
common stock is quoted on the Pink Sheets under the symbol "WLSI."




For the
periods indicated, the following table sets forth the high and low bid prices
per share of common stock. These prices represent inter-dealer quotations
without retail markup, markdown, or commission and may not necessarily represent
actual transactions.




Particularly
since our common stock is traded infrequently, such over-the-counter market
quotations reflect inter-dealer prices, without markup, markdown or commissions
and may not necessarily represent actual transactions or a liquid trading
market.




Quarter
      Ended
                        High
                        LowJanuary
      31, 2006
                        0.28
                        0.075April
      30, 2006
                        0.28
                        0.085July
      31, 2006
                        0.29
                        0.165October
      31, 2006
                        0.225
                        0.031January
      31, 2007
                        0.09
                        0.024April
      30, 2007
                        0.05
                        0.01July
      31, 2007
                        0.03
                        0.01October
      31, 2007
                        0.02
                        0.004


January
      31, 2008
              0.0016
              0.001April
      30, 2008
              0.0009
              0.0007July
      31, 2008
              0.022
              0.016October
      31, 2008
              0.004
              0.0038




Number
of Stockholders




As of
October 27, 2008, there were approximately [509,940,017 shares of common stock
outstanding, of which [62,365,000] shares were restricted under Rule 144 of the
Securities Act of 1933.




As of
October 27, 2008, there were approximately [88] active holders of our common
stock. The number of record holders was determined from the records of our
transfer agent and does not include beneficial owners of common stock whose
shares are held in the names of various security brokers, dealers, and
registered clearing agencies. The transfer agent of our common stock is Pacific
Stock Transfer.




Dividend
Policy




Historically,
we have not paid any dividends to the holders of our common stock and we do not
expect to pay any such dividends in the foreseeable future as we expect to
retain our future earnings for use in the operation and expansion of our
business. In addition, any future determination to pay cash dividends will be at
the discretion of the Board of Directors and will be dependent upon our
financial condition, results of operations, capital requirements, and such other
factors as the Board of Directors deem relevant.




12




Item
6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION




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.




Results
of Operations for the Fiscal Year Ended July 31, 2008 Compared To the Fiscal
Year Ended July 31, 2007




Revenues




For the
year ended July 31, 2008, we had  no revenues from our medical imaging
business. Revenues for the year ended July 31, 2007 were $100,000 and were
generated from the Limited Technology License Agreement with MacLath Ltd for the
exclusive rights to distribute Trillennium products and systems.




Net Loss




For the
year ended July 31, 2008, we incurred a net loss of $5,713,087, or $..02 per
share, which was an increase of $2,058,970 from the net loss of $3,654,117, or
$..04 per share for the year ended July 31,2007. The increase in net loss is
attributable to Derivative Instrument Net Expense which increased by $1,631,439
from $839,662 for the year ended July 31, 2007 as compared to $2,471,101 for the
year ended July 31, 2008. This increase in expense from the derivative
instrument is as a result of our stock price being lower at July 31, 2008
compared to January 31, 2007, which results in the increase of our derivative
liabilities for the same period one year ago. As a result, we recorded a net
increase in expense related to our derivative liabilities. This increase in
expense may be reversed in the future if the liabilities decrease, depending on
our stock price.




Operating
Expenses




Total
operating expenses for the year ended January 31, 2008 decreased by $66,565
to $2,366,704 from $2,433,269 for the year ended July 31, 2007. This change is
due principally to an decrease in expenses for professional fees to $319,319from
$448,182 and in travel expense to $141,054 from $207,438.




13




Selling,
General and Administrative Expenses




Our
selling, general and administrative expenses totaled $1,975,850 for the year
ended July 31, 2008. This amount included the following: salaries for officers
and employees totaling $892,772, research and devlopment totaling $259,200 and
professional fees for consultants, attorneys and auditors totaling
$319,319.




Depreciation
and Amortization




For the
year ended July 31, 2008, our deprecation and amortization expense was $390,854.
This charge represents a charge to operations for depreciating the imaging
equipment and the office equipment and fixtures, which has a cost of $837,874
and $154,540 respectively. The depreciable assets have been assigned a useful
life of five years. It also includes a charge for amortizing the covenant not to
compete, manufacturing and distribution agreement, loan acquisition costs and
software and manuals, which have a cost of $20,000, $ 700,000, $297,525 and
$135,400 respectively with a life of 2 to 5.5 years.




Interest
Expense




For the
year ended July 31, 2008 interest expense was $477,395, which primarily
represents interest charges on our debt to AJW Partners, LLC and its related
entities.




Critical
Accounting Policies and Estimates




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




14


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 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 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.




15




Liquidity
and Capital Resources




As of July 31, 2008 we had a working capital deficit
of approximately $6,781,471, and cash of approximately $25,560. Through the end
of July 20087, we have generated minimal revenues and have incurred operating
losses in every quarter. We plan to achieve positive cash flow by obtaining
additional financing and by installing thermal imaging equipment units under our
Licensing Agreements. We expect significant camera expenditures during the next
12 months, which we will fund out of cash flows, company reserves, or by raising
additional funds specifically for the purchase of cameras. By adjusting our
operations and development to the level of capitalization, we believe we have
sufficient capital resources to meet our projected cash flow projections. We
anticipate that we will be able to satisfy our cash requirements with our
currently available resources through the second quarter of our 2009 fiscal
year.




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.




16


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 October 27, 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 $..0074 and, therefore, the conversion price for the secured convertible
notes was $..00444. Based on this conversion price, the $4,859,169 outstanding
principal amount of the secured convertible notes, excluding interest, were
convertible into approximately 1,094,407,000 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.




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).




We
presently do not have any available credit, bank financing or other external
sources of liquidity. Due to our brief operating history and startup, our
operations have not been a source of liquidity. We will need to obtain
additional capital in order to expand operations. We estimate that we will
require additional cash resources, based on our current operating plans, in
order to 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.




RISK
FACTORS




An
investment in our shares involves a high degree of risk. Before making an
investment decision, you should carefully consider all of the risks described in
this prospectus. If any of the risks discussed in this prospectus actually
occur, our business, financial condition and results of operations could be
materially and adversely affected. If this were to happen, the price of our
shares could decline significantly and you may lose all or a part of your
investment. The risk factors described below are not the only ones that may
affect us. Our forward-looking statements in this prospectus are subject to the
following risks and uncertainties. Our actual results could differ materially
from those anticipated by our forward-looking statements as a result of the risk
factors below. See "Forward-Looking Statements."




Risks
Relating to Our Business:




We Have a
Limited Operating History, Which May Negatively Impact Our Ability to Achieve
Our Business Objectives.




We have
no operating history. We cannot assure you that we can achieve or sustain
profitability on a quarterly or annual basis in the future. As of July 31, 2008,
we had an accumulated deficit of $14,313,370. Our operations are subject to the
risks and competition inherent in the establishment of a business enterprise.
Unanticipated problems, expenses, and delays are frequently encountered in
establishing a new business and marketing and developing products. These
include, but are not limited to, competition, the need to develop customers and
market expertise, market conditions, sales, marketing and governmental
regulation. Our failure to meet any of these conditions would have a materially
adverse effect upon us and may force us to reduce or curtail our operations.
There can be no assurance that future operations will be profitable. Revenues
and profits, if any, will depend upon various factors, including whether we will
be able to continue expansion of our thermal imaging operations. We may not
achieve our business objectives and the failure to achieve such goals would have
an adverse impact on us.




17




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 Contains
Certain Restrictions and Limitations on Our Ability to Seek Additional
Financing. If We Do Obtain Additional Financing, Our Then Existing Shareholders
May Suffer Substantial Dilution.




We will
require additional funds to sustain and expand our sales and marketing
activities. Additional capital will be required to effectively support the
operations and to otherwise implement our overall business strategy. In order to
implement our business strategy over the next 12 months, we anticipate that we
will require approximately $12 million dollars in additional funds. We
anticipate that these additional funds would be used to restructure existing
debt ($7.0million), purchase additional thermal imaging equipment ($2.5million)
and for working capita ($2.5 million).




Without
the prior written consent of a majority-in-interest of the investors for a
period ending on the later of (i) 270 days from the closing date, or (ii) 180
days from the date that this registration statement is declared effective by the
SEC, Section 4e of our October 2005 Securities Purchase Agreement limits our
ability to seek additional financing, including negotiating or contracting with
any party to obtain additional equity financing (including debt financing with
an equity component) which involves the following:




o the
issuance of shares of our common stock at a discount to the market price on the
date of issuance;




o the
issuance of convertible securities that are convertible into an indeterminate
number of shares of our common stock; or




o the
issuance of warrants to purchase shares of our common stock.




There can
be no assurance that financing will be available in amounts or on terms
acceptable to us, if at all, or if a majority-in-interest of the investors under
our October 2005 Securities Purchase Agreement will provide their prior written
consent for us to engage in additional financing involving the issuance of our
securities as set forth above. The inability to obtain additional capital will
restrict our ability to grow and may reduce our ability to continue to conduct
business operations. If we are unable to obtain additional financing, we will
likely be required to curtail our marketing and development plans and possibly
cease our operations. Any additional equity financing may involve substantial
dilution to our then existing shareholders.




If We Are
Unable to Retain the Services of John Antonio or If We Are Unable to
Successfully Recruit Qualified Personnel Having Experience in Business, We May
Not Be Able to Continue Our Operations.




Our
success depends to a significant extent upon the continued service of John
Antonio, our current President and a Director. Loss of the services of Mr.
Antonio could have a material adverse effect on our growth, revenues, and
prospective business. We have applied for a "key man" life insurance policy on
the life of Mr. Antonio in the amount of $3,000,000. In addition, in order to
successfully implement and manage our business plan, we will be dependent upon,
among other things, successfully recruiting qualified personnel having
experience in business. Competition for qualified individuals is intense. There
can be no assurance that we will be able to find, attract and retain existing
employees or that we will be able to find, attract and retain qualified
personnel on acceptable terms.




In
addition, each of our executive officers is involved in the business activities
of other companies. As a result, each of our executive officers may not be able
to devote their full time, attention and energy to our Company, which could have
a negative impact on their ability to effectively manage our
Company.




18




If We Are
Not Able to Successfully Market and Gain Public Awareness of Our Products and
Services, We May Sustain Substantial Losses Which Could Require Us to Curtail or
Cease Our Operations.




Achieving
market awareness and acceptance for products being introduced and under
development requires substantial marketing efforts and expenditure of
significant marketing and advertising funds. There is uncertainty as to the rate
of sales expansion and the degree of market acceptance of our products. Because
of this, we are currently developing and evaluating, and anticipate that we will
continue to develop, marketing and advertising for such new products or
services; we will devote resources, financial and otherwise to such efforts. The
failure of these efforts could result in substantial losses.




We
May Not Be Able To Compete Successfully.




A number
of companies have developed, or are expected to develop, products that compete
or will compete with our products. Many of these competitors offer a range of
products in areas other than those in which we compete, which may make such
competitors more attractive to hospitals, radiology clients, general purchasing
organizations and other potential customers. In addition, many of our
competitors and potential competitors are larger and have greater financial
resources than we do and offer a range of products broader than our products.
Some of the companies with which we now compete or may compete in the future
have or may have more extensive research, marketing and manufacturing
capabilities and significantly greater technical and personnel resources than we
do, and may be better positioned to continue to improve their technology in
order to compete in an evolving industry.




Our Delay
or Inability To Obtain Any Necessary U.S. or Foreign Regulatory Clearances Or
Approvals For Our Products Could Harm Our Business And Prospects.




Our
medical imaging products are the subject of a high level of regulatory
oversight. Any delay in our obtaining or our inability to obtain any necessary
US or foreign regulatory approvals for new products could harm our business and
prospects. There is a limited risk that any approvals or clearances, once
obtained, may be withdrawn or modified which could create delays in shipping our
product, pending re-approval. Medical devices cannot be marketed in the US
without clearance or approval by the FDA. Our business and the business of our
key suppliers, including the manufacturers of the thermal imaging cameras
marketed by us, must be operated in compliance with FDA Good Manufacturing
Practices, which regulate the design, manufacture, packing, storage and
installation of medical devices. These manufacturing facilities and our business
practices are subject to periodic regulatory audits and quality certifications
and we do self audits to monitor our compliance. In general, corrective actions
required as a result of these audits do not have a significant impact on our
supplier's manufacturing operations; however there is a limited risk that delays
caused by a potential response to extensive corrective actions could impact our
operations. Virtually all of our products manufactured or sold overseas are also
subject to approval and regulation by foreign regulatory and safety agencies. If
we do not obtain these approvals, we could be precluded from selling our
products or required to make modifications to our products which could delay
bringing our products to market.




We
Must Rapidly Develop New Products In Order To Compete Effectively.




Technology
in our industry, particularly in the x-ray and medical imaging businesses,
evolves rapidly, and making timely product innovations is essential to our
success in the marketplace. Also, our technology is approved as an adjunctive
medical procedure to be used in conjunction with other diagnostic techniques
such as mammography, X-Ray, CT and MRI, not as a stand alone diagnostic tool.
The introduction by our competitors of products with improved technologies or
features may render our existing products obsolete and unmarketable. If we
cannot develop products in a timely manner in response to industry changes, or
if our products do not perform well, our business and financial condition will
be adversely affected. Also, our new products may contain defects or errors
which give rise to product liability claims against us or cause the products to
fail to gain market acceptance. Additionally, market acceptance is a function of
the acceptance of thermograph as an emerging technology by field practioners.
Accuracy in imaging, development of a data base from which practitioners can
draw statistically verifiable conclusions and market resistance to change all
impact on our ability to compete effectively.




19




Our
Success is Dependant Upon Our Ability to Adequately Protect Our Trade Secrets,
Know-How, Patents and Trademarks.




We own
the following intellectual property: proprietary software controlling image
quality, data compilation and facility billing information. Where patent
protection is not available, we rely for protection of our intellectual property
on trade secret law and nondisclosure and confidentiality agreements with our
employees and others. There can be no assurance that such agreements will
provide meaningful protection for our trade secrets or proprietary know-how in
the event of any unauthorized use or disclosure of such trade secrets or
know-how. In addition, others may obtain access to or independently develop
technologies or know-how similar to ours.




Our
success will also depend on our ability to avoid infringement of patent or other
proprietary rights of others. We are not aware that we are infringing any patent
or other such rights, nor are we aware of proprietary rights of others for which
we will be required to obtain a license in order to develop our products.
However, there can be no assurance that we are not infringing proprietary rights
of others, or that we will be able to obtain any technology licenses we may
require in the future.




We Rely
on Contractual Relationships. The Loss of One or More of These Contractual
Relationships Could Have an Adverse Effect On Our Business.




We rely
on key contractual relationships with our customers, including Natural Horizons
Wellness Center Fairfax, Surgicenters of America, Inc. and Spineonumics. We also
rely on a key contractual relationship with the supplier of our thermal imaging
equipment, Mikron Instrument Co. If we were to lose any or all of these
contractual relationships, our ability to maintain or increase revenues could be
adversely affected. There can be no assurance that our key contractual
relationships will continue to exist.




Any
Future Acquisitions Could Disrupt Our Existing Business and Harm Our Financial
Position.




An
element of our growth strategy includes the acquisition of companies which we
believe have synergistic business models. Acquisitions entail a number of risks
that could materially and adversely affect business and operating results. Such
risks would include problems integrating the acquired operations, technologies
or products; diversion of management's time and attention from core businesses;
difficulties in retaining business relations with suppliers and customers of the
acquired company; risks associated with entering markets in which our management
lacks prior experience, and potential loss of key employees from the acquired
company.




If
healthcare providers do not receive adequate reimbursement for procedures using
our products, the market may not accept our products and our revenues may
decline.




The
success of our products will depend upon the ability of healthcare providers,
such as physicians, hospitals, pain clinics and imaging centers, to obtain
satisfactory reimbursement for medical procedures in which our thermal imaging
systems are used. Use of the TMI thermal imaging system for its current FDA
approved uses is not covered by any third-party insurer. If healthcare providers
are unable to obtain reimbursement from third-party payors, the market may not
accept our products and our revenues may decline. Moreover, we are unable to
predict what additional legislation or regulation, if any, relating to the
health care industry or third-party coverage and reimbursement may be enacted in
the future, or what effect such legislation or regulation would
have.




20




Risks
Relating to Our Current Financing Arrangement:




There Are
a Large Number of Shares Underlying Our Secured Convertible Notes and Warrants
That May be Available for Future Sale and the Sale of These Shares May Depress
the Market Price of Our Common Stock.




As of
October 27, 2008 we had [509,940,017] shares of common stock issued and
outstanding, secured convertible notes outstanding that may be converted into an
estimated 1,321,700,000shares of common stock based on a conversion price of
$..00444, and related warrants to purchase 75,000,000 shares of common stock at
an exercise price of $0.0001 to $0.50. In addition, the number of shares of
common stock issuable upon conversion of the outstanding secured convertible
notes may increase if the market price of our stock declines. All of the shares
issuable upon conversion of the secured convertible notes issued pursuant to our
October 2005 through October 2008 Securities Purchase Agreements and upon
exercise of our warrants, may be sold without restriction. The sale of these
shares may adversely affect the market price of our common stock.




The
Continuously Adjustable Conversion Price Feature of the Secured Convertible
Notes Issued Pursuant to Our October 31, 2005 through October 2008 Private
Placement Could Require Us to Issue a Substantially Greater Number of Shares,
Which Will Cause Dilution to Our Existing Stockholders.




Our
obligation to issue shares upon conversion of our secured convertible notes is
essentially limitless. The following is an example of the amount of shares of
our common stock that are issuable, upon conversion of the principal amount of
our secured convertible notes, based on market prices 25%, 50% and 75% below the
market price as of October 27, 2008of $..006.




%
      Below
                  
                  
                  Price
      Per
                  
                  
                  With
      Discount
                  
                  
                  Number
                  
                  
                  %
      ofMarket
                  
                  
                  Share
                  
                  
                  at
      40%
                  
                  
                  of
       Shares
                  
                  
                  Outstanding25
                  %
                  
                  $
                  .0045
                  
                  
                  $
                  .0027
                  
                  
                  
                  2,035,215,185
                  
                  
                  
                  399
                  %50
                  %
                  
                  $
                  .003
                  
                  
                  $
                  .0018
                  
                  
                  
                  3,052,822,778
                  
                  
                  
                  599
                  %75
                  %
                  
                  $
                  .0015
                  
                  
                  $
                  .0009
                  
                  
                  
                  6,105,645,556
                  
                  
                  
                  1,197
                  %




As
illustrated, the number of shares of common stock issuable upon conversion of
our secured convertible notes will increase if the market price of our stock
declines, which will cause dilution to our existing stockholders.




The
Continuously Adjustable Conversion Price Feature of our Secured Convertible
Notes May Have a Depressive Effect on the Price of Our Common
Stock.




The
secured convertible notes issued pursuant to our October 2005 Securities
Purchase Agreement and our October 2005 Convertible Term Loan Agreement are
convertible into shares of our common stock at a 40% discount to the trading
price of the common stock prior to the conversion. The significant downward
pressure on the price of the common stock as the selling stockholders convert
and sell material amounts of common stock could have an adverse effect on our
stock price. In addition, not only the sale of shares issued upon conversion or
exercise of secured convertible notes and warrants, but also the mere perception
that these sales could occur, may adversely affect the market price of the
common stock.




21




The
Issuance of Shares Upon Conversion of the Secured Convertible Notes and Exercise
of Outstanding Warrants May Cause Immediate and Substantial Dilution to Our
Existing Stockholders.




The
issuance of shares upon conversion of the secured convertible notes and exercise
of warrants may result in substantial dilution to the interests of other
stockholders since the selling stockholders may ultimately convert and sell the
full amount issuable on conversion. Although AJW Partners, LLC, AJW Qualified
Partners, LLC, AJW Offshore, Ltd., and New Millennium Partners II, LLC may not
convert their secured convertible notes and/or exercise their warrants if such
conversion or exercise would cause them to own more than 4.99% of our
outstanding common stock, this restriction does not prevent AJW Partners, LLC,
AJW Qualified Partners, LLC, AJW Offshore, Ltd., and New Millennium Partners II,
LLC from converting and/or exercising some of their holdings and then converting
the rest of their holdings. In this way, AJW Partners, LLC, AJW Qualified
Partners, LLC, AJW Offshore, Ltd., and New Millennium Partners II, LLC could
sell more than this limit while never holding more than this limit. There is no
upper limit on the number of shares that may be issued which will have the
effect of further diluting the proportionate equity interest and voting power of
holders of our common stock, including investors in this offering.




In The
Event That Our Stock Price Declines, The Shares Of Common Stock Allocated For
Conversion Of The Secured Convertible Notes and Registered Pursuant To Our
Registration Statement on Form SB-2 (File No. 333-130295) May Not Be Adequate
And We May Be Required to File A Subsequent Registration Statement Covering
Additional Shares. If The Shares We Have Allocated And Are Registering Herewith
Are Not Adequate And We Are Required To File An Additional Registration
Statement, We May Incur Substantial Costs In Connection Therewith.




Based on
our current market price and the potential decrease in our market price as a
result of the issuance of shares upon conversion of the secured convertible
notes, we have made a good faith estimate as to the amount of shares of common
stock that we are required to register and allocate for conversion of the
secured convertible notes. In the event that our stock price decreases, the
shares of common stock we have allocated for conversion of the secured
convertible notes and are registering hereunder may not be adequate. If the
shares we have allocated to the registration statement are not adequate and we
are required to file an additional registration statement, we may incur
substantial costs in connection with the preparation and filing of such
registration statement.




If We Are
Required for any Reason to Repay Our Outstanding Secured Convertible Notes, We
Would Be Required to Deplete Our Working Capital, If Available, Or Raise
Additional Funds. Our Failure to Repay the Secured Convertible Notes, If
Required, Could Result in Legal Action Against Us, Which Could Require the Sale
of Substantial Assets.




In
October 2005, we entered into a Securities Purchase Agreement for the sale of an
aggregate of $3,000,000 principal amount of secured convertible notes, of which
$2,860,000 remains outstanding. The secured convertible notes are due and
payable, with 8% interest, three years from the date of issuance, unless sooner
converted into shares of our common stock. Any event of default such as our
failure to repay the principal or interest when due, our failure to issue shares
of common stock upon conversion by the holder, our failure to timely file a
registration statement or have such registration statement declared effective,
breach of any covenant, representation or warranty in the Securities Purchase
Agreement or related convertible note, the assignment or appointment of a
receiver to control a substantial part of our property or business, the filing
of a money judgment, writ or similar process against our company in excess of
$50,000, the commencement of a bankruptcy, insolvency, reorganization or
liquidation proceeding against our company could require the early repayment of
the secured convertible notes, including a default interest rate of 15% on the
outstanding principal balance of the notes if the default is not cured with the
specified grace period. We anticipate that the full amount of the secured
convertible notes will be converted into shares of our common stock, in
accordance with the terms of the secured convertible notes. If we were required
to repay the secured convertible notes, we would be required to use our limited
working capital and raise additional funds. If we were unable to repay the notes
when required, the note holders could commence legal action against us and
foreclose on all of our assets to recover the amounts due. Any such action would
require us to curtail or cease operations.




22




If an
Event of Default Occurs under the Securities Purchase Agreement, Secured
Convertible Notes, Warrants, Security Agreement or Intellectual Property
Security Agreement, the Investors Could Take Possession of all Our Goods,
Inventory, Contractual Rights and General Intangibles, Receivables, Documents,
Instruments, Chattel Paper, and Intellectual Property.




In
connection with the Securities Purchase Agreements we entered into in October
2005, we executed a Security Agreement and an Intellectual Property Security
Agreement in favor of the investors granting them a first priority security
interest in all of our goods, inventory, contractual rights and general
intangibles, receivables, documents, instruments, chattel paper, and
intellectual property. The Security Agreements and Intellectual Property
Security Agreements state that if an even of default occurs under the Securities
Purchase Agreement, Secured Convertible Notes, Warrants, Security Agreements or
Intellectual Property Security Agreements, the Investors have the right to take
possession of the collateral, to operate our business using the collateral, and
have the right to assign, sell, lease or otherwise dispose of and deliver all or
any part of the collateral, at public or private sale or otherwise to satisfy
our obligations under these agreements.




Risks
Relating to Our Common Stock:




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




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




o that a
broker or dealer approve a person's account for transactions in penny stocks;
and




o the
broker or dealer receive from the investor a written agreement to the
transaction, setting forth the identity and quantity of the penny stock to be
purchased.




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




o obtain
financial information and investment experience objectives of the person;
and




o make a
reasonable determination that the transactions in penny stocks are suitable for
that person and the person has sufficient knowledge and experience in financial
matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prescribed by the Commission relating to the penny
stock market, which, in highlight form:




o sets
forth the basis on which the broker or dealer made the suitability
determination; and




o that
the broker or dealer received a signed, written agreement from the investor
prior to the transaction.




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




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




23




Item
7. FINANCIAL STATEMENTS




All
financial information required by this Item is attached hereto beginning on Page
F-1.











WELLSTAR
INTERNATIONAL, INC.


CONSOLIDATED
FINANCIAL STATEMENTS


JULY 31,
2008 AND 2007




CONTENTS
   PAGEREPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
              F-iCONSOLIDATED BALANCE
      SHEETS
              F-1 -
      F-2CONSOLIDATED
      STATEMENTS OF OPERATIONS
              F-3CONSOLIDATED
      STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
              F-4CONSOLIDATED
      STATEMENTS OF CASH FLOWS
              F-5, F-6NOTES TO
      CONSOLIDATED FINANCIAL STATEMENTS
              F-7 -
      F-26








24




SIMONTACCHI, MILLER & DeANGELIS, PA
                  CERTIFIED
      PUBLIC ACCOUNTANTS
                170
      E. MAIN STREET
                  ROCKAWAY,
      NEW JERSEY07866
                  TEL: (973) 664-1140
                  FAX: (973) 664-1145
  To
The Board of Directors
 Welistar
International, Inc.
 Holland,
Ohio 43528


Report
of Independent Registered Public Accounting Firm
  We have
audited the accompanying consolidated balance sheets of Wellstar International,
Inc. and Subsidiary as of July 31, 2008 and 2007 and the related consolidated
statements of operations, changes in stockholders' equity (deficit) and cash
flows for the years ended July 31, 2008 and 2007. The financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on the financial statements based on our audits.
  We
conducted our audits in accordance with the Standards of the Public Company
Accounting Oversite Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
  In our
opinion, the financial statements referred to above presents fairly, in all
material respects, the financial position of Wellstar International, Inc. and
Subsidiary as of July 31, 2008 and 2007, and the results of their operations and
their cash flows for the years ended July 31, 2008 and 2007 in conformity with
accounting principles generally accepted in the United States of
America.
  The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 7 to the
consolidated financial state­ments, the Company had a net loss of
$5,713,087, negative cash flow from operations of $1,079,933, negative working
capital of $6,781,471, and a stockholders' deficiency of $12,755,069 at July 31,
2008. These matters raise substantial doubt about the Company's ability to
continue as a going concern. Management's plan in regards to these matters is
also described in Note 7. The accompanying consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
   /s/
Simontacchi, Miller & DeAngelis, PA
 
 Simontacchi, Miller &
DeAngelis, PA
 Rockaway, New
Jersey
 October 30,
2008
  MEMBER,
AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
 MEMBER,
NEW JERSEY SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS
  F-i
  WELLSTAR
INTERNATIONAL, INC. AND SUBSIDIARY
 CONSOLIDATED
BALANCE SHEETS
 JULY
31, 2008 AND 2007
  ASSETS


2008
                                    
                                    
                                    2007Current
      Assets:Cash
                                    
                                    $
                                    25,560
                                    
                                    
                                    $
                                    64,791Accounts
      Receivable
                                    
                                    
                                    
                                    
                                    
                                    
                                    50,000Prepaid
      Expenses
                                    
                                    
                                    40
                                    
                                    
                                    
                                    12,624Rent
      Refund Receivable
                                    
                                    
                                    1.580
                                    
                                    
                                    
                                    1,580Total
      Current Assets
                                    
                                    
                                    27,180
                                    
                                    
                                    
                                    128.995Fixed
      Assets:Imaging
      Equipment
                                    
                                    
                                    837,874
                                    
                                    
                                    
                                    505,761Office
      Equipment and Fixtures
                                    
                                    
                                    154,540
                                    
                                    
                                    
                                    150,354Subtotal
                                    
                                    
                                    992,414
                                    
                                    
                                    
                                    656,115Less:
      Accumulated Depreciation
                                    
                                    
                                    374,414
                                    
                                    
                                    
                                    197,921Net
      Fixed Assets
                                    
                                    
                                    618,000
                                    
                                    
                                    
                                    458.194Intangible
      Assets:Covenant
      Not To Compete
                                    
                                    
                                    20,000
                                    
                                    
                                    
                                    20,000Manufacturing
      and Distribution Agreement
                                    
                                    
                                    700,000
                                    
                                    
                                    
                                    700.000Subtotal
                                    
                                    
                                    720,000
                                    
                                    
                                    
                                    720,000Less:
      Accumulated Amortization
                                    
                                    
                                    352,304
                                    
                                    
                                    
                                    221,141Net
      Intangible Assets
                                    
                                    
                                    367.696
                                    
                                    
                                    
                                    498.859Other
      Assets:Loan
      Acquisition Cost (net of amortization of $216,861
                                      @
      7/31/08 and $167,663 @ 7/31/07)
                                    
                                    
                                    80,664
                                    
                                    
                                    
                                    69,862Software
      and Manuals (net of amortization of $99,425
                                      @
      7/31/08 and $65,425 @ 7/31/07)
                                    
                                    
                                    35,975
                                    
                                    
                                    
                                    54,575Security
      Deposit
                                    
                                    
                                    4,525
                                    
                                    
                                    
                                    4.425Total
      Other Assets
                                    
                                    
                                    121,164
                                    
                                    
                                    
                                    128,862Total
      Assets
                                    
                                    $
                                    1,134,040
                                    
                                    
                                    $
                                    1,214,910




See Accompanying Notes to
Consolidated Financial Statements




F-1




WELLSTAR
INTERNATIONAL, INC. AND SUBSIDIARY
 CONSOLIDATED
BALANCE SHEETS
 JULY
31, 2008 AND 2007
  LIABILITIES
LESS SHAREHOLDERS' DEFICIT
   2008
                                  
                                  
                                  2007Current
      Liabilities:Accounts
      Payable
                                  
                                  $
                                  699,295
                                  
                                  
                                  $
                                  140,380Accrued
      Expenses
                                  
                                  
                                  1,915,925
                                  
                                  
                                  
                                  724,294Note
      & Loan Payable - Other
                                  
                                  
                                  13,000
                                  
                                  
                                  
                                  500Notes
      Payable
                                  
                                  
                                  750,000
                                  
                                  
                                  
                                  750,000Derivative
      Instrument Liability - Loan
                                  
                                  
                                  374,952
                                  
                                  
                                  
                                  335,511Derivative
      Instrument Liability - Convertible Notes
                                  
                                  
                                  2,525,027Convertible
      Debt
                                  
                                  
                                  530,452Total
      Current Liabilities
                                  
                                  
                                  6.808.651
                                  
                                  
                                  
                                  1,950,685Long
      Term Liabilities:Convertible
      Debt
                                  
                                  
                                  85,499
                                  
                                  
                                  
                                  119,486Derivative
      Instrument Liability - Convertible Notes
                                  
                                  
                                  5,841,505
                                  
                                  
                                  
                                  6,310,525Derivative
      Instrument Liability - Warrants
                                  
                                  
                                  1.153.454
                                  
                                  
                                  
                                  212.868Total
      Long-Term Liabilities
                                  
                                  
                                  7.080.458
                                  
                                  
                                  
                                  6,642.879Total
      Liabilities
                                  
                                  
                                  13.889.109
                                  
                                  
                                  
                                  8.593.564Stockholders'
      Deficit:Common
      StockAuthorized
      500,000,000 Shares, par value .001 per shareIssued
      Shares,461,540,217 - Outstanding Shares, 460,040,217 (7/31/08) and
      119,083,975 (7/31/07)
                                  
                                  
                                  460,041
                                  
                                  
                                  
                                  119,084Paid
      in Surplus
                                  
                                  
                                  1,098,260
                                  
                                  
                                  
                                  1,102,545Retained
      Earnings (Deficit)
                                  
                                  
                                  (14,313,370
                                  )
                                  
                                  
                                  (8,600,283
                                  )Total
      Shareholders' Deficit
                                  
                                  
                                  (12355,069
                                  )
                                  
                                  
                                  (7,378,654
                                  )Total
      Liabilities Less Stockholder's Deficit
                                  
                                  $
                                  1,134,040
                                  
                                  
                                  $
                                  1,214,910
  See
Accompanying Notes to Consolidated Financial
Statements
 F-2
  WELLSTAR
INTERNATIONAL, INC. AND SUBSIDIARY
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 FOR
THE YEARS ENDED JULY 31, 2008 AND 2007
 2008
                        
                        
                        2007Income:Revenue
      from License Agreement
                        
                        $
                        -0-
                        
                        
                        $
                        100,000Revenue
      from Medical Imaging
                        
                        
                        -0-
                        
                        
                        
                        1,500Total
      Revenue
                        
                        
                        -0-
                        
                        
                        
                        101,500Cost
      of Sales
                        
                        
                        -0-
                        
                        
                        
                        100Gross
      Profit (Loss)
                        
                        
                        -0-
                        
                        
                        
                        101.400Operating
      Expenses:Selling,
      General and Administrative
                        
                        
                        1,975,850
                        
                        
                        
                        2,095,515Depreciation
      and Amortization
                        
                        
                        390,854
                        
                        
                        
                        337,754Total
      Operating Expenses
                        
                        
                        2,366,704
                        
                        
                        
                        2,433,269Loss
      from Operations
                        
                        
                        (2,366,704
                        )
                        
                        
                        (2,331,869
                        )Other
      Expense (Income):Interest
      Income
                        
                        
                        (2,313
                        )
                        
                        
                        (7,947
                        )Interest
      Expense
                        
                        
                        477,395
                        
                        
                        
                        375,159Derivative
      Instrument Expense, Net
                        
                        
                        2,471,101
                        
                        
                        
                        839,662Delinquent
      Stock RegistrationPenalty
      - Convertible Debentures
                        
                        
                        400,200
                        
                        
                        
                        115,374Total
      Other Expenses (Income)
                        
                        
                        3,346,383
                        
                        
                        
                        1,322.248Loss
      before Provision for Taxes
                        
                        
                        (5,713,087
                        )
                        
                        
                        (3,654,117
                        )Provision
      for Taxes
                        
                        
                        -
                        
                        
                        
                        -Net
      Loss
                        
                        $
                        (5,713,087
                        )
                        
                        $
                        (3,654,117
                        )Net
      Loss Per Share,Basic and
      Diluted
                        
                        $
                        (0.02
                        )
                        
                        $
                        (.04
                        )Weighted
      Average Number of Common Shares
                          Outstanding,
      Basic and Diluted
                        
                        $
                        253,954,978
                        
                        
                        $
                        98,852,685
  See
Accompanying Notes to Consolidated Financial
Statements
 F-3
  WELLSTAR
INTERNATIONAL, INC. AND SUBSIDIARY
 CONSOLIDATED
STATEMENTS OF CHANGES IN
 STOCKHOLDERS'
EQUITY (DEFICIT)
 FOR
THE YEARS ENDED JULY 31, 2008 AND 2007
   Common
      Stock
                                                                          
                                                                          
                                                                          Additional
                                                                            Paid
      in
                                                                          
                                                                          
                                                                          AccumulatedShares
                                                                          
                                                                          
                                                                          Amount
                                                                          
                                                                          
                                                                          Capital
                                                                          
                                                                          
                                                                          Deficit
                                                                          
                                                                          
                                                                          TotalBalance,
      July 31, 2006
                                                                          
                                                                          
                                                                          80,100,000
                                                                          
                                                                          
                                                                          
                                                                          80,100
                                                                          
                                                                          
                                                                          $
                                                                          461,475
                                                                          
                                                                          
                                                                          
                                                                          (4,946,166
                                                                          )
                                                                          
                                                                          $
                                                                          (4,404,591
                                                                          )Stock
      Issued to Consultants for Services
                                                                          
                                                                          
                                                                          9,609,975
                                                                          
                                                                          
                                                                          
                                                                          9,610
                                                                          
                                                                          
                                                                          
                                                                          131,171
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          140,781Stock
      Issued to Employees
                                                                          
                                                                          
                                                                          4,300,000
                                                                          
                                                                          
                                                                          
                                                                          4,300
                                                                          
                                                                          
                                                                          
                                                                          60,200
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          64,500Conversion
      of Debentures
                                                                          
                                                                          
                                                                          25,074,000
                                                                          
                                                                          
                                                                          
                                                                          25,074
                                                                          
                                                                          
                                                                          
                                                                          449,699
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          474,773Net
      Loss for the Period
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          (3,654,117
                                                                          )
                                                                          
                                                                          
                                                                          (3,654,117
                                                                          )Balance,
      July 31, 2007
                                                                          
                                                                          
                                                                          119,083,975
                                                                          
                                                                          
                                                                          $
                                                                          119,084
                                                                          
                                                                          
                                                                          $
                                                                          1,102,545
                                                                          
                                                                          
                                                                          $
                                                                          (8,600,283
                                                                          )
                                                                          
                                                                          $
                                                                          (7,378,654
                                                                          )Common
      Stock - Issued for Services
                                                                          
                                                                          
                                                                          40,682,142
                                                                          
                                                                          
                                                                          
                                                                          40,682
                                                                          
                                                                          
                                                                          
                                                                          54,400
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          95,082Conversion
      of Debentures
                                                                          
                                                                          
                                                                          300,274,100
                                                                          
                                                                          
                                                                          
                                                                          300,275
                                                                          
                                                                          
                                                                          
                                                                          (58,685
                                                                          )
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          241,590Common
      StockNet
      Loss for the Period
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          (5,713,087
                                                                          )
                                                                          
                                                                          
                                                                          (5,713,087
                                                                          )Balance,
      July 31, 2008
                                                                          
                                                                          
                                                                          460,040,217
                                                                          
                                                                          
                                                                          $
                                                                          460,041
                                                                          
                                                                          
                                                                          $
                                                                          1,098,260
                                                                          
                                                                          
                                                                          $
                                                                          (14,313,370
                                                                          )
                                                                          
                                                                          $
                                                                          (12,755,069
                                                                          )
  See
Accountants' Report and Accompanying Notes to Financial
Statements
  F-4
  WELLSTAR
INTERNATIONAL, INC. AND SUBSIDIARY
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 FOR
THE YEARS ENDED JULY 31, 2008 AND 2007
 2008
                                    
                                    
                                    2007Cash
      Flows from Operating Activities:Net
      Loss
                                    
                                    $
                                    (5,713,087
                                    )
                                    
                                    $
                                    (3,654,117
                                    )Adjustments
      to Reconcile Net Loss to Net Cash used in Operating
      Activities:Depreciation
      and Amortization
                                    
                                    
                                    390,854
                                    
                                    
                                    
                                    337,754Delinquent
      Registration Penalty ConvertibleDebentures
                                    
                                    
                                    400,200
                                    
                                    
                                    
                                    115,374Services
      Paid in Stock
                                    
                                    
                                    95,082
                                    
                                    
                                    
                                    205,281Interest
      Paid in Stock
                                    
                                    
                                    
                                    
                                    
                                    
                                    274,152Derivative
      Instrument Expense, Net
                                    
                                    
                                    2,471,101
                                    
                                    
                                    
                                    839,662Changes
      in Operating Assets and Liabilities:(Increase)
      Decrease Accounts Receivable
                                    
                                    
                                    50,000
                                    
                                    
                                    
                                    (43,900
                                    )(Increase)
      Decrease Prepaid Expenses
                                    
                                    
                                    12,584
                                    
                                    
                                    
                                    (500
                                    )(Increase)
      Decrease Rent Refund Receivable
                                    
                                    
                                    
                                    
                                    
                                    
                                    (406
                                    )Increase
      Accounts Payable
                                    
                                    
                                    258,915
                                    
                                    
                                    
                                    104,623Increase
      Accrued Expenses
                                    
                                    
                                    954,418
                                    
                                    
                                    
                                    276.417Net
      Cash Used in Operating Activities
                                    
                                    
                                    (1,079,933
                                    )
                                    
                                    
                                    (1,545,660
                                    )Cash
      Flows from Investing Activities:Purchase
      of Equipment
                                    
                                    
                                    (36,298
                                    )
                                    
                                    
                                    (49,972
                                    )Purchase
      of Software
                                    
                                    
                                    (15,400
                                    )
                                    
                                    
                                    (40,000
                                    )Security
      Deposit
                                    
                                    
                                    (100
                                    )
                                    
                                    
                                    (2,845
                                    )Net
      Cash Used in Investing Activities
                                    
                                    
                                    (51,798
                                    )
                                    
                                    
                                    (92,817
                                    )Cash
      Flows From Financing Activities:Payments
      of Financing Costs
                                    
                                    
                                    (60,000
                                    )
                                    
                                    
                                    (42,500
                                    )Proceeds
      from Issuance of Convertible Notes
                                    
                                    
                                    1,140,000
                                    
                                    
                                    
                                    1,500,000Other
      Loan
                                    
                                    
                                    12,500
                                    
                                    
                                    
                                    500Net
      Cash Provided by Financing Activities
                                    
                                    
                                    1,092,500
                                    
                                    
                                    
                                    1,458,000Net
      (Decrease) Increase in Cash
                                    
                                    
                                    (39,231
                                    )
                                    
                                    
                                    (180,477
                                    )Cash
      at Beginning of Period
                                    
                                    
                                    64,791
                                    
                                    
                                    
                                    245.268$
                                    25,560
                                    
                                    
                                    $
                                    64,791Cash
      at End of PeriodCash
      Paid for Interest
                                    
                                    $
                                    -0-
                                    
                                    
                                    $
                                    -0-Cash
      Paid for Taxes
                                    
                                    $
                                    -0-
                                    
                                    
                                    $
                                    -0-
 See
Accountants' Report and Accompanying Notes to Financial
Statements
 F-5
 WELLSTAR
INTERNATIONAL, INC. AND
SUBSIDIARY


CONSOLIDATED
STATEMENTS OF CASH FLOWS


FOR
THE YEARS ENDED JULY 31, 2008 AND 2007




Supplemental
Disclosure of Non-Cash Investing and Financing Activities:




1.
            During
      the year ended July 31, 2008, stock purchase warrants exercisable for
      55,000,000 shares of Common Stock were issued in connection with a closing
      on $830,000 of convertible notes had no cash
  effect.




2.
            40,682,142
      shares of Common Stock was issued for services rendered. The amount was
      $95,082.




3.
            During
      the year ended July 31, 2008, convertible debentures in the amount of
      $241,590 were converted into 300,274,100 shares of Common
      Stock.




4.
            During
      the year ended July 31, 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.




5.
            During
      the year ended July 31, 2007, stock purchase warrants exercisable for
      15,833,334 shares of Common Stock were issued in connection with a closing
      on $1,500,000 of convertible notes had no cash
  effect.




6.
            13,909,975
      shares of Common Stock was issued for services rendered. The amount was
      $205,281.




7.
            During
      the year ended July 31, 2007, convertible debentures and related accrued
      interest in the amount of $474,773 were converted into 25,074,000 shares
      of Common Stock.




8.
            During
      the year ended July 31, 2008 and 2007, delinquent registration penalties
      of $400,200 and $115,374, respectively, were recorded, no cash was
      expended.






See
Accountants' Report and Accompanying Notes to Financial Statements
  F-6




WELLSTAR
INTERNATIONAL, INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


AS
OF JULY 31, 2008 AND 2007




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"), 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)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.




d)Useof 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.




e)            
Cash




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






F-7






WELLSTAR
INTERNATIONAL, INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


AS
OF JULY 31, 2008 AND 2007




NOTE1Summary
of Significant Accounting Policies and Organization(cont'd)




f)Loss
Per Share




Basic and
diluted net loss per common share for the years ended July 31, 2008 and 2007 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 loss per share because the assumed conversion and
exercise would be anti-dilutive due to the net 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 7,726,687,864 on July 31, 2008.




g)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.




h)            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 asequity. 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 instrument 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.




F-8




WELLSTAR
INTERNATIONAL, INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


AS
OF JULY 31, 2008 AND 2007




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




i)Income
Taxes




The
Company will provide for income taxes based on the provisions of Financial
Accounting Standards Board ("FASB") Statements 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
statements and tax basis of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to
reverse.




j)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 July 31, 2008. The
Company does not anticipate non-performance by the financial
institution.




k)            
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.




1)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 years ended July 31, 2008
and 2007 were $176,493 and $129,396, respectively.




m)            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 six months for the
original term of the Note Payable. Total amortization for the years ended July
31, 2008 and 2007 were $49,198 and $30,098, respectively.




F-9




WELLSTAR
INTERNATIONAL, INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


AS OF
JULY 31, 2008 AND 2007




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




m)Intangible
Assets(cont'd)




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 Yz years for the
manufacturing and distribution agreement. The total amortization expense for the
years ended July 31, 2008 and 2007 were $165,163 and $178,260,
respectively.




n)Derivative
Instruments




Because
of the limited trading history of our Common Stock, we have estimated the future
volatility ofour 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.




o)            
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.




F-10




WELLSTAR
INTERNATIONAL, INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


AS
OF JULY 31, 2008 AND 2007




NOTE2Convertible
Notes




On
October 31, 2005, the Company entered into a Securities Purchase Agreement with
MW 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.




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 and June 12, 2008. The total shares
at July 31, 2008 were 7,167,016,295.




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 MW 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.




F-11






WELLSTAR
INTERNATIONAL, INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


AS OF
JULY 31, 2008 AND 2007




NOTE
2Convertible
Notes(cont'd)




No
interest shall be due on any payable for any month in which the Company's stocktrading 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.




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




OnMay 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 on any payable for any month in which the Company's stock
trading price is greater than $.0775for each trading day of the month. The notes are secured by all the
assets and intellectual property of the Company.




OnOctober 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 of15,000,000 shares of common stock exercisable at anytime at $ .0001 per
share expiring on the seventh anniversary from the date of issue October 12,
2014.




F-12




WELLSTAR
INTERNATIONAL, INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


AS
OF JULY 31, 2008 AND 2007




NOTE2Convertible
Notes(coned)




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. 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.




F-13




WELLSTAR
INTERNATIONAL, INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


AS
OF JULY 31, 2007 AND 2008




NOTE2Convertible
Notes(cont'd)




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.




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.




See
Paragraph 2 of this note related to the terms of conversion. The total shares at
July 31, 2008, 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 $695,574 was accrued through July 31, 2008.




F-14




WELLSTAR
INTERNATIONAL, INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


AS
OF
JULY 31, 2007 AND 2008




NOTE
2Convertible
Notes(cont'd)




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 $708,592 into 325,348,200 shares of Common
Stock as of July 31, 2008. The balance of the notes are $4,859,169 at July 31,
2008. Interest due of $235,912 is included in Accrued Expenses.






NOTE
3                  Notes
Payable
  a)             The
Company has borrowed $150,000 from an unrelated individual. The Note isdated
August 1, 2005. The outstanding balance ofthe loan shall bear monetary interest at the fixed rate of sixpercent (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 $27,375 is included in Accrued
Expenses.




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




Note
Payable - July 31, 2008 and
2007                                                                                      $150,000




b)The
Company has entered into a loan agreement with an unrelated individual.
Thenote 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 July 31, 2008, 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.
 F-15




WELLSTAR
INTERNATIONAL, INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


AS OF
JULY 31, 2008 AND 2007




NOTE
3Notes
Payable(cont'd)




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. Inconsideration 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 July 31, 2008, the
note has not been paid.




At July
31, 2008, $170,865 of interest expense is included in Accrued Expenses. As
security for the loan, the Company has pledged all ofits tangible and intangible assets. Commencing on January 1, 2006, the
Company shall establish an escrow account and shall deposit 25%
ofall 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 July 31, 2008, 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 July 31, 2008 were 559,671,569. 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 FASB133 (see Note 4).




Balance
due at July 31, 2008 and
2007                                                                                      $400,000




c)         
   OnDecember 21, 2005, the Company completed the purchase of certain assets
ofMicro
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.




F-16




WELLSTAR
INTERNATIONAL, INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


AS OF
JULY 31, 2008 AND 2007




NOTE
3Notes
Payable(cont'd)




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
                    
                    $
                    700,000Tangible
      Assets
                    
                    
                    80,000Covenant
      Not-To-Compete
                    
                    
                    20,000Total
                    
                    $
                    800,000




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 liotes due. Due to the default, the interest charged from June 19, 2006 is
18% on the $200,000 Note Payable. Interest expense of $78,338 is included in
Accrued Expenses.




OnNovember 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 July 31, 2008 and through October 30, 2008, nothing has
transpired.




Balance due at July 31,
2008 and
2007                                                                                     $200.000




(d)
            The
      Company has borrowed $10,000 from an unrelated company. The Note is
      dated




April
      14, 2008, and was due on July 15,2008 (maturity date). The Note has an interest rate of 15% 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. Inan event of default, Lender by notice given to Borrower may declare
      the unpaid principal and accrued interest owing upon this notice to be
      immediately payable. The Company (Borrower) has not received any demand
      for payment from the Lender as of October 31, 2008. The Note is included
      as a current liability in Note and Loan Payable - Other, in the amount of
      $10,000.




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.




F-17




WELLSTAR
INTERNATIONAL, INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


AS OF
JULY 31, 2008 AND 2007




NOTE
4Derivative
Financial Instrument Liabilities(coned)




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 July 31, 2008, we used the market price of our Common Stockon 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 1.68% to 2.81%, based on constant maturity
rates published by the U.S. Federal Reserve, applicable to the remaining life
ofthe options or warrants.




F-18




WELLSTAR
INTERNATIONAL, INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


AS
OF JULY 31, 2008 AND 2007




NOTE
4Derivative
Financial Instrument Liabilities(cont'd)




At July
31, 2008, 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
      - July 31,
                200810/11/05
              04/11/06
              1,000,000
              Thompson
              $.50
              $            41,526
              $                    011/19/06
              02/18/08
              200,000
              Thompson
              $.10
              3,845
              011/19/06
              02/18/08
              200,000
              Thompson
              $.20
              2,276
              010/31/05
              10/31/10
              1,666,667
              AJW
      Partners
              $.50
              169,629
              2,80601/20/06
              01/20/11
              1,666,667
              AJW
      Partners
              $.50
              81,321
              3,57707/25/06
              07/25/11
              833,333
              AJW
      Partners
              $.50
              146,197
              2,69908/04/06
              08/04/11
              833,333
              AJW
      Partners
              $.50
              102,816
              2,76511/30/06
              11/30/13
              4,000,000
              AJW
      Partners
              $.08
              158,741
              48,44703/26/07
              03/26/14
              1,000,000
              AJW
      Partners
              $.03
              25,433
              14,07105/30/07
              05/30/14
              10,000,000
              AJW
      Partners
              $.02
              163,409
              147,06010/12/07
              10/12/14
              15,000,000
              AJW
      Partners
              $.0001
              179,353
              254,15311/1f/07
              11/15/10
              10,000,000
              AJW
      Partners
              $.0001
              39,649
              169,44512/14/07
              12/14/10
              10,000,000
              AJW
      Partners
              $.0001
              24,000
              169,45204/22/08
              04/22/15
              20,000,000
              AJW
      Partners
              $.0001
              17,540
              338.979Fair
      value of derivative instrument liabilities for warrants
              
              $1
      155 735
              $1,153,454















F-19






WELLSTAR
INTERNATIONAL, INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


AS
OF JULY 31, 2008 AND 2007




NOTE
4Derivative
Financial Instrument Liabilities(cont'd)




Issue
                        Date
                      
                      Due
                        Date
                      
                      Amount
                      
                      Note
                        Instrument
                      
                      Exercise
                        Price
      Per
                        Share
                      
                      Value
      -Issue
                        Date
                      
                      
                      Value
      - July 31,
                        200810/11/05
                      
                      04/11/06
                      
                      $
                      400,000
                      
                      Loan
                      
                      Various
                      
                      $
                      370,189
                      
                      
                      $
                      374,95210/31/05
                      
                      10/31/08
                      
                      
                      1,000,000
                      
                      Convertible
      Notes
                      
                      Various
                      
                      
                      2,681,204
                      
                      
                      
                      381,48001/20/06
                      
                      01/20/09
                      
                      
                      1,000,000
                      
                      Convertible
      Notes
                      
                      Various
                      
                      
                      1,363,058
                      
                      
                      
                      1,379,93507/25/06
                      
                      07/25/09
                      
                      
                      500,000
                      
                      Convertible Notes
                      
                      Various
                      
                      
                      791,994
                      
                      
                      
                      763,61208/04/06
                      
                      08/04/09
                      
                      
                      500,000
                      
                      Convertible
      Notes
                      
                      Various
                      
                      
                      616,127
                      
                      
                      
                      768,50611/30/06
                      
                      11/30/09
                      
                      
                      400,000
                      
                      Convertible
      Notes
                      
                      Various
                      
                      
                      523,047
                      
                      
                      
                      643,32203/26/07
                      
                      03/26/10
                      
                      
                      165,000
                      
                      Convertible
      Notes
                      
                      Various
                      
                      
                      274,500
                      
                      
                      
                      276,29105/30/07
                      
                      05/30/10
                      
                      
                      435,000
                      
                      Convertible
      Notes
                      
                      Various
                      
                      
                      825,801
                      
                      
                      
                      742,45110/12/07
                      
                      10/12/10
                      
                      
                      175,000
                      
                      Convertible
      Notes
                      
                      Various
                      
                      
                      711,289
                      
                      
                      
                      309,39111/15/07
                      
                      11/15/10
                      
                      
                      325,000
                      
                      Convertible
      Notes
                      
                      Various
                      
                      \465,052
                      
                      
                      
                      578,30412/14/07
                      
                      12/14/07
                      
                      
                      315,000
                      
                      Convertible
      Notes
                      
                      Various
                      
                      
                      631,254
                      
                      
                      
                      564,00112/31/07
                      
                      12/31/10
                      
                      
                      427,760
                      
                      Convertible
      Notes
                      
                      Various
                      
                      
                      894,835
                      
                      
                      
                      768,60404/22/08
                      
                      04/22/11
                      
                      
                      190,000
                      
                      Convertible
      Notes
                      
                      Various
                      
                      
                      569,394
                      
                      
                      
                      694,46206/12/08
                      
                      06/12/11
                      
                      
                      135,000
                      
                      Convertible
      Notes
                      
                      Various
                      
                      
                      555.374
                      
                      
                      
                      496.173Fair
      value of bifurcated embedded derivative instrument
    liabilities
                      
                      
                      
                      
                      
                      
                      
                      
                      $
                      11,273,118
                      
                      
                      $
                      8,741,484Total
      derivative financial instruments
                      
                      
                      
                      
                      
                      
                      
                      
                      $
                      12.428,853
                      
                      
                      $
                      9,894,938
 F-20




WELLSTAR
INTERNATIONAL, INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


AS
OF JULY 31, 2008 AND 2007




NOTE
5Stockholders'
Equity (Deficit)




On August
14, 2006, the Company issued 300,000 shares of Restricted Common Stock to
various individuals for marketing services. The number of shares of stock issued
was at 30% of the market value. The total recorded as Common Stock was $300 and
additional paid in capital of $13,200. The amount of $13,500, the charge for the
services rendered, is reflected as an expense in the Statements of
Operations.




On
September 19, 2006, the Company issued 450,000 shares of Restricted Common Stock
for medical consulting services. The number of shares of stock issued was at 30%
of the market value for the fair value of the service. The total recorded as
common stock was $450 and additional paid in capital of $9,540. $9,990 is
reflected as medical consulting in the Statements of Operations.




On
December 4, 2006, the Company issued 9,853,993 shares of Restricted Common
Stock. The number of shares of stock issued was at 30% of the market value.
4,300,000 shares were issued to employees, 1,353,993 for legal services and
4,200,000 for computer and financial consulting services. The total recorded as
Common Stock was $9,854 and additional paid in capital of $137,965. A total of
$147,819 is reflected as an expense in the Statements of
Operations.




During
the quarter ended April 30, 2007, the Company issued 2,196,154 shares of
Restricted Common Stock as follows, Financial Consulting, 400,000 shares,
Medical Consulting, 1,200,000 shares and Legal Services, 596,154 shares.
2,100,000 shares are at 75% of market value and 96,154 shares were at market
value. The total recorded as Common Stock was $2,196 and additional paid in
capital of $17,146. A total of $19,342 is reflected as an expense in the
Statements of Operations.




During
the quarter ended July 31, 2007, the Company issued 1,109,828 shares of
Restricted Common Stock for legal services . The shares were issued at market
value. The total was recorded as Common Stock was $1,110 and additional paid-in
capital of $13,520. A total of $14,630 is reflected as an expense in the
Statements of Operations.




During
the nine months ended April 30, 2008, the Company issued the following shares of
restricted common stock for services rendered; for legal services 38,232,142
shares, at market value, for computer software 2,200,000 shares at 60% of market
value and for medical consulting 250,000 shares at 50% of market value. The
total was recorded as common stock $40,682 and additional paid-in capital of
$54,400. The total of $95,082 is reflected as an expense in the Statement of
Operations.




F-21




WELLSTAR
INTERNATIONAL, INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


AS OF JULY 31, 2008
AND 2007




Note
6Derivative
Instruments Income, Net




Derivative
instruments expense of $2,471,101 and $839,662 represents the net unrealized
(non-cash) change during the years ended July 31, 2008 and July 31, 2007,
respectively, 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.




Note7Going
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 $5,713,087 and a negative cash flow from operations of $1,079,933
for the year ended July 31, 2008, negative working capital of $6,781,471, and a
stockholders' deficiency of $12,755,069 at July 31, 2008.




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
8Employee
Compensation Plan




In
December 2006, the Company filed a Form S-8 to register 5,000,000 shares of
common stock with a proposed offering price of $ .075 per share related to the
formation of the Wellstar International, Inc. 2006 Employee Compensation Plan.
In August 2007, the Company filed a Form S-8 and registered 8,500,000 shares of
Common Stock with a projected offering price of $ .013 per share related to the
formation of the 2007 Employee Compensation Plan. To date, no shares have been
issued under either plan.




Note
9Limited
Technology License Agreement




On July
9, 2007, the Company's wholly owned subsidiary, Trillennium Medical Imaging,
Inc., entered into a Limited Technology License Agreement with MacLath Ltd, a
Costa Rican corporation. Trillennium appointed MacLath Ltd to be the exclusive
licensee of Trillennium to distribute Trillennium products and systems to those
persons and entities asoutlined in the Agreement for a renewable term of 25 years.




F-
 F-22




WELLSTAR
INTERNATIONAL, INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


AS
OF JULY 31, 2008 AND 2007




Note
9Limited
Technology License Agreement(cont'd)




Under the
Agreement, Licensee is obligated to pay Trillennium ongoing payments of 7% of
gross revenues received by Licensee from any sale, lease or sub-licensing under
the Agreement. Licensee is also obligated to purchase and pay for a minimum of
50 Trillennium Systems, as defined in the Agreement, during the one-year period
commencing on the effective date of the Agreement, and each succeeding one-year
period throughout the term of the Agreement.




The
prices to be paid by Licensee for Trillennium products will be equal to the list
price then published by the Trillennium product manufacturer, minus 7.5%, plus
all applicable taxes or fees.




The
Licensee is in default as it has not made the required payments due under the
Agreement. The Licensee paid $100,000 which is not returnable, and has been
recorded as Revenue in the Statements of Operations, for the year ended July 31,
2007. The Agreement has been terminated.




Note10Compensated
Absences




There has
been no liability accrued for compensated absences as in accordance with Company
policy, all compensated absences, accrued vacation and sick pay must be used by
December 31. At July 31, 2008, any amount for accrual is not material and has
not been computed.




Note
11Recently
Issued Accounting Pronouncements




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 on 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 measurements on
earnings. SFAS No. 157 is effective for fiscal years beginning after November
15, 2007, and interim periods within those fiscal years. The Company is
currently evaluating what effect, if any, the adoption of SFAS No. 157 will have
on its financial position, results of operations, or cash flows, for the year
beginning August 1, 2008.




EITF
Topic D-98, Classification and Measurement of Redeemable Securities, on March
15, 2007, the SEC staff announced its position that requires preferred
securities that are redeemable for cash or other assets to be classified outside
of permanent equity if the stock is: (1) redeemable at a fixed or determinable
price and date, (2) at the option of the holder and (3) conditions outside the
control of the issuer. The pronouncement currently has no effect on the
Company.




F-
 F-23




WELLSTAR
INTERNATIONAL, INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


AS OF
JULY 31, 2008 AND 2007




Note
11Recently
Issued Accounting Pronouncements(cont'd)




On
December 21, 2006, the Financial Accounting Standards Board (FASB) posted FASB
Staff Position (FSP) FSPEIFT00-19-2, 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. The guidance in this FSP
amends FASB Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities, and No. 150, Accounting for Certain Guarantor's Accounting and
Disclosure Requirements for Guarantees, including Indirect Guarantees of
Indebtedness of Others, to include scope exceptions for registration payment
arrangements. This FSP further clarifies that a 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. The Company has 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 forFinancial
Assets and Financial Liabilities("SFAS 159"). SFAS 159 expands the use
of fair value accounting but does not affect 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 held­to-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 cannot 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 are
currently assessing the impact of SFAS 159 will have on our results of opeations
and financial position.




In
December 2007, the FASB issued SFAS No. 141 (revised 2007), BusinessCombinations("SFAS 141R"), which replaces FASB No. 141 and SFAS 160, Noncontrolling
Interests in Consolidated Financial Statements - an amendment ofAFB
No. 51,("SFAS 160").




F-24




WELLSTAR
INTERNATIONAL, INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


AS
OF JULY 31, 2008 AND 2007




Note
11Recently
Issued Accounting Pronouncements(cont'd)




SFAS 141R
establishes principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, any noncontrolling interest in the acquiree and the
goodwill acquired. The Statement also established disclosure requirements that
will easily enable users to evaluate the nature and financial effects of the
business combination. SFAS 160 will change the accounting and reporting for
minority interests, reporting them as equity separate from the parent entity's
equity, as well as requiring expanded disclosures. SFAS 141R and SFAS 160 are
effective as of the beginning of an entity's fiscal year beginning after
December 15, 2008. We have not yet determined the impact of these pronouncements
will have on our results of operations and financial position.




Note
12Lease
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 $4,175. The lease expires July 16, 2008 and
was renewed to July 16, 2009. The Company incurred a rent expense of
approximately $50,025 and $32,550 for the years ended July 31, 2008 and 2007,
respectively. Future rental payments under the lease for the year ended July 31,
2009 is $50,100.




Note
13Subsequent
Events




AJW
Partners, LLC and related entities converted a portion of their notes (See Note
2) into 15,400,000 shares of Common Stock during the period August 1, 2008
through September 16, 2008.




In August
2008, the Company filed Form S-8 and registered 47,000,000 shares of Common
Stock at a proposed maximum offering price of $ .019 per share, issuable
pursuant to the Company's 2008 Compensation Plan, dated August 7,
2008.




The
Company had a special meeting of the stockholders in September 2008 pursuant to
a proxy statement in accordance with Section 14(a) of the Securities Act of
1934, sent to stockholders of record of common stock on June 3, 2008. The
following was authorized at the stockholders meeting to amend the Company's
Articles of Incorporation for the following:




1.
            Increased
      the authorized shares of Common Stock, par value $ .001 per share from
      500,000,000 shares to 1,000,000,000
shares.




2.
            To
      create 10,000,000 shares of blank check preferred stock $001 par value per
      share.




F-25




WELLSTAR
INTERNATIONAL, INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


AS
OF JULY 31, 2008 AND 2007




Note
13Subsequent
Events(cont'd)




3.
            To
      authorize the Company's Board of Directors, in its discretion, to amend
      the Company's Articles of Incorporation to effect a reverse split of the
      outstanding shares of the Company's common stock at a ratio of
      one-for-30.




OnAugust 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 July 31, 2008. 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 Notes (see Note 2
above).






F-26




Item 8. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE




Not applicable.




Item
8A. CONTROLS AND PROCEDURES




(a)
Evaluation of Disclosure Controls and Procedures: As of the end of the period
covered by this report, we conducted an evaluation, under the supervision and
with the participation of our chief executive officer and chief financial
officer, of our disclosure controls and procedures (as defined in Rule 13a-15(e)
and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our chief
executive officer and chief financial officer concluded that the our disclosure
controls and procedures are effective to ensure that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified
in the Commission's rules and forms. There was no significant change in our
internal controls or in other factors that could significantly affect these
controls subsequent to the date of the evaluation.




(b)
Limitations on Effectiveness of Disclosure Controls and Procedures:




Disclosure
controls and procedures cannot provide absolute assurance of achieving financial
reporting objectives because of their inherent limitations. Disclosure controls
and procedures is a process that involves human diligence and compliance and is
subject to lapses in judgment and breakdowns resulting from human failures.
Disclosure controls and procedures also can be circumvented by collusion or
improper management override. Because of such limitations, there is a risk that
material misstatements may not be prevented or detected on a timely basis by
disclosure controls and procedures. However, these inherent limitations are
known features of the financial reporting process. Therefore, it is possible to
design into the process safeguards to reduce, though not eliminate, this
risk.




PART
III




Item
9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT




Directors
and Executive Officers




The
following table sets forth current information regarding our executive officers
and directors:




Name
                    
                    Position
                    
                    Position
      Held SinceJohn
      Antonio
                    
                    President,
      Chief Executive Officer, Director
                    
                    June   2005Ken
      McCoppen
                    
                    Senior
      Vice President, Director
                    
                    June   2005Howard
      Bielski
                    
                    Chief
      Financial Officer
                    
                    August
      2005Dr.
      Michael Shen
                    
                    Director
                    
                    July   2005Dr.
      McKinley Boston
                    
                    Director
                    
                    July   2005




For
directors, the term of office is until the next annual meeting of shareholders.
For officers, the term of office is until the next annual meeting of the Board
of Directors, presently scheduled to be held immediately following the annual
meeting of the shareholders.




John
Antonio, President, Chief Executive Officer and Director. John Antonio has
served as our President, Chief Executive Officer, and a Director since June
2005. From March of 2004 until present, Mr. Antonio has been involved in the
establishment of Trillennium Medical Imaging, Inc. and its merger with Wellstar
International, Inc. From January 2003 until present, Mr. Antonio has been the
Vice President of Have Network Technologies International, Inc. From 1996 to
present Mr. Antonio has been the manager of Intertel LLC, which is engaged in
the distribution of prepaid phone cards in Mexico. Mr. Antonio graduated from
Bowling Green State University with a BLS Degree.




25




Ken
McCoppen, Senior Vice President and Director. Ken McCoppen has served as our
Senior Vice President and a Director since June 2005. From September 2002 until
September 2004, Mr. McCoppen was Executive Vice President of Sales for Arista
Communications, a provider of telecommunications services. From June 1999 until
September 2002, Mr. McCoppen was Vice President of the National Partners Program
for Qwest Communications. From 1982 to 1999, Mr. McCoppen held sales positions
at the following companies: Toshiba America; Samsung America; Micronics; Mantech
International; and GTE.




Howard
Bielski, Chief Financial Officer. Mr. Bielski has served as our Chief Financial
Officer since August 2005. Mr. Bielski is the managing member of Bielski &
Bielski, LLC, an accounting firm located in West Orange, New Jersey and is a
member of the American Institute of Certified Public Accountants and the New
Jersey Society of Certified Public Accountants.




Dr.
Michael Y. H. Shen, Director. Dr. Shen has served as a Director since July 2005.
Since October 2004, Dr. Shen has been the Head of the Section of Cardiac Imaging
and a Staff Physician at the Cleveland Clinic Florida. Since June 2003, Dr. Shen
has been the Head of the Section of Nuclear Cardiology and a Staff Physician at
the Cleveland Clinic Florida. From July 1999-May 2003, Dr. Shen held the
following positions at the Cooper Hospital/University Medical
Center:




Director,
Nuclear Cardiology and Director, Center for Cardiovascular Informatics. Also
from July 1999-May 2003, Dr. Shen was an Assistant Professor of Medecine at the
UMDNJ Robert Wood Johnson Medical School South Campus.




Dr.
McKinley Boston, Director. Dr. Boston has served as a Director since July 2005.
Since December 2004, Dr. Boston has served as Athletic Director and Vice
President of New Mexico State University. Since September 2000, Dr. Boston has
served as an Education Consultant at the Consortium of Minneapolis Board of
Education, Minneapolis Youth Coordinating Board, and Minneapolis Park
Board.




Audit
Committee




At
present we do not have an audit committee and consequently the entire Board
serves as the audit committee. The Board presently consists of 4 members, two of
whom are independent. We have interviewed several qualified individuals for the
position of Audit Committee Financial Expert on the Board of Directors. All have
declined to serve, with the primary reason being personal liability issues,
especially the perceived view that being the "financial expert" increases the
individual's personal exposure over that of being a regular Board
member.




Code
of Ethics




The Board
of Directors has not adopted a Code of Business Conduct and Ethics that is
applicable to our directors, principal executive and financial officer,
principal accounting officer or controller, and persons performing similar
functions.




Compliance
with Section 16(a) of the Exchange Act




Section
16(a) of the Securities Exchange Act of 1934, as amended (the "1934 Act")
requires officers and directors of a company with securities registered pursuant
to Section 12 of the 1934 Act, and persons who own more than 10% of the
registered class of such company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC"). Officers, directors and greater than 10% stockholders are required
by SEC regulation to furnish the subject company with copies of all Section
16(a) forms filed. During our fiscal year ended July 31, 2006, "), our officers,
directors and greater than 10% stockholders were not subject to the filing
requirements of Section 16(a) of the 1934 Act.





26




Item
10. Executive Compensation




The
following table sets forth the cash compensation (including cash bonuses) paid
or accrued by us for our years ended July 31, 2008, 2007 and 2006 to (i) our
Chief Executive Officer and (ii) our four most highly compensated officers,
other than our Chief Executive Officer, whose total annual salary and bonus
exceeded $100,000.




Summary
Compensation Table




Annual
      Long-term
                                                      
                                                      
                                                      CompensationAwards
                                                      
                                                      
                                                      CompensationPayoutsName
      and Principal Position
                                                      Fiscal
      Year
                                                      
                                                      Salary
                                                        ($)
                                                      
                                                      
                                                      Bonus
                                                        ($)
                                                      
                                                      
                                                      Securities
                                                        Underlying
                                                        Options/SARs
      (#)
                                                      
                                                      
                                                      LTIP
                                                        Payouts
                                                        ($)
                                                      
                                                      
                                                      All
      Other Compensation
                                                        ($)John
      Antonio
                                                      2008
                                                      
                                                      $
                                                      240,000
                                                      
                                                      
                                                      $
                                                      $36,000
                                                      
                                                      
                                                      
                                                      --
                                                      
                                                      
                                                      
                                                      --
                                                      
                                                      
                                                      
                                                      --President
      & CEO
                                                      2007
                                                      
                                                      
                                                      240,000
                                                      
                                                      
                                                      
                                                      --
                                                      
                                                      
                                                      
                                                      --
                                                      
                                                      
                                                      
                                                      --
                                                      
                                                      
                                                      
                                                      --2006
                                                      
                                                      
                                                      240,000
                                                      
                                                      
                                                      $
                                                      61,133
                                                      
                                                      
                                                      
                                                      --
                                                      
                                                      
                                                      
                                                      --
                                                      
                                                      
                                                      
                                                      --Ken
      McCoppen
                                                      2008
                                                      
                                                      $
                                                      240,000
                                                      
                                                      
                                                      $
                                                      $36,000
                                                      
                                                      
                                                      
                                                      --
                                                      
                                                      
                                                      
                                                      --
                                                      
                                                      
                                                      
                                                      --Vice
      President &Secretary
                                                      2007
                                                      
                                                      
                                                      240,000
                                                      
                                                      
                                                      
                                                      --
                                                      
                                                      
                                                      
                                                      --
                                                      
                                                      
                                                      
                                                      --
                                                      
                                                      
                                                      
                                                      --2006
                                                      
                                                      $
                                                      240,000
                                                      
                                                      
                                                      $
                                                      74,550
                                                      
                                                      
                                                      
                                                      --
                                                      
                                                      
                                                      
                                                      --
                                                      
                                                      
                                                      
                                                      --




Options
Grants in Last Fiscal Year




None.




Aggregate
Option Exercises In Last Fiscal Year and Fiscal Year End Option
Values




None.




Employment
Agreements




As
previously disclosed on, August 5, 2005, we entered into separate
employment agreements with John A. Antonio, our President and CEO; and Kenneth
B. McCoppen, our Vice President and Corporate Secretary. These agreements
provide for base annual salaries of $240,000. Further, each agreement has a base
term of five (5) years.




27




Item 11. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT




The
following table indicates beneficial ownership of our common stock as of October
27, 2008 by each person or entity known by us to beneficially own more than 5%
of the outstanding shares of our common stock; each of our executive officers
and directors; and all of our executive officers and directors as a
group.




Name
      and Address of Beneficial Owner (1)(2)
                    
                    Common
      Shares
                      Beneficially
                      Owned
      (1)
                    
                    
                    Total
                    
                    
                    Percent
                      of
                      Class
                      (3)John
      A. Antonio (4)
                    
                    
                    7,700,000
                    
                    
                    
                    7,700,000
                    
                    
                    
                    1.5
                    %Howard
      Bielski
                    
                    
                    3,000,000
                    
                    
                    
                    3,000,000
                    
                    
                    
                    0.5
                    %McKinley
      Boston
                    
                    
                    500,000
                    
                    
                    
                    500,000
                    
                    
                    
                    *Ken
      McCoppen
                    
                    
                    10,112,500
                    
                    
                    
                    10,112,500
                    
                    
                    
                    1.9
                    %Michael
      Shen
                    
                    
                    4,000,000
                    
                    
                    
                    4,000,000
                    
                    
                    
                    0.8
                    %Andrew
      M. Thompson (5)
                    
                    
                    111,111,111
                    
                    
                    
                    111,111,111
                    
                    
                    
                    21.8
                    %




All
directors and Executive 25,312,500 totaling 4.9%.




*Less
than 1%




(1)
            Beneficial
      Ownership is determined in accordance with the rules of the Securities and
      Exchange Commission and generally includes voting or investment power with
      respect to securities. Shares of common stock subject to options or
      warrants currently exercisable or convertible, or exercisable or
      convertible within 60 days of June 19, 2008 are deemed outstanding for
      computing the percentage of the person holding such option or warrant but
      are not deemed outstanding for computing the percentage of any other
      person.




(2)
            Unless
      otherwise indicated, the address of each beneficial owner is c/o Wellstar
      International, Inc., 6911 Pilliod Road, Holland, Ohio
    43528.




(3)
            Based
      on 509,940,017 shares issued and outstanding as of October 27,
      2008.




(4)
            Includes
      (i) 7,700,000 shares of common stock owned by Mr.
  Antonio




(5)
            Includes
      (i) 111,111,111shares of common stock underlying a $400,000 Secured
      Convertible Note (ii)




28




Item 12. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS







None of
the following parties has, during the last two years, had any material interest,
direct or indirect, in any transaction with Wellstar International, Inc. or in
any presently proposed transaction that has or will materially affect Wellstar
International, Inc.:




- Any of
our directors or officers;


- Any
person proposed as a nominee for election as a director;


- Any
person who beneficially owns, directly or indirectly, shares carrying more than
5% of any class of our voting securities;


- Any of
our promoters;


- Any
relative or spouse of any of the foregoing persons who has the same house as
such person.




Item
13. EXHIBITS




(a)
Exhibits




Exhibit




3.1
              Articles
      of Incorporation of Wellstar International, Inc.
  **




3.2
              Certificate
      of Amendment to Articles of Incorporation of Wellstar International,
      Inc.*****




3.3
              Bylaws
      of Wellstar International, Inc.
**




10.1
              Securities
      Purchase Agreement dated October 31, 2005, by and among Wellstar
      International Inc. and the investors named on the signature pages thereto.
      ****




10.2
              Form
      of Callable Secured Convertible Note dated October 31, 2005.
      **




10.3
              Form
      of Stock Purchase Warrant dated October 31, 2005.
  **




10.4
              Registration
      Rights Agreement dated October 31, 2005, by and among Wellstar
      International Inc. and the investors named on the signature pages thereto.
      **




10.5
              Security
      Agreement dated October 31, 2005, by and among Wellstar International Inc.
      and the investors named on the signature pages thereto.
  **




10.6
              Intellectual
      Property Security Agreement dated October 31, 2005, by and among Wellstar
      International Inc. and the investors named on the signature pages thereto.
      **




10.7
              Technical
      Services Agreement by and between Trillennium Medical Imaging, Inc. and
      Surgicenters of America, Inc. dated October 4,
  2005.**




10.9
              Term
      Loan Agreement dated October 11, 2005.
**




10.10
              Commercial
      Cognovit Promissory Note dated October 17, 2005.
  **




29




10.11
              Commercial
      Cognovit Promissory Note dated November 28, 2005.
  **




10.12
              Security
      Agreement dated October 11, 2005.
**




10.13
              Demand
      Note dated August 1, 2005. **




10.14
              Employment
      Agreement by and between Wellstar International, Inc. and John A. Antonio
      * *




10.15
              Employment
      Agreement by and between Wellstar International, Inc. and Ken
      McCoppen**




10.16
              Definitive
      Agreement dated December 12, 2005, by and among Wellstar International,
      Inc., Micro Health Systems, Robert Barnes and Terri
    Cmorey.***




10.17
              Marketing
      Agreement between Trillennium Medical Imaging, Inc., and Allevia
      Medical.*




10.18
              Addendum
      to Commercial Cognovit Promissory Note between Wellstar International,
      Inc., Trillennium Medical Imaging, Inc., and Andrew M.
      Thompson.*




10.19
              Second
      Addendum to Commercial Cognovit Promissory Note between Wellstar
      International, Inc., Trillennium Medical Imaging, Inc., and Andrew M.
      Thompson. ******





10.20
              Securities  Purchase  Agreement,  dated  November
      30, 2006, by and among Wellstar  International,  Inc.
      and
      AJW  Offshore,  Ltd.,  AJW  Qualified
      Partners, LLC, AJW Partners, LLC and New Millennium Capital Partners II,
      LLC.





10.21
              Form
      of Callable Secured Convertible
Note.*******





10.22
              Form
      of Stock Purchase
Warrant.*******





10.23
              Registration
      Rights Agreement by and among Wellstar International Inc. and the secured
      parties signatory
thereto.*******





10.24
              Security
      Agreement by and among Wellstar International Inc. and the secured parties
      signatory thereto. *******





10.25
              Intellectual
      Property Security Agreement by and among Wellstar International Inc. and
      the secured parties signatory thereto.
*******





10.26
              Limited
      Technology License Agreement by and between Trillennium Medical Imaging,
      Inc. and Maclath Ltda




31.1
              Certification
      of Chief Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a),
      promulgated under the Securities and Exchange Act of 1934, as amended.
      *




31.2
              Certification
      of Chief Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a),
      promulgated under the Securities and Exchange Act of 1934, as amended.
      *




32.1
              Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).
  *




32.2
              Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002 (Chief Financial
  Officer).*




* Filed
herewith.




**
Incorporated by reference to Form SB-2 filed with the Commission on December 13,
2005.




***
Incorporated by reference to Form SB-2/A filed with the Commission on February
1, 2006.




****
Incorporated by reference to Form SB-2/A filed with the Commission on April 4,
2006.




*****
Incorporated by reference to Form SB-2/A filed with the Commission on June 20,
2006.




******
Incorporated by reference to Form 8-K filed with the Commission on November 24,
2006




*******
Incorporated by reference to Form 8-K filed with the Commission on December 6,
2006




*******
Incorporated by reference to Form 8-K filed with the Commission on July 12,
2007




30




Item
14. Principal Accounting Fees and Services




Audit
fees




The
aggregate fees billed for professional services rendered by our independent
auditors for the audit of our financial statements, for the reviews of the
financial statements included in our annual report on Form 10-KSB, and for other
services normally provided in connection with statutory filings were $[34,908]
and $40,542 for the years ended July 31, 2008 and July 31, 2007,
respectively.




Audit-Related
Fees




No
audit-related fees were incurred for the years ended July 31, 2008 and July 31,
2007.




Tax
Fees




No tax
fees were incurred for the years ended July 31, 2008 and July 31,
2007.




All
Other Fees




We did
not incur any fees for other professional services rendered by our independent
auditors during the years ended July 31, 2008 and July 31, 2007.









31




SIGNATURES




In
accordance with 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.Dated:   November
      17, 2008
                By:
                /s/ John
      AntonioJohn
      AntonioPresident
      and Chief Executive Officer(Principal
      Executive Officer)




Dated:   November
      17, 2008
                By:
                /s/ Howard
      BielskiHoward
      BielskiChief
      Financial Officer(Principal
      Financial and Accounting Officer)




PURSUANT
TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN
SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES
INDICATED:




Signature
                        
                        Title
                        
                        Date/s/
      John Antonio
                        
                        President
      and Chief Executive Officer, Director
                        
                        November
      17, 2008John
      Antonio
                        
                        (Principal
      Executive Officer)/s/
      Ken McCoppen
                        
                        Senior
      Vice President, Director
                        
                        November
      17, 2008Ken
      McCoppen/s/
      Micahel Shen
                        
                        Director
                        
                        November
      17,2008Michael
      Shen/s/ McKinley Boston
                        
                        Director
                        
                        November
      17, 2008McKinley
      Boston













32