UNITED STATES
                          SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D.C. 20549

                                    FORM 10-KSB/A

[x]  Annual  Report  Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934
     For the fiscal year ended December 31, 2006

[ ]  Transition Report  Pursuant  to  Section  13  or  15(d)  of the Securities
     Exchange Act of 1934
     For the transition period from                          to

			Commission file number 0-28161


                                WELLSTONE FILTERS, INC.
		 ----------------------------------------------------
                 (Exact name of small business issuer in its charter)

                  Delaware                           	     33-0619264
	  -------------------------------		-------------------
	  (State or other jurisdiction of		(I.R.S.  Employer
	  incorporation or organization)		Identification No.)

	300 Market Street, Suite 130-13,  Chapel Hill, North Carolina 27516
	-------------------------------------------------------------------
        (Address of principal executive offices)                 (Zip Code)

Registrant's telephone number, including area code:             (919) 370-4408
Securities registered pursuant to Section 12(b) of the Act:              None

Securities registered pursuant to Section 12(g) of the Act:  Common Stock,  par
value $.001

        Check  whether  the registrant (1) has filed all reports required to be
filed by Section 13 or     15(d)  of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such  shorter  period  that  the registrant was
required  to  file  such  reports)  and  (2)  has  been subject to such  filing
requirements for the past 90 days.

                                                   YES  [X]        NO [ ]

        Check if there is no disclosure of delinquent  filers  in  response  to
Item  405  of  Regulation  S-B is not contained in this form, and no disclosure
will be contained, to the best  of  registrant's knowledge, in definitive proxy
or information statements incorporated  by  reference  in part III of this Form
10-K or any amendment to this Form 10-K. [X]

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

        State issuer's revenues for its most recent fiscal year: None

        The aggregate market value of the voting stock held  by  non-affiliates
of  the  registrant  as  of March 23, 2007 was $434,251 based on a closing  bid
price of $.15 per share as of March 23, 2007

        The number of shares  outstanding  of  the  issuer's  classes of Common
Stock as of March 25, 2007

Common Stock, $.001 Par Value - 10,433,760  Shares

Transitional Small Business Disclosure Format           YES [ ]     NO   [X]

                      DOCUMENTS INCORPORATED BY REFERENCE:  NONE





<PAGE>
                                    PART I

ITEM 1.DESCRIPTION OF BUSINESS

        When  used  in  this  Form  10-KSB, the words "expects," "anticipates,"
"estimates" and similar expressions are  intended  to  identify forward-looking
statements.  Such statements are subject to risks and uncertainties,  including
those set forth  below under "Risks and Uncertainties," that could cause actual
results  to differ  materially  from  those  projected.  These  forward-looking
statements  speak only as of the date hereof. Wellstone expressly disclaims any
obligation or  undertaking  to release publicly any updates or revisions to any
forward-looking statements contained  herein  to  reflect  any  change  in  the
Company's  expectations with regard thereto or any change in events, conditions
or circumstances  on  which  any  statement is based. This discussion should be
read together with the financial statements  and  other  financial  information
included in this Form 10-KSB. Readers should carefully review the risk  factors
described   in   other   documents  the Company files from time  to  time  with
the  Securities  and Exchange  Commission,  including  the Quarterly Reports on
Form 10-QSB to be filed  by the  Company  subsequent  to  this Annual Report on
Form 10-KSB and any Current Reports  on  Form 8-K filed by the Company.

GENERAL

        Wellstone Filters, LLC ("Wellstone LLC") was founded  in February, 1998
by Dr. Carla Cerami Hand at Cerami Consulting Company.  Cerami  Consulting Corp
was  investigating  the  negative  health impact of cigarette smoking.   As  an
outgrowth  of   this   work,  Cerami  Consulting  decided  to  investigate  the
possibility  of developing  a  filter technology  that would remove carcinogens
without impacting flavor.  As a  result  of their research,  Cerami  Consulting
filed for U.S. and international patents on  the technology and licensed it and
related   patents  to Wellstone  LLC  for  potential   commercialization.   Two
U.S. patents have  been  issued  (1) U.S. Patent 6,119,701:  filed  -  Feb  13,
1998: issued- September 19, 2000:   valid   until  2018  and  (2)  U.S.  patent
6,615,842:   filed-June   26,   2000: issued-September  9,  2003:  valid  until
2020).   International  patents   are  pending.    The   patents   are  held by
Cerami  Consulting,  however the Company has the perpetual, exclusive worldwide
rights  to the use and  commercialization  of  the  patents  and the technology
related to the patents.  The Company has sublicensed the technology outside the
United States in January 2007.

        On May 25, 2001, Wellstone LLC was acquired  by  Farallon  Corporation,
a  publicly  registered  reporting  corporation formed with the  intention   of
making subsequent  acquisitions.  Farallon  Corporation  acquired  all  of  the
outstanding membership interests  of  Wellstone  LLC  in exchange for 8,400,000
shares  of common  stock of Farallon Corporation.  In addition,  in  connection
with  the  transaction,  Farallon  Corporation  issued 238,728 shares of common
stock in cancellation   of   debt.   As  a result of  the  merger,  the  former
members  of Wellstone LLC acquired  a  majority   of   the  outstanding  shares
of Farallon. Accordingly, the combination has been accounted  for  as a reverse
acquisition,  under  which,  for  accounting  purposes,  Wellstone  LLC is  the
accounting   acquiror,   and    Farallon   Corporation   is   accordingly   the
accounting   acquiree.   As is customary in a  reverse  acquisition,  only  the
historical financial  statements of Wellstone LLC, the accounting acquiror, are
presented  for  periods  prior   to  the  acquisition.   Farallon  Corporation,
incorporated in 1994, subsequently  changed  its name to Wellstone Filters, Inc
and Wellstone LLC  became a wholly-owned subsidiary  of Wellstone Filters, Inc.
References  to Wellstone refer to the combined  entity.  On  January  5,  2005,
Wellstone  created  a  wholly-owned  subsidiary  operating  company,  Wellstone
Tobacco,  Inc.,  a  North  Carolina  corporation.  All  of  the  tobacco  sales
operations have been conducted through Wellstone Tobacco, Inc.

        Wellstone   tested   the   filter  technology  in  small  manufacturing
batches.  Wellstone held  discussions  with  several  major  manufacturers  for
licensing or  supply contracts, but no contracts have been entered into nor are
any  currently  under   negotiation.   All  testing  performed  on  the  filter
technology prior to and through  December  31,  2005 has been for developmental
purposes  only and in the third  quarter of 2005  Wellstone  shipped product to
Central and South America for promotional and consumer trial purposes  only.

        Wellstone's  original  plan  was  to license its proprietary  cigarette
filter technology to existing cigarette  manufacturers.    We  believe that our
filter  compound  removes  certain  carcinogens  and the incorporation  of  our
compound  into currently marketed brands would be the  quickest  way  to  bring
Wellstone Filters  to   the  smoking  public.  After  a  review  of the tobacco
marketplace,  Management determined  to manufacture and produce its  own brand,
hoping  to  be  a part of an increasing number of small manufacturers who  have
gained market share  in  recent years (estimated by some to be 12 billion units
of the total 2005 US market)  in this multi-billion dollar market.  Wellstone's
objective is to offer an ultra  premium product at a value price.  Sales of the
Wellstone brand began in the first  quarter of calendar 2006. On April 5, 2006,
the  Company announced  that  a  major  supplier  to  convenience stores in the
Southeastern United States agreed to  carry  all  styles of the Wellstone brand
and secure orders using  its sales organization.

        Wellstone has developed packaging materials  and  tobacco  blends for a
full line of cigarettes (regular, smooth blue, and menthol) that is  consistent
with its ultra premium brand positioning.  In addition to selling our own brand
of Wellstone cigarettes, we will continue to pursue incorporation of our filter
into existing cigarette brands.   We purchase various ingredients necessary for
our  filter from suppliers, but do not enter into written agreements with  such
suppliers; rather we submit purchase orders on an as-needed basis.

        The Wellstone brand of cigarettes are lower in toxins, yet, we believe,
do not  compromise  the  pleasurable  effects of smoking. Wellstone's strategic
plan as well as its philosophy is based  on  two  assumptions:  first, quitting
smoking  can  be  difficult  and  second, smokers do not  appear  to  focus  on
cigarette tar levels.   In 2002, according  to  industry  reports,  64%  of all
cigarettes sold in the United States were high in tar. Wellstone believes  that
part  of  the  reason  smokers  prefer high tar cigarettes is because of taste.
Wellstone's goal is to reduce tar  and  certain  associated carcinogens without
affecting the cigarettes' taste. We believe smokers  will try Wellstone for its
lower price, and come back for its taste.

        In  the  quarter  ended  September 30, 2006, the Company  continued  to
suffer from a negative gross margin  on  its  cigarettes, which was part of the
Company's  strategy  to  obtain  market share and entry  into  the  competitive
cigarette marketplace.  Management  reviewed  the  liquidity  position  of  the
Company  during  the quarter ended September 30, 2006 and sought unsuccessfully
for additional debt  or  equity  funding.  Although  the Company did enter into
negotiations  for  a  private placement, the funding group  required  that  the
Company  carry  out a 1-for-  25  reverse  split  of  the  common  stock  as  a
precondition to such  placement. After Wellstone carried out the reverse split,
the funding source did  not  complete  funding.   Faced  with  inadequate  cash
resources  to  fund  the  market  introduction  of   its  products,  management
determined  to suspend further marketing activity.  As  a  result, sales in the
quarter  ended  September  30, 2006 fell to only $6,475, and Wellstone  had  no
significant sales for the remainder  of  the year ended December 31, 2006.  All
employees and officers have been dismissed  or  have  resigned,  except for the
Company  Chief Executive Officer. The Company has negotiated with it  suppliers
for time to obtain financing and continue its business, but there is not a high
probability  that  financing can be obtained that is not unduly dilutive to the
Company shareholders.


RISKS AND UNCERTAINTIES

We may be sued and may not be covered by insurance.

        There are currently several pending legal actions affecting the tobacco
industry,  including   proceedings    and  claims  arising  out  of  the  sale,
distribution,  manufacture, development,  advertising,  marketing  and  claimed
health effects of  cigarettes.  We may be named as a defendant in the future as
there has been a noteworthy  increase  in  the  number  of these cases pending.
Punitive damages, often in amounts ranging into the hundreds  of  millions,  or
even  billions  of dollars, are specifically pleaded in a number of these cases
in addition to compensatory  and  other damages. We do not yet have any product
liability insurance, and if such insurance can be obtained it probably would be
very  limited  in  scope  of  coverage to  any  claims  that  tobacco  products
manufactured by or for us.  Such  insurance  probably  would  not cover health-
related   claims   such  as  those  that  have  been  made  against  the  major
manufacturers of tobacco  products.   We  do  not  believe  that such insurance
currently can be obtained. Accordingly, our inclusion in any  of  these actions
or any future actions would have a material and adverse effect on our financial
condition.

We have generated only limited revenues and our marketing operations  have been
suspended.

        Sales  and  marketing of the Wellstone brand began in the first quarter
of calendar 2006. Our  sales  were limited and were carried out with a negative
gross margin in order to obtain  market share. Marketing efforts were suspended
in the third quarter of 2006. Wellstone  may  not  be  able to find an adequate
market  for  its  products,  achieve  a significant level of  sales  or  attain
profitability.  As a result  of  the  significant operating expenses related to
start up operations, Wellstone had a loss  of  $2,772,581  for  the  year ended
December  31,  2006.  We do not have financing at this time to resume marketing
operations, and we had  to  write  off  stale and obsolete inventory during the
last quarter of 2006. Wellstone may not be  able to resume marketing, or attain
profitability.  Wellstone may not  be  able to  implement  its business plan in
accordance  with  its  internal  forecasts  or  at  a  level   that  meets  the
expectations of investors.

        The  report  of  our  independent  registered  public  accounting  firm
included in this Annual Report on Form 10-KSB contains an explanatory paragraph
expressing substantial doubt about our ability to continue as a going concern.

        As  a result of our losses to date and our current lack of revenue, our
independent registered  public  accounting  firm  has  concluded  that there is
substantial  doubt  as  to  our  ability  to  continue as a going concern,  and
accordingly, our independent registered public  accounting firm has included in
their  report  on our December  31,  2006 consolidated   financial   statements
included herein  an explanatory paragraph describing the events that have given
rise to this uncertainty.  The  Company will seek additional sources of capital
through the issuance of debt or equity financing, but there can be no assurance
the Company will be successful in accomplishing its objectives.  The ability of
the Company to continue as a going  concern  is dependent on additional sources
of capital.

We are dependent on the domestic tobacco business, which is contracting.

        Substantially all of our revenues are  initially expected to be derived
from sales in the United States. The U.S. cigarette  market  is a mature market
and on average, domestic consumption has decreased approximately  2%  per  year
over  the  past  decade.   Numerous  factors  have contributed to this decline,
including health considerations,  diminishing   social  acceptance  of smoking,
legislative  limitations  on  smoking in public places and rapidly accelerating
costs in the form of increased state tax on cigarettes and settlement cost.  If
the U.S. cigarette market continues to contract,  it could adversely affect our
potential future sales, operating income and cash flows.

Weaknesses  in  the  Company's internal controls and procedures  could  have  a
material adverse effect on the Company.

        Management is  responsible  for  establishing  and maintaining adequate
internal control over financial reporting. Our internal  control over financial
reporting is a process designed to provide reasonable assurance  regarding  the
reliability  of financial reporting and the preparation of financial statements
in accordance  with GAAP. Management determined that material weaknesses in our
internal control  over  financial reporting existed as of December 31, 2005.  A
material  weakness  is  a  control   deficiency,   or  combination  of  control
deficiencies  that  results in a more than remote likelihood  that  a  material
misstatement  of  the annual  or  interim  financial  statements  will  not  be
prevented or detected.

        If we are unable  to  substantially  improve our internal controls, our
ability to report our financial results on a timely  and  accurate  basis  will
continue  to  be adversely affected, which could have a material adverse effect
on our ability  to  operate  our  business.   Please see Item 8A - Controls and
Procedures for more information regarding  the measures implemented in 2005, as
well as those that we intend to implement in  2006.  Each remedy is designed to
remediate the deficiencies in our internal controls.   In  addition, even after
the remedial measures discussed in  Item 8A - Controls and Procedures are fully
implemented,  our  internal  controls may not prevent all potential  errors  or
fraud,  because any control system,  no  matter  how  well  designed,  can only
provide  reasonable  and  not  absolute  assurance  that  the objectives of the
control system will be achieved.

We do not have any production facilities unless we acquire them or contract out
production.

        Problems in purchasing equipment, establishing manufacturing facilities
and meeting demand can be expected.  Problems in contracting out production can
also be expected.  If we cannot produce filter material or outsource production
we may not be able to meet market demands of our own brand  nor  can the filter
be used in existing brands unless we license the filer to such existing brands.

Competition could prevent us from meeting our objectives.

        The cigarette industry is highly competitive.  Our competitors  include
developers of low-carcinogen tobacco and developers of other filter technology,
and   these   competitors   may   have   a   substantially  greater  financial,
manufacturing,  marketing  and  other  resources at  their  disposal.   Another
company could develop filter technology  similar  to  ours.   Competition  will
affect  our  ability  to  market  our  product and obtain financing.  Wellstone
brands  will  be subject to increased competition  and  this  has  resulted  in
additional pressure due to price discounting.

Our cigarettes  and  the  cigarettes  using  our  filter may not be accepted by
smokers.

        Our filter and the Wellstone brand utilizing  it may not be accepted by
smokers.  Smokers may decide  not  to purchase our brand or any tobacco product
made with our filters due to taste or other preferences,  and  sales of filters
with our technology would be adversely affected.

The cigarette industry is subject to substantial and increasing  regulation and
taxation and this can only have a negative impact on us.

        Various federal, state and local laws limit the advertising,  sale  and
use  of cigarettes, and these laws have proliferated in recent  years.   If, as
expected,  this  trend  continues,  it may have material and adverse effects on
potential sales, operating income and  cash flows.  In addition, cigarettes are
subject to substantial and increasing excise taxes.  Increased excise taxes may
result in declines in overall sales volume.  This result could adversely affect
the market for our product.

        The  U.S.  Food  and  Drug  Administration   ("FDA")   has  promulgated
regulations  governing  the  sale  and  advertising of tobacco products.  These
regulations are designed primarily to discourage  the  sale to, and consumption
by,  adolescents  and  children.  The authority of the FDA to  promulgate  such
regulations was challenged in the federal courts. On March 21, 2000, the United
States Supreme Court in a five to four  decision  held  that  Congress  had not
given  the  FDA authority to regulate tobacco products as customarily marketed.
Given the decision  by  the Supreme Court it is unclear whether Congress in the
future will act to grant  such  authority to the FDA, although legislation that
would  create such authority has already  been  introduced  in  Congress.   See
"Government Regulation."

The cigarette  industry is a mature market in which overall consumer demand may
continue to decline over time and this may have a negative impact on us.

        On average, domestic consumption has fallen approximately 2 percent per
year over the past  decade.  Numerous factors have contributed to this decline,
including health considerations,  diminishing  social  acceptance  of  smoking,
legislative  limitations  on smoking in public places, and rapidly accelerating
costs in the form of increased state tax on cigarettes and settlement costs. If
this decline in industry-wide consumption  continues and Wellstone is unable to
capture market share from its  competitors,  or   if the industry as a whole is
unable to offset the decline, Wellstone's sales volume,  operating  income  and
cash  flows  could  be  materially  adversely  affected,  which  in  turn could
negatively affect the value of our common stock.

If  we  are successful, we might not be able to hire  employees  and  manage  a
bigger enterprise.

        If  we  are successful in obtaining market acceptance for our products,
we will be required to manage increasing, possibly substantial, volume from the
resulting customers.    To accommodate any such growth and compete effectively,
we  will be required to attract,  integrate,  motivate  and  retain  additional
highly  skilled  sales,  technical and other employees. We face competition for
these people.  Our ability  to  successfully  manage  such  volume also will be
dependent  on  our ability to find a suitable manufacturer for  our  brand  and
filters.   We or  any  person  contracted  with  to  produce  our  products  in
commercial quantities might not be able to overcome the challenge of setting up
any  production operations, and our personnel, systems, procedures and controls
might  prove  inadequate  to  support  our  future operations.   Any failure to
implement and improve our operational, financial  and  management systems or to
attract, integrate, motivate and retain additional employees required by future
growth,  if  any,  could have a material and adverse effect on our business and
prospects, financial condition and results of operations.

We may not be able to protect our patents against infringement.

        Our  success  in  commercially  exploiting  our proprietary  technology
depends in large part on our ability to defend the patents  that  were licensed
to  us,  to  obtain further patent protection for the technology in the  United
States and other  jurisdictions  and  to  operate  without  infringing upon the
patents  and proprietary rights of others.  Additionally, we must  be  able  to
obtain appropriate  licenses  to  patents  or  proprietary rights held by third
parties if infringement would otherwise occur, either  in  the United States or
in foreign countries.  The primary patents licensed to us were  only  issued in
the United States and not in foreign jurisdictions.   If international  patents
are  not  issued,  it  would  diversely  affect our competitive advantage, with
respect to sales outside the United States.

        Patent positions, including our patent  positions  (owned  or licensed)
are  uncertain  and  involve  complex  legal  and  factual  questions for which
important  legal  principles  are  unresolved.  Any conflicts  resulting   from
third  party patent applications  and patents could  significantly  reduce  the
coverage  of our patents and limit our  ability  to  obtain  meaningful  patent
protection.   If patents are issued to other companies that contain competitive
or conflicting  claims,  we may be required to obtain licenses to these patents
or to develop or obtain alternative  technology.  Such licensing agreements, if
required, may be unavailable on acceptable  terms  or  at all. If such licenses
are  not  obtained, we  could  be  delayed  in  or  prevented   from   pursuing
the  development   or  commercialization  of our products.  It is possible that
there exists an issued or pending patent which  conflict  with  or  potentially
infringe on our patent.

        Litigation  which  could  result  in  substantial  cost   may  also  be
necessary  to   enforce  any  patents to which we have rights, or to  determine
the  scope, validity  and  unenforceability   of   other   parties' proprietary
rights  which  may  affect  our  rights.  U.S.  patents carry a presumption  of
validity  and generally can be invalidated only through  clear  and  convincing
evidence. We  may also have to participate in interference proceedings declared
by the U.S. Patent  and  Trademark  Office  to  determine  the  priority  of an
invention,  which could result in substantial costs. Our licensed patents might
not be held valid  by  a  court  or  administrative  body or  that  an  alleged
infringer  would  be  found  to  be infringing.  The mere uncertainty resulting
from the institution and continuation  of  any technology-related litigation or
interference  proceeding  could  have a material  and  adverse  effect  on  our
business and prospects.

        We may also rely on unpatented  trade  secrets and know-how to maintain
our competitive position, which we seek to protect, in part, by confidentiality
agreements with employees, consultants, suppliers  and others. These agreements
might be breached or terminated, or we might not have adequate remedies for any
breach, and our trade secrets might otherwise become  known or be independently
discovered by competitors.

If we lose our management it would damage our business.

        We depend upon the continued services of our senior  management for our
continued success.  The loss of the Company's Chief Executive  Officer, Learned
Jeremiah  Hand,  could  have  a  serious negative impact upon our business  and
operating results.  We do not have  an  employment agreement with Mr. Hand, and
we have not obtained "key-man" life insurance with respect to his life.

No cash dividends have been paid and we do  not anticipate that we will pay any
dividends in the future.

        Wellstone  has  not  paid  any cash dividends  on  its  capital  stock.
Wellstone anticipates that its future  earnings,  if  any, will be retained for
use in the business, or for other corporate purposes, and it is not anticipated
that  any cash dividends on its common stock will be paid  in  the  foreseeable
future.  Investors should not expect to receive any dividends or other periodic
income on their investment.

Penny Stock rules could make it hard to resell your shares.

        The  Penny Stock rules apply to the trading of our stock.   Wellstone's
common stock does  not  meet  the  listing  requirements for any trading market
other than the OTC Bulletin Board.   Consequently, the liquidity of Wellstone's
securities could be impaired, not only  in the number of securities which could
be  bought and sold, but also through delays in  the  timing  of  transactions,
reduction in security analysts' and the news media's coverage of Wellstone, and
lower prices for Wellstone's securities than might otherwise be attained.

        In  addition, the  "penny  stock" rules limit trading of securities not
traded  on  NASDAQ  or a recognized stock exchange,  or securities which do not
trade at a  price of  $5.00  or higher, in that brokers making trades in  those
securities must  make a special suitability determination for purchasers of the
security, and obtain the purchaser's consent prior to sale.  The application of
these rules may make it difficult for shareholders to resell their shares.

As the holders of a significant amount of common stock of Wellstone, management
and its affiliates have, and will  have,  substantial influence over Wellstone,
and such affiliates may have interests which differ from other holders.

        Members of management, and their affiliates,  own  7,177,320  shares of
common stock, on a fully diluted basis, or 65.7% of the common stock.  As such,
such individuals have substantial influence and control over matters voted upon
by  stockholders  (such  as  the election of the  directors  to  the  Board  of
Directors of Wellstone, mergers  and  sale  of  assets  involving Wellstone and
other matters upon which stockholders of Wellstone vote).  This power, in turn,
gives them substantial control over the business and operations of Wellstone.

We could change the strategy we outline in this report.

        Although  we  have no current plan to do so, we may change our strategy
for the development and  marketing  of  our  technology  in  the  future.   Our
business plan might not be implemented as set forth herein.

THE TOBACCO AND CIGARETTE INDUSTRY

        Published  industry  sources  estimate  that  the  annual   U.S   sales
of  cigarettes  in  2005  were  381  billion.  Approximately 44.5 million adult
Americans  smoke;  worldwide, the figure is estimated to be 1.5 billion people.
The market share of  five  major  U.S.  cigarette  manufacturers  in  2005  was
estimated as follows:


              U.S. MARKET SHARE
        Phillip Morris Cos., Inc.  48.7%
        RJ Reynolds                28.2%
        Lorillard                   9.2%
        Commonwealth                3.5%
        Liggett & Meyers            2.2%
        Total                      91.8%

FILTERS

        Almost  all  cigarettes  sold are filtered.   Worldwide, 93% of the 5.5
trillion cigarettes sold in 2005 were  filtered.  Four types  of  material  are
used in filters:  cellulose  acetate  (68%),  polypropylene  (21%  primarily in
China)  pure  cellulose (less than 1%), and granular additive filters  such  as
activated charcoal (1%).  Activated charcoal filters are efficient, having been
proven to reduce carcinogenicity.   However,   activated  carbon  filters  also
remove  much  of  the  taste  and  nicotine,  and have probably not become more
popular  due  to  this  reason.  In management's  opinion,  the  development of
"safe"  or "safer" cigarettes has been slow due to three factors.   First,  the
manufacturers had no interest in developing  "safer"  cigarettes since to do so
would  be  an  admission  that smoking was prejudicial to health,  which  would
adversely impact sales and  lead  to  liability.   We think this is no longer a
factor due  to  overwhelming  consensus that smoking is unhealthy, and the 1998
settlement between the state governments and the tobacco companies.

        Second, an effective filter (such as activated charcoal) also is likely
to remove that substance in tobacco  smoke which makes smoking a pleasurable or
addictive habit - nicotine.

        Third, until Wellstone was introduced,  any  perceived safer cigarette,
or PREP (perceived reduced exposure product) did not lead to a pleasant smoking
experience.  We believe that the Wellstone filter provides  a unique smoothness
and rich flavor not found in any other PREP.

        Cigarette  manufacturers  produce their own filters, or  purchase  from
outside manufacturers, principally Filtrona Richmond, Inc.

        Another  device  used  to  enhance   filter   performance  is  to  make
perforations around the base of the filter for ventilation.   The  introduction
of air dilutes the smoke, but this device can be circumvented by the  smoker by
covering the perforations with the fingers.

HARMFUL COMPONENTS OF TOBACCO SMOKE

        Tobacco  smoke is comprised of atmospheric and other gases, particulate
matter, and hundreds  of  chemical compounds.   Tar is condensed tobacco smoke.
Nicotine is the addictive substance  in  tobacco smoke.   In the doses found in
cigarette smoke carbon monoxide reduces the  blood's  ability  to carry oxygen.
Known carcinogens include   benzene, 2-napthylamine, 4-amino and  byphenyl  and
radioactive polonium-210.  Potential carcinogens include N-nitrosodiethylamine,
N-nitrosopyrrolidine, benzoapyrene, N-nitrosodieth aholomine and cadmium.

OUR FILTER REMOVES CERTAIN CARCINOGENS

        Our  filter material works  by  trapping  nucleophiles in tobacco which
is  produced  during   combustion   and   is   the  subject  of   U.S.   Patent
6,119,701,  "Methods, agents and devices for removing  nucleophilic toxins from
tobacco and tobacco  smoke", issued September 19, 2000, to  Anthony Cerami, Dr.
Carla Cerami Hand M.D./Ph.D.  and  Dr.  Peter Ulrich Ph.D, all shareholders  of
Wellstone  and licensed  to  Wellstone  on   September   14,  1999, and of U.S.
Patent 6,615,842 "Methods for removing nucleophilic toxins from  tobacco smoke"
issued September 9,  2003  to  Dr.  Cerami,  and Drs. Cerami  Hand  and  Ulrich
and   licensed  to Wellstone on September 14, 1999.  Compounds  in  the  filter
material    include   periodate-oxidated   (dialdeyhde)   devivaties   of   the
polysaccarides cellulose, starch and agarose.

        We intend to sell  and  market  our  own  cigarette   brand and to sell
filters  directly  to  manufacturers to be integrated into their own  cigarette
brands.  We also intend  to  develop  our own "make your own" as well as  enter
into  the  small cigar market.

RESULTS OF IN-HOUSE TESTING

        The  patent  developers  have  tested   our  filter  technology  in   a
biopharmaceuticals   laboratory,  using  standard  cigarette   filter  material
(cellulose acetate) containing the compound.  We have also tested our filter in
an  FTC testing facility.  These tests indicate that our technology  removes  a
measurable  level  of  harmful substances. Variables such as the mix of tobacco
used and manufacturing additives  may cause variations in the actual percentage
of harmful materials removed.

        The  Ames test is a standard  test  used  to  measure  mutagenicity  by
exposing the smoke  (filtered  and  unfiltered)   to   a   strain of Salmonella
bacteria.  The Ames test demonstrated that our filter removed   a  majority  of
mutagens compared to the control cigarette.

        The  Greiss  test  measures  nitrosamines,  which   are   contained  in
cigarette  smoke  and  believed  to  be  carcinogenic.   With  a  250 milligram
level   of  concentration   in   the   Wellstone  filter,  a  majority  of  the
nitrosamines  were removed.

MARKETING

        The U.S.  cigarette   market   is   a  mature  market  in which overall
consumer demand is expected to continue to decline  over  time.    On  average,
domestic  consumption   has   fallen approximately 2 percent per year over  the
past  decade. Numerous  factors   have    contributed    to    this    decline,
including   health  considerations,    diminishing    social    acceptance   of
smoking,    legislative  limitations  on smoking in public places, and  rapidly
accelerating  costs  in  the form of increased  state  tax  on  cigarettes  and
settlement cost.

        Even  though our filter  technology  has  proven   to   be   effective,
tobacco companies   are   now   prohibited  from  making  any claims around the
safety   of   an  ingredient,  filter  or   process   utilized   in   cigarette
manufacturing.  However, because our test marketing indicates that our  package
design and  product  taste  is acceptable, management feels that the brand will
be  successful  if  we get consumer  trial  and  are  able to maintain adequate
distribution  channels. We believe that our sales in the  first  half  of  2006
justified management's  assessment  of  the  potential  success  of  the brand.
Wellstone  did  not  conduct  any formal taste tests, but feedback from smokers
indicated that Wellstone cigarettes  had  high taste acceptance. Unfortunately,
Wellstone had to suspend marketing in the third  quarter of 2006 due to lack of
finances. We do not know when, if ever, we will be  able  to continue marketing
and resume sales.

INTERNATIONAL MARKETS; GLYCANEX LICENSE; ACQUISITIONS

        Wellstone investigated the  international potential  of its proprietary
compound, especially in Europe, Africa, and Asia where smoking levels are  much
higher  than  in  the  United States and Canada. On January 17, 2007, Wellstone
entered into a Patent License Agreement with  Glycanex BV, the  supplier of the
patented  filter  compound  used   in  Wellstone  cigarettes. Under the  Patent
License  Agreement, Wellstone granted to Glycanex an  exclusive  right  to  the
patent  rights   for  all  countries excepting the  United  States  of  America
and its territories  and  possessions.   Glycanex agreed to pay Wellstone a  3%
royalty  on  net  sales which exceed the minimum  threshold  of  Euro  500,000.
The  consideration  for   the   granting  of  the  license  to Glycanex was the
cancellation  of  $120,000  owed  to  Glycanex   for  purchases  of the  filter
compound.

        Two  principal factors led to the decision to license Wellstone's   key
technology to Glycanex.  First,  Wellstone  lacks  cash  at  this  time  to pay
Glycanex   for  the  $ 120,000  which is owed and likewise lacks cash to defend
any collection  lawsuit.  Wellstone  also  lacks  at  this  time  cash  to fund
marketing  of its Wellstone cigarettes in the United States, but believes  that
with sufficient  funding  it  can resume marketing. Secondly Wellstone believes
that the technology is viable and  that  the  licenses  to  Glycanex  provide a
possibility  for  Wellstone to receive royalty income from the exploitation  of
the technology outside  the  United States. Management believes that the Patent
License Agreement validates the value of the technology.


        We are also considering  one  or  more  acquisitions  if  such   can be
synergistic with our current business, but no agreements have been reached  for
any acquisitions.

COMPETITION

        Our    technology   faces  competition,   but   we   think   that   our
technology competes favorably   because  it reduces carcinogens while retaining
taste and a significant level of nicotine.   We  believe  that  we  potentially
have   five competitors, however additional  competitors  or  new  technologies
could arise  at any  time.  None of them has any significant level of sales and
there has never existed any market for special purpose filters.

        Philip   Morris   test-marketed  a  new  cigarette  brand  during 2005,
Marlboro Ultra Smooth, which contained a new carbon filter that  was presumably
designed to help filter out certain toxins in cigarette smoke and  to therefore
reduce  exposure  to  these  toxins.  However,  Philip Morris did not make  any
reduced risk or reduced exposure health claims.   The  brand  was  removed from
test market due to a lack of consumer acceptance.

        RJ   Reynolds  introduced  its  Eclipse  cigarette  in  1998.   Eclipse
purports  to  be safer  because   it   primarily   heats   rather   than  burns
tobacco, greatly reducing  second  hand  smoke,  and  leaves  no  ashes, stains
or  odor.   RJR  advertised   that  smoking Eclipse cigarette might reduce  the
risk   of   cancer, chronic bronchitis,   and  emphysema.   The  American  Lung
Association and  American  Heart  Association  disagree   with   those  claims.
Eclipse  is  being  marketed through the internet and limited retail sales.

INTELLECTUAL PROPERTY

        The   technology   fundamental   to  Wellstone is protected under  U.S.
Patent number  6,119,701,  entitled  "Methods,    agents    and    devices  for
removing  nucleophilic  toxins  from tobacco and tobacco smoke," by Cerami   et
al.,  and issued  to  the Cerami Consulting Corporation.  This patent was filed
on February 13, 1998, and  approved   on   September  19,  2000.   Based  on  a
licensing   agreement  with  Cerami  Consulting  Corporation,   Wellstone   has
exclusive  rights  to  the technology  on  which  the  patent  is  based.   The
patent is protected  until  February 13, 2018, according to current U.S. Patent
law.   A second U.S. patent was   issued  to  Cerami Consulting Corporation and
licensed to  Wellstone:   U.S.  Patent   U.S.    Patent    number    6,615,842,
entitled   "Methods  for  removing nucleophilic toxins from tobacco smoke"   by
Cerami et al.,  and  issued to Cerami  Consulting Corporation.  This patent was
filed  on  June 26, 2000  and  issued  on  September   9,   2003.   Based  on a
licensing  agreement  with   Cerami   Consulting  Corporation,  Wellstone   has
exclusive   rights   to   the   technology   on  which  the  patent  is  based.
Therefore,  Wellstone  has controlling rights to the technology on which it  is
based until June 26, 2020, according to current U.S. Patent law.

        The international  rights  to  our  technology  have  been  licensed to
Glycanex, NL, as set forth under the caption "Marketing."

EMPLOYEES

        As   of   December   31,   2006,  we  had  only one employee, our Chief
Executive  Officer,  and  a  part-time  controller.   Pending   resumption   of
marketing, we do not intend to add additional employees at this time.

GOVERNMENTAL REGULATION

        The  manufacture and  sale of cigarettes and other tobacco products and
of  pharmaceutical   products  are  subject  to  extensive  federal  and  state
governmental regulation in the United States  and  by comparable authorities in
many foreign countries.  These  national agencies and  other federal, state and
local  entities  regulate,  among   other  things,  research  and   development
activities  and  the  testing,  manufacture,  safety,  effectiveness, labeling,
storage,  record  keeping,  approval,  advertising  and  promotion  of  tobacco
products.

        There  are multiple bills pending before the Congress  and  in  several
state legislatures  which,  if  enacted,  would significantly change the United
States tobacco industry.  Some  of  these  federal   bills  contain  provisions
which would provide substantial federal government funds  for smoking cessation
programs and products, as well as incentives to tobacco companies and others to
produce less harmful  or  reduced-risk  tobacco  products.    We  are unable to
predict  what effect, if any, these provisions, if enacted, would have  on  our
technology.

        The  FDA has promulgated regulations governing the sale and advertising
of  tobacco products  designed  primarily  to  discourage   the  sale  to,  and
consumption  by,   adolescents   and   children.  The  authority of the FDA  to
promulgate   such  regulations  was  challenged  in  the  federal   courts.   A
federal  District  Court  upheld  the  FDA's   authority   to  promulgate  such
regulations   but   ruled   that   certain   of   the  regulations  restricting
advertising  were  invalid  as violative of the constitutional  right  of  free
speech. On appeal, the United  States  Court  of Appeals for the Fourth Circuit
affirmed  portions of the District Court opinion  that  held  the FDA could not
regulate tobacco  advertising  and  ruled  that the executive   branch  of  the
United  States government, in particular the FDA,  does not have any  authority
to  regulate   tobacco  products generally. The federal government appealed the
Appeals Court's  ruling  and  the matter was heard by the United States Supreme
Court in late 1999. On March  21,   2000,  the  Supreme Court in a five to four
decision  held  that  Congress has not given  the  FDA  authority  to  regulate
tobacco products as customarily  marketed.  Given  the  decision by the Supreme
Court   it   is   unclear   whether   the   Congress  will act to  grant   such
authority to the FDA, although legislation that would create such authority has
already been introduced in Congress.

        The requirements for health warnings on cigarettes   are   governed  by
the  Federal   Cigarette   Labeling  and Advertising Act ("Labeling Act").  The
Labeling  Act   imposes   labeling  and   advertising   requirements   on   the
manufacturers, packagers and  importers  of cigarettes and requires any company
wishing to sell cigarettes within  the  United  States  to  submit  a  plan  to
the Federal Trade Commission  explaining   how   it   will   comply   with  the
warning label  display requirements.

        The  sale  of  tobacco  products  is  subject to taxation  in all fifty
states.  In   addition,  some  states  permit  municipalities   to   impose  an
additional   sales  tax,   and   many   municipalities   do  so.  The state and
municipal  sales  taxes are imposed upon wholesalers and/or retailers  but  not
manufacturers or suppliers  of  components  such  as  filters and therefore  we
have  no  liability  for  such taxes. In addition, cigarettes  are  subject  to
substantial and increasing  excise  taxes.  The    federal    excise    tax  on
cigarettes  has  been  steadily   increasing. Additionally, state excise  taxes
range  from  $.07 per pack in South Carolina to $2.46 per pack in Rhode Island.
These  taxes could  adversely  affect  cigarette  sales  in  the future and our
potential revenues.

        Tobacco    production   in   the   United   States   is   subject    to
government controls,  including  the  tobacco-price  support   and   production
control  programs  administered  by the United States Department of Agriculture
(the  "USDA").  In October  2004,  the Fair and Equitable Tobacco Reform Act of
2004 ("FETRA") was signed into law.   FETRA  provides  for  the  elimination of
the federal tobacco quota and price support program through an industry  funded
buy-out of tobacco growers   and   quota-holders.   The  cost  of  the  buy-out
is   approximately  $9.6  billion  and  will   be   paid  over   10  years   by
manufacturers and importers of all tobacco products. The cost will be allocated
based  on the relative market shares  of  manufacturers  and  importers  of all
tobacco  products.   Manufacturers  and  importers of tobacco products are also
obligated to cover any losses (up to $500  million)   that  the  government may
incur  on  the  disposition  of  pool  stock tobacco  accumulated   under   the
previous   tobacco  price  support  program.  Wellstone's share of tobacco pool
stock losses will be minimal.

PRODUCT LIABILITY

        In   the   United   States,   there   have been  numerous   and   well-
publicized  lawsuits  against the largest manufacturers   of   cigarettes   and
other  tobacco products   initiated   by   state   and  municipal  governmental
units, health care providers  and  insurers, individuals  (for  themselves  and
on  a  class-action basis) and by others.  The  legal theories underlying  such
lawsuits  are  varied,  but  are  generally  based  upon  one  or  more  of the
following:  (1) manufacturer defendants  have  deceived   consumers  about  the
health   risks   associated   with  tobacco  product  consumption;   (2)   such
defendants   knew   or  should have known about  various harmful ingredients of
their products and failed  to  adequately warn consumers  about  the  potential
harmful effects of those  ingredients;  and  (3)  such  defendants  knew of the
addictive  attributes  of  nicotine  and  have purposefully  manipulated  their
product  ingredients  so  as  to  enhance the delivery of nicotine.

        We  intend  to  sell  cigarettes and to supply filters which we believe
could  make  cigarettes  less  prejudicial   to   health,  Wellstone  could  be
liable   for personal injury to consumers.  Even if we  believe  such  lawsuits
are without  merit,  the  cost  of  defense  or settlement of lawsuits could be
substantial.

AVAILABLE INFORMATION

        We file annual, quarterly and current  reports,  information statements
and other information with the Securities and Exchange Commission  (the "SEC").
The  public  may read and copy any materials we file with the SEC at the  SEC's
Public Reference  Room  at  450 Fifth Street, N.W., Washington, D.C. 20549. The
public may obtain  information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330.   The   SEC   also   maintains  an  Internet
site  that contains  reports,  proxy  and  information  statements,   and other
information  regarding  issuers  that  file  electronically  with  the SEC. The
address  of  that
site is http://www.sec.gov.

ITEM 2.DESCRIPTION OF PROPERTY

        Until September 3, 2003, we rented a minimal amount of office and a lab
room  of  1,200  square  feet  space of an affiliate, Kenneth Warren Institute.
From October 1, 2003 through November  30,  2004,  we  used a minimal amount of
office space provided by our chief executive officer at  no  cost.   The agreed
upon value of the facilities at the Warren Institute was $1,400 per month which
was  accrued from January 2002 to September 30, 2003. No rent was paid  to  the
Warren  Institute;  however, Wellstone recorded rent expense for the use of the
facilities and a contribution to capital by principal shareholder of $1,400 per
month. We also use lab  space  provided  from time to time under agreement with
our director of research as part of his compensation.  On November 30, 2004, we
relocated from New York to North Carolina to avail ourselves of the talent pool
and infrastructure already in place in North Carolina. Wellstone  leased  space
in  a  state-of-the-art cigarette manufacturing facility. In addition to office
and plant  space,  Wellstone  also  leased, on a non-exclusive basis as needed,
certain production assets to produce  cigarette samples. Wellstone vacated this
space in September, 2006 and now rents  a  minimal  amount  of  space in Chapel
Hill, North Carolina on a month to month basis.

ITEM 3.LEGAL PROCEEDINGS

       Not Applicable.

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

       No  matters  were  submitted  to  a vote of security holders during  the
fourth quarter of the fiscal year ended December 31, 2006.








<PAGE>
PART II


ITEM 5.MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER  MATTERS  AND COMMON STOCK
       REPURCHASES

       (a)  Market Information

             The  Company's  Common Stock has traded on the OTC Bulletin  Board
             under the symbol WLSF.OB from May, 2003 to June 29, 2006, when the
             symbol was changed  to  WFLT.OB  in  connection  with  a  1-for-25
             reverse  stock  split.    The  high  and  low sales prices for the
             common stock were as follows:

       Quarter Ended                      High             Low
        December 31, 2006                $  .75     	  $  .10
        September 30, 2006                 3.07              .62
        June 30, 2006                      9.50             3.25
        March 31, 2006                    13.75             7.50
        December 31, 2005                 12.75            10.50
        September 30, 2005                15.00            13.00
        June 30, 2005                     15.50            10.25
        March 31, 2005                    24.50            18.00

       All share information is adjusted for stock splits  and stock dividends.
The above information was supplied by the OTC Bulletin Board  and  these prices
reflect  inter-dealer  prices,  without retail mark-up, mark-down or commission
and may not represent actual transactions.

       (b)  Holders

             As  of December 31, 2006,  there  were  approximately  143  record
holders of Company common stock.

       (c) Dividends

             The Company  has  not paid any dividends on its common stock.  The
Company currently intends to retain  any  earnings for use in its business, and
therefore does not anticipate paying cash dividends in the foreseeable future.
       (a)Equity Compensation Plans







<PAGE>

<TABLE>
<CAPTION>
<S>			<C>			<C>

       Equity Compensation Plan Information as of December 31, 2006

									Number of Securities
									remaining available
			(a)			(b)			for future issuance
			Number of securites	Weighted Average	under equity
			To be ussued upon	excersice price of	compansation plans
			excercise of existing	outstanding options,	(excluding securities
			Options, warrants	warrants and		reflected in
Plan Category		and rights		rights			column (a)

Equity compensation	720,000			$2.50			960,000
Plans approved by
Security holders

Equity compensation	0			0			0
Plans not approved
By security holders

Total			720,000			$2.50			$960,000


</TABLE>

(e)  Sales  of  Unregistered Securities during the year ended December 31, 2006

        On  January  25, 2006, the Company received $500,000 from  the  Carlson
Group, Ltd., pursuant   to  a  promissory  note,  dated  January 25, 2006.  The
Company borrowed the principal  amount  of $500,000,  at an interest rate of 8%
per annum, due in full on December 31, 2007. In addition to the stated interest
rate, the Company shall also pay to the lender  an  amount equal  to the lesser
of (a) $25,000 or (b) 3% of the net profits after taxes  as  of  September  30,
2007,   to  be  payable simultaneously with the principal and interest  due  on
December  31,  2007. If a portion of the principal or interest is paid prior to
December 31, 2007,  the  calculation of the additional amount shall be adjusted
pro-rata. In the event  of  a default under the note when due, then the lender,
at its election, may declare   the   entire  unpaid  principal, and all accrued
but   unpaid   interest,   immediately   due   and    payable.    The   maximum
additional amount that the Company shall pay is $25,000, and such amount is due
on the maturity of the Note.

(f) Company repurchases of common stock during the  years  ended  December  31,
    2006 and 2005.

       None

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

SUSPENSION OF MARKETING PROGRAM

        In  the  quarter  ended  September 30, 2006,  the Company continued  to
suffer from a negative  gross  margin   on its cigarettes; which  was  part  of
the   Company's  strategy  to  obtain market   share   and   entry   into   the
competitive  cigarette marketplace.  Management reviewed the liquidity position
of  the Company  during the  quarter   ended  September  30,  2006  and  sought
unsuccessfully for additional debt or equity  funding. Although the Company did
enter  into  negotiations for a private placement,  the  funding group required
that the Company  carry out a 1-for- 25 reverse split of the  common stock as a
precondition to such  placement.  After  Wellstone  carried  out  the   reverse
split,    the   funding   source   did  not  complete   funding.   Faced   with
inadequate  cash  resources to fund the market introduction  of  its  products,
management  determined   to  suspend  further marketing activity.  As a result,
sales in the  quarter  ended  September  30,  2006  fell  to  only  $6,475, and
Wellstone  had  no  significant   sales  for the fourth  quarter, and does  not
expect  to  be able to have any further sales  until  such  time  as  Wellstone
obtains financing. All full time employees and officers have  been dismissed or
have resigned  except for the Company Chief Executive Officer. The  Company  is
in negotiations  with its suppliers for time to  obtain  financing and continue
its  business,  but   there   is  not  a  high probability that  financing  can
be obtained that is not unduly dilutive to the Company shareholders.

WELLSTONE'S STRATEGIC DIRECTION

        Following a review of the  tobacco   market   and  cigarette  industry,
Wellstone  determined  to  manufacture   and   produce   its   own   brand   of
cigarettes.   In  connection with such plan, Wellstone has developed  packaging
materials and tobacco  blends for a full line of cigarettes, including regular,
smooth blue and menthol.  Our  strategy  and  objective  is  to offer an ultra-
premium product at a value price.

        Wellstone has received approval from the Federal Trade Commission (FTC)
and the National  Association  of Attorneys Generals (NAAG) and  has been added
to  the list of approved brands  in  thirty  one states. We have initiated  the
process  for  approval in the remaining states but are not actively prosecuting
approval due to  lack  of  funds  and  uncertainty  about  the Company's future
marketing.  Wellstone has signed a multi-year manufacturing  contract  with  US
Flue-Cured   Tobacco   for  production. With the exception of filters, US Flue-
Cured will procure all materials,  manufacture, package, and ship to order. The
Company believes US Flue-Cured's annual manufacturing capacity is sufficient to
meet its short and long-term needs.  Filters  will  be sourced from the largest
domestic filter manufacturer, as well as several European alternatives. Tobacco
leaves  and  filter compound material is readily available  through  a  variety
of sources.

        Subject to regulatory  approval,  we  intend  to offer what we consider
to be a "Potentially Reduced  Exposure  Product" or "PREP"  or  products within
the price value  segment  of  the  market.   The Company launched its Wellstone
brand  of cigarettes in the United States during  the  first  quarter  of  2006
and   has shipped  all  brand  styles to Arizona,  Louisiana,  North  Carolina,
Virginia  and  California.  Wellstone   is   investigating   the  international
potential  of its proprietary  compound,  especially  in  Europe,   Africa, and
Asia  where  smoking  levels  are  much  higher  than in the United States  and
Canada.  The  Company continues to consider one  or  more  acquisitions if such
can be synergistic with  our  current  business,  but no agreements  have  been
reached  for  any acquisitions.

        We  believe  that  our brand of cigarettes  are  lower  in  toxins  and
do  not compromise the  pleasurable  effects  of smoking. Wellstone's strategic
plan as well as its philosophy  is  based  on  two assumptions: first, quitting
smoking can be  difficult and second, many smokers  do   not   concentrate   on
cigarette   tar  levels.   In   2002, according to industry reports, 64% of all
cigarettes sold in the United States   were   high  (more  than  10 mg) in tar.
Wellstone  believes  that  part  of  the  reason  smokers   prefer   high   tar
cigarettes   is  because  of  taste.  Wellstone's goal is to reduce toxins  and
certain associated carcinogens without  affecting  the  cigarettes'  taste.  We
believe  smokers will try  Wellstone for its lower price, and come back for its
taste.

        We  believe  that Wellstone is the only small (less than $50 million in
sales) US cigarette manufacturer  that is publicly traded. We believe that  the
remainder of  the  small  manufacturers   in   the  industry are privately held
or foreign. Management believes Wellstone's access to  the  US  capital markets
will  assist  Wellstone   in its goal to become the  largest  company  in   the
growing  discount cigarette  market.  However,  there  can be no assurance that
Wellstone's access to US capital markets  will  provide the necessary financing
to build and grow the business.

        We intend to sell and market  our  own  cigarette  brand  and  to  sell
filters directly  to  manufacturers  to be integrated into  their own cigarette
brands.  Management  has  determined  that   manufacturing  and distributing  a
Wellstone  line  of  cigarettes  will  be  in  the  best   interests    of  its
stockholders,  particularly  if  Wellstone  is  able to successfully market its
brand. The successful launch of a  Wellstone  brand   should   add  significant
value   to   the  Company.  More importantly, the success of a Wellstone  brand
will,  it  is  anticipated, lead the way for other manufacturers to utilize the
filter in their  own  cigarettes  under  a Wellstone license. We also intend to
develop our own "make  your own" as well as enter into the small cigar market.

OVERVIEW

        Wellstone  has  relocated from New York  to  North  Carolina  to  avail
itself of the talent  pool   and  infrastructure  already  in  place  in  North
Carolina.   Wellstone  has  leased  space   in   a  state-of-the-art  cigarette
manufacturing facility. In addition to office and  plant space, Wellstone  also
leases,  on  a  non-exclusive  basis as needed, certain  production  assets  to
produce  cigarette  samples.  The  office   space  and plant are located at 250
Crown Boulevard in Timberlake, North Carolina,  approximately   20  miles  from
Durham.  This  space  was  vacated  in September, 2006, and now rents a minimal
amount of space in Chapel Hill, North  Carolina  on a month to month basis.  In
furtherance of its  marketing plans, the Company:

- Designed packaging to reflect the benefits of the Wellstone filter.

- Retained  Signal  Design, Inc.  of  Durham,  North  Carolina  to  assist   in
  developing a comprehensive brand strategy and marketing campaign.

- Has received results  from  an  independent FTC testing facility that confirm
  the Company's expectations for their patented filter technology.

- Hired independent sales consultants and are negotiating with several more.

- Entered  into  an agreement with U.S.  Flue-Cured  Tobacco  Growers,  Inc. to
  manufacture Wellstone's product line.

- Received FTC advertising approval and rotation warning approval

- Wellstone brand  approved  by  Settling  States  under  the Master Settlement
  Agreement

- Has formulated distribution plans and begun shipping cigarettes.

RESULTS OF OPERATIONS

        On  January  5,  2006,  the  Company  announced  that it launched   its
Wellstone brand in the United States with shipments to several states resulting
in  revenue of $258,194 for the year ended December 31, 2006, of which $215,741
represented  sales  for  the  six  months ended June 30, 2006 before  marketing
efforts were suspended in the third  quarter.  On  April  5, 2006, the  Company
announced  that  a  major  supplier  to  convenience stores in the Southeastern
United States had agreed to carry all styles  of the Wellstone brand and secure
orders  using  its  sales  organization. Wellstone  had  been  able  to  secure
additional  suppliers  to  carry all styles of the Wellstone brand  family  and
anticipated that it would ship  to additional states  during  the third quarter
of 2006 with sales to most states  by  the  end  of  the  year. However, due to
cessation  of  marketing,  there was only limited sales after  June  30,  2006.
Wellstone shipped product to Central and South America during the third quarter
of  2005  for  promotional  and   consumer  trial   purposes   only.  Prior  to
January  2006  Wellstone  had  received  no  revenue.  Our operations primarily
consisted   of  developing  and  refining our proprietary filter   formulation,
obtaining  a  US  and   international   patent   on  that formulation,  and  on
seeking to market the filter technology and the Wellstone brand of cigarettes.

       The Company had a loss of $  2,772,581  for  the year ended December 31,
2006.  The loss is primarily the result of general and  administrative expenses
of   $2,389,852   and    interest    expense    of   $584,868.   General    and
administrative expenses  include  employee wages  of   $546,905  ,  promotional
material   of  $44,573  and  write  off  of  stale inventory of $589,899.As  of
December 31, 2006, the Company owed its manufacturer,  US  Flue  Cured  Tobacco
Growers, $542,261 and also had an accounts receivable from its manufacturer  in
the  amount  of $227,074.  US Flue Cured and the Company agreed to offset these
amounts, with  the  result  that the Company owes US Flue Cured Tobacco Growers
$315,187 as of December 31, 2006.  Other income of $227,074 resulted from write
off of accounts receivable owed as uncollectible as of December 31, 2006.

        Substantially all of our losses  for  the  year ended December 31, 2005
were the   result   of  general  operating  expense,  legal  fees,  and  stock-
based  compensation  expense   for  the issuance of stock  and  stock  options.
Options to purchase 180,000 shares  with  exercise  prices of $.08325 per share
were issued to two officer employees resulting in an expense  of  approximately
$1,920,000. Because  these  stock  options   were   issued  to  employees,  the
expense   was calculated  in  accordance  with  Accounting   Principles   Board
(APB)  No.   25, Accounting  for  Stock Issued to Employees.  Under APB No. 25,
the  difference  between  the  fair value  of the Company's common stock on the
grant date and the exercise  price  of  the stock  option,  multiplied  by  the
number   of   options  granted,  is   recorded   as  compensation  expense.  In
addition,  the  Company  issued 160,000 shares  of  stock   to   an   unrelated
individual as certain compensation for consulting services that he provided  to
the Company and 20,000 shares  of  common stock to the brother of the Company's
Chief  Executive Officer for legal services  that  he  provided to the Company.
These shares  were  valued  at $25.50 per share based on  the  closing price of
the Company's common stock on the  date of  issuance  and  resulted  in  a non-
cash expense of $4,590,000.  The Company issued 65,000 shares of  common  stock
upon  the  exercise  of  stock options at an exercise price of $.25 and  24,000
shares  of common stock upon the exercise of stock options at an exercise price
of $.08325.

LIQUIDITY AND CAPITAL RESOURCES

        We began shipping   cigarettes   in   the  US  during January 2006 with
shipments  to several states resulting in revenue  of  $258,194  (before  trade
discounts of $8,132.50) resulting in net revenue of $250,061.50  for  the  year
ended December 31,  2006.

        Wellstone  Filters,  Inc. received  $250,000  from  the Carlson  Group,
Ltd., pursuant  to  a  promissory  note,  dated May 17, 2006. This  Note is not
associated with  the prior promissory notes  which had been issued in 2006  and
2004.  The Company  borrowed  the  principal amount of $250,000, at an interest
rate of 8% per annum, due in full on December  31,  2007.  In  addition  to the
stated  interest rate, the Company shall also pay to the Lender an amount equal
to the lesser  of  (a)  $25,000 or (b) 3% of  the net profits after taxes as of
September 30, 2007, to be  payable  simultaneously   with   the   principal and
interest  due on December 31, 2007. If a portion of the principal or   interest
is paid prior  to  December  31, 2007, the calculation of the additional amount
shall  be adjusted pro-rata. In   the   event  of a default under the note when
due,  then  the  Lender,  at  its election,  may   declare  the  entire  unpaid
principal, and  all accrued but unpaid interest, immediately  due  and payable.
The maximum additional amount that the Company shall pay is $25,000,  and  such
amount  is due on the maturity of the Note.

        On January 25, 2006, Wellstone Filters, Inc. received $500,000 from the
Carlson Group, Ltd.,  pursuant  to a promissory note, dated January  25,  2006.
This Note is not associated with  the  prior  promissory  note  which  had been
issued  in  2004. The Company borrowed the principal amount of $500,000, at  an
interest  rate   of  8%   per   annum,  due  in  full  on December 31, 2007. In
addition to the stated  interest  rate,  the  Company  shall   also  pay to the
Lender  an  amount  equal  to  the lesser of (a) $25,000 or (b) 3% of  the  net
profits after taxes as of September  30,  2007,  to  be  payable simultaneously
with  the principal and interest due on December 31, 2007.  If a portion of the
principal  or  interest is paid prior to December 31, 2007, the  calculation of
the additional amount  shall  be adjusted pro-rata.  In the event  of a default
under  the note when due, then the  Lender, at its election,  may  declare  the
entire unpaid  principal, and all accrued but unpaid interest, immediately  due
and  payable.  The  maximum  additional  amount  that  the Company shall pay is
$25,000, and such amount  is  due on the maturity of the Note.

        During  2004,  the  Company  received  $1,500,000  in  exchange  for  a
$1,500,000 convertible promissory note, due December 31,  2006,  that it issued
to the Carlson  Group,  Ltd.  The note bears interest  at  a  rate  of  4%  per
annum  (effective  interest  rate   of  38%),  which accrues and is payable  on
maturity. This note has not been paid as of December  31, 2006, and the Company
lacks funds to pay the note. Wellstone is in discussions  with  Carlson  Group,
Ltd. regarding repayment options.

        Wellstone    has   sourced   suppliers   to  manufacture  its  patented
formulation  in commercial  quantities.  These sources  of  supply  will enable
Wellstone to meet all foreseeable market demand  for the Wellstone line as well
as to supply other manufacturers who may choose to license the product. Because
the formulation is unique to Wellstone's product,  Wellstone  has been required
to specially source manufacturing  to  ensure  that  strict  specifications can
be  met.   Wellstone  intends  to use multiple suppliers to ensure  a  reliable
supply.

        Our activities to date have  been  limited  to seeking capital; seeking
sources of supply and development of a business plan.  We  do not believe  that
conventional financing,  such  as bank loans, is available to  us  due to these
factors.   The  Company  will  be  required   to   engage   in  debt  or equity
transactions  to satisfy cash needs over the next twelve months, and Management
believes that it  will  be  able   to  raise  the required funds for operations
from   one   or  more  future offerings  and  to  affect   our  business  plan.
However, there  can  be  no  assurances to that effect because our  ability  to
raise significant amounts of financing  will  be dependent on favorable capital
markets  and  obtaining a market for our products,   and  other  risks inherent
in the business as  discussed  under  the caption "Risk Factors" may affect the
outcome of Management's plans.

RISKS AND UNCERTAINTIES

        We may be sued and may not be covered by insurance.

        There  are  currently several  pending  legal   actions  affecting  the
tobacco  industry,  including   proceedings   and   claims   arising   out   of
the  sale,  distribution,   manufacture,   development, advertising,  marketing
and  claimed health effects of cigarettes.   We  may be named as a defendant in
the future as there has been a noteworthy increase   in  the  number  of  these
cases pending. Punitive damages, often in amounts ranging into the hundreds  of
millions,  or even  billions  of dollars, are specifically  pleaded in a number
of these cases in addition to compensatory  and  other damages.  We  do not yet
have any product liability insurance, and if such insurance can be obtained  it
probably  would be very  limited  in  scope  of  coverage to  any  claims  that
tobacco  products  manufactured  by or for us. Such  insurance  probably  would
not  cover health-related   claims    such   as   those  that  have  been  made
against  the  major manufacturers of tobacco  products.   We   do  not  believe
that  such insurance currently  can be obtained. Accordingly, our  inclusion in
any  of these  actions or any future actions would have a material and  adverse
effect on our financial condition.

        We  are  still   in   the   Research and Development Stage and have not
received any significant revenues.

        To date, Wellstone's activities   have  been  limited  to  research and
development,  product  testing  and  initial marketing.  We  currently have  no
sales.  Wellstone might not be able to  find  a   market   for   its  products,
achieve a significant level of sales  or  attain profitability. As a result  of
the    significant   operating  expenses  related  to  start   up   operations,
operating   results   will  be  adversely   affected   if significant  sales do
not materialize, whether  due to competition or otherwise. Wellstone might  not
be  able  to  grow in the future  or  attain profitability. Wellstone might not
be  able  to implement  its  business plan  in  accordance  with  its  internal
forecasts or to a level that meets the expectations of investors.

        The  report  of  our  independent  registered  public  accounting  firm
included  in  the  audited financials in our most recent Annual Report  on Form
10-KSB  contains  an explanatory   paragraph   expressing   substantial   doubt
about  our  ability  to continue as a going concern.

        As  a  result   of   our   losses   to   date  and  our current lack of
revenue,   our independent registered public accounting  firm   has   concluded
that  there   is  substantial   doubt  as  to  our  ability  to  continue  as a
going concern, and accordingly, our  independent  registered  public accounting
firm has included in their  report  on  our  December  31,  2005   consolidated
financial   statements  included  in  our Annual Report on Form 10-KSB,   filed
with  the  Securities and Exchange Commission on April 11, 2006, an explanatory
paragraph  describing   the  events   that    have    given    rise   to   this
uncertainty.  The  Company will seek additional sources of capital  through the
issuance  of  debt  or  equity  financing,  but  there can be no assurance  the
Company will be successful in  accomplishing  its objectives.  The  ability  of
the Company to continue as a going concern is dependent  on  additional sources
of capital.

        We   are   dependent  on  the  domestic  tobacco  business,  which   is
contracting.

        Substantially  all  of  our  revenues   are expected to be derived from
sales in the United States. The U.S. cigarette market   is   a   mature  market
and on average, domestic  consumption  has decreased approximately  2% per year
over  the  past decade. Numerous factors  have  contributed  to  this  decline,
including   health  considerations,    diminishing    social    acceptance   of
smoking,   legislative  limitations  on  smoking  in public places and  rapidly
accelerating  costs  in  the form  of increased state  tax  on  cigarettes  and
settlement  cost.  If  the   U.S.  cigarette  market  continues to contract, it
could adversely affect our potential future sales, operating  income  and  cash
flows.

        Weaknesses   in   the   Company's   internal   controls  and procedures
could have a material adverse effect on the Company.

        Management  is responsible for establishing and  maintaining   adequate
internal  control over financial reporting. Our internal control over financial
reporting is  a  process designed to provide reasonable assurance regarding the
reliability of  financial    reporting   and   the   preparation  of  financial
statements   in  accordance   with GAAP.  Management  determined   that   there
werematerial weaknesses in our  internal control over financial reporting as of
December  31,  2006.  A  material   weakness   is   a  control  deficiency,  or
combination of control deficiencies   that   results  in  a  more  than  remote
likelihood  a  material misstatement  of  the   annual   or  interim  financial
statements   will   not   be prevented or detected.  The Company  is  currently
evaluating its options for  improving  its  material  weaknesses  and  internal
controls due to its limited resources.

        If  we  are unable to maintain our  internal  controls, our ability  to
report our financial  results  on  a  timely  and  accurate  basis   could   be
adversely  affected,  which   could   have   a   material adverse effect on our
ability   to   operate   our business. Please see Item   8   -   Controls   and
Procedures for more information  regarding  the  measures  implemented  in  the
quarter  ended  March  31,  2006,  as well as those that implemented throughout
2006.  Each  remedy is designed to remediate  the  deficiencies in our internal
controls. In addition, even after the remedial measures  discussed  in Item 8 -
Controls and Procedures  are  fully implemented,  our  internal  controls   may
not  prevent  all  potential  errors or fraud,  because  any control system, no
matter  how  well  designed,  can   only provide reasonable  and  not  absolute
assurance  that  the  objectives of the control system will be achieved.

        We do not have any production  facilities  unless  we  acquire  them or
contract out production.

        Problems    in    purchasing    equipment,  establishing  manufacturing
facilities  and meeting demand can be expected.  Problems  in  contracting  out
production  can  also  be  expected. If we cannot produce  filter  material  or
outsource production we may not be able to meet market demands of our own brand
nor  can the filter be used  in  existing brands unless we license the filer to
such existing brands.

        Competition could prevent us from meeting our objectives.

        The   cigarette   industry   is  highly  competitive.  Our  competitors
include developers of low-carcinogen tobacco  and  developers  of  other filter
technology.  Such   competition  may   have  substantially  greater  financial,
manufacturing, marketing  and other resources.  Another  company  could develop
filter  technology  similar  to  ours.  Competition will affect our ability  to
market our product and obtain financing.  Wellstone  brands  will be subject to
increased competition and this has resulted in additional pressure due to price
discounting.

        Our  cigarettes and  the  cigarettes  using  our  filter   may  not  be
accepted by smokers.

        Our filter  and the Wellstone brand utilizing it may not be accepted by
smokers. Smokers may  decide  not to purchase our brand or any tobacco  product
made with our  filters  due to taste or other preferences, and sales of filters
with  our technology would be adversely affected.

        The  cigarette industry   is  subject  to  substantial  and  increasing
regulation and taxation and this can only have a negative impact on us.

        Various  federal,  state  and  local  laws  limit the advertising, sale
and use of cigarettes, and these laws  have  proliferated  in recent years. If,
as expected, this trend continues, it may have  material  and  adverse  effects
on   potential sales, operating income and cash flows. In addition,  cigarettes
are subject   to  substantial   and   increasing excise taxes. Increased excise
taxes  may  result  in declines in overall  sales  volume.  This  result  could
adversely affect the market for our product.

        The  U.S. Food  and  Drug   Administration   ("FDA")   has  promulgated
regulations  governing   the   sale and advertising of tobacco products.  These
regulations are designed primarily  to  discourage the sale to, and consumption
by, adolescents and children. The authority  of  the  FDA  to  promulgate  such
regulations was challenged in the federal courts. On March 21, 2000, the United
States Supreme Court in a five to  four decision held that the Congress has not
given  the  FDA authority  to  regulate   tobacco   products   as   customarily
marketed.  Given  the decision by the Supreme Court it is unclear whether   the
Congress in the future  will  act  to grant such authority to the FDA, although
legislation  that  would create  such  authority has already been introduced in
Congress. See "Government Regulation."

        If we are  successful,  we  might   not  be  able to hire employees and
manage a bigger enterprise.

        If we are successful in obtaining market acceptance  for  our products,
we will be  required  to  manage  increasing,   possibly   substantial,  volume
from   the  resulting  customers.  To  accommodate  any such growth and compete
effectively, we will be required to attract, integrate,  motivate  and   retain
additional  highly  skilled   sales,   technical  and  other employees. We face
competition   for   these  people.  Our ability  to  successfully  manage  such
volume also will be dependent on our  ability  to  find a suitable manufacturer
for our brand and filters. We or any person contracted  with   to  produce  our
products  in  commercial  quantities  might   not   be   able  to overcome  the
challenge  of   setting   up   any  production operations, and our   personnel,
systems,  procedures  and controls  might  prove  inadequate   to  support  our
future  operations.  Any failure  to  implement  and improve  our  operational,
financial  and  management   systems  or  to  attract, integrate,  motivate and
retain additional employees required  by  future  growth,  if any, could have a
material and adverse effect on our business and prospects, financial  condition
and results of operations.

        We may not be able to protect our patents against infringement.

        Our  success  in   commercially  exploiting  our proprietary technology
depends  in  large part on our  ability  to  defend  the  patents   that   were
licensed to us,  to obtain  further patent protection for the technology in the
United  States  and  other jurisdictions  and  to  operate  without  infringing
upon the patents and proprietary   rights  of  others.  Additionally,  we  must
be  able  to  obtain appropriate licenses  to  patents  or  proprietary  rights
held  by  third  parties  if  infringement would otherwise occur, either in the
United  States  or in foreign countries.   The   primary patents licensed to us
were only issued in the  United States and not in   foreign  jurisdictions.  If
international   patents   are  not  issued,   it   would adversely  affect  our
competitive advantage, with respect  to sales outside the United States.

        Patent  positions,   including   our   patent   positions   (owned   or
licensed)  are uncertain  and involve complex legal and factual  questions  for
which  important  legal principles  are  unresolved.  Any  conflicts  resulting
from third party patent applications and patents could significantly reduce the
coverage  of our patents   and   limit   our   ability   to  obtain  meaningful
patent  protection.  If  patents  are  issued to other companies  that  contain
competitive  or conflicting claims, we may  be  required  to obtain licenses to
these  patents or to develop or obtain alternative technology.  Such  licensing
agreements,  if required,  may  be unavailable  on  acceptable terms or at all.
If such licenses  are  not  obtained, we  could  be  delayed  in  or  prevented
from  pursuing  the  development  or commercialization  of  our products. It is
possible that there exists an  issued  or pending patent which conflict with or
potentially infringe on our patent.

        Litigation which could result  in   substantial   cost   may   also  be
necessary to enforce  any  patents  to  which  we  have rights, or to determine
the   scope,  validity  and  unenforceability  of  other  parties'  proprietary
rights  which  may  affect  our  rights. U.S. patents carry  a  presumption  of
validity  and  generally can be invalidated  only  through clear and convincing
evidence.  We  may  also  have  to  participate  in  interference   proceedings
declared by the U.S. Patent  and Trademark Office to determine the priority  of
an invention, which could result  in  substantial  cost.  Our  licensed patents
might  not  be  held  valid  by a court or administrative  body  or   that   an
alleged infringer  would  be  found  to  be infringing.  The  mere  uncertainty
resulting   from   the   institution    and  continuation  of  any  technology-
related litigation or interference proceeding could have a material and adverse
effect on our business and prospects.

        We  may  also rely on unpatented  trade   secrets   and   know-how   to
maintain our competitive   position,   which   we  seek to protect, in part, by
confidentiality agreements with employees, consultants,   suppliers and others.
These agreements might be breached or terminated, or we might not have adequate
remedies for any breach, and our trade secrets might otherwise  become known or
be independently discovered by competitors.

        If we lose our management it would damage our business.

        We  depend   upon  the  continued  services  of our senior   management
for   our continued success.  The  loss  of  the  Company's   Chief   Executive
Officer,  Learned Jeremiah Hand, could have  a serious negative impact upon our
business and  operating  results. We  do not have  an employment agreement with
Mr. Hand, and we have not obtained "key-man" life insurance with respect to his
life.

        No cash dividends  have been paid and we do not anticipate that we will
pay any dividends in the future.

        Wellstone has not  paid   any  cash  dividends  on  its  capital stock.
Wellstone anticipates that its future  earnings,  if any, will be retained  for
use  in  the  business,   or  for  other  corporate purposes,  and  it  is  not
anticipated that  any cash dividends  on  its   common   stock  will be paid in
the foreseeable future. Investors should not expect to receive  any   dividends
or other periodic income on their investment.

        Penny Stock rules could make it hard to resell your shares.

        The  Penny  Stock rules apply to the trading of our stock.  Wellstone's
common  stock  does  not   meet the listing requirements for any trading market
other than the OTC Bulletin  Board.  Consequently, the liquidity of Wellstone's
securities could be impaired,  not  only   in   the  number of securities which
could  be  bought  and  sold,  but  also  through  delays  in   the  timing  of
transactions, reduction in security analysts' and the  news media's coverage of
Wellstone, and lower prices for Wellstone's securities than  might otherwise be
attained.

        In addition, the "penny stock" rules limit  trading of  securities  not
traded  on NASDAQ or a recognized stock exchange, or securities  which  do  not
trade at a price  of  $5.00  or  higher, in that brokers making trades in those
securities  must  make  a special suitability  determination  for purchasers of
the  security,  and  obtain   the  purchaser's  consent  prior  to  sale.   The
application  of   these  rules may make it difficult for shareholders to resell
their shares.

        As the holders of  a  significant  amount of common stock of Wellstone,
management and its  affiliates  have, and will have, substantial influence over
Wellstone,  and  such affiliates may have interests  which  differ  from  other
holders.

        Members of  management,   and  their  affiliates,  own 7,177,320 shares
of common stock, on a fully diluted  basis,  or 65.7% of the common  stock.  As
such,  such individuals have substantial influence  and  control  over  matters
voted  upon   by  stockholders   (such  as the election of the directors to the
Board  of  Directors  of  Wellstone, mergers   and  sale  of  assets  involving
Wellstone and other matters upon which stockholders  of  Wellstone  vote)  This
power, in turn, gives them substantial control over the business and operations
of Wellstone.

        We could change the strategy we outline in this report.

        Although we have no current plan to do so, we may  change  our strategy
for  the development  and marketing  of  our  technology  in  the  future.  Our
business  plan might not be implemented as set forth herein.

ITEM 7.FINANCIAL STATEMENTS

         Wellstone's  financial  statements  are  appended  to  the end of this
report.

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

        (a)  On  February  23,  2006,  Wellstone Filters, Inc.  (the "Company")
received  notification from Tanner LC ("Tanner"),  the  Company's   independent
registered  public   accounting  firm,  that  Tanner  resigned as the Company's
independent registered public accounting firm as of February 23, 2006.

        The reports of Tanner on the Company's financial  statements  as of and
for the fiscal years ended December 31, 2004 and December 31, 2003 contained no
adverse opinion  or  disclaimer of opinion, nor were they qualified or modified
as   to uncertainty, audit  scope  or  accounting  principle,  except  for  the
addition  of  an  explanatory  paragraph   in  the  report  of  Tanner  on  the
Company's financial statements  as  of and for  the  fiscal year ended December
31,  2003  expressing substantial doubt about the Company's ability to continue
as a going concern.

        During the fiscal  years  ended  December  31,   2004  and December 31,
2003,  and  through  February 23, 2006, the Company had no disagreements   with
Tanner on any matter of accounting principles or practices, financial statement
disclosure or auditing   scope   or   procedure,   which  disagreements, if not
resolved  to  the satisfaction of Tanner, would have  caused   Tanner   to make
reference thereto in its reports on the financial statements of the Company for
such years.

        Other  than  as set forth below, there were no reportable  events   (as
defined in Regulation   S-B  Item  304(a)(1)(iv)) during the fiscal years ended
December  31, 2004 and December  31,   2003   or  the subsequent interim period
through February 23, 2006. As set forth in Item  8A  on  Annual  Report on Form
10-KSB/A for the fiscal year ended December 31, 2004  and  Item 3 on  Quarterly
Report on Form 10-QSB/A for the fiscal quarterly periods ended March 31,  2005,
June  30,  2005  and September 30, 2005, respectively, the Company  and  Tanner
identified significant deficiencies and material weaknesses that existed in the
design or operation of the Company's internal controls over financial reporting
and  such  items   are incorporated  herein  by  reference.  In connection with
the initial filings  of  Annual  Report  on  Form  10-KSB/A and each  Quarterly
Report  on  Form  10-QSB/A, respectively  referred   to  above, Tanner, through
letters delivered on February 13,  2006  and  March  18,   2005,  informed  the
board  of  directors  of  its determinations  regarding the   effectiveness  of
the  internal  controls  over financial reporting.  The Company  has authorized
Tanner  to  respond fully to any inquiries  by  De  Joya Griffith  &   Company,
LLC  regarding   the   significant  deficiencies  and  material  weaknesses  in
internal  control  set  forth in the Annual Report on Form  10-KSB/A  and  each
Quarterly Report on Form 10-QSB/A.

        (b)  Effective  February  23, 2006, De Joya Griffith & Company, LLC was
engaged  as  the new independent registered  public  accounting  firm  for  the
Company.

Item 8A.  CONTROLS AND PROCEDURES

        We  maintain   disclosure  controls  and  procedures designed to ensure
that  information  required   to be disclosed in our reports  filed  under  the
Securities Exchange Act of 1934, as  amended  (the  Exchange Act), is recorded,
processed,  summarized,  and  reported  accurately,  in  accordance  with  U.S.
Generally  Accepted  Accounting   Principles  and  within  the  required   time
periods,  and  that  such information is  accumulated  and  communicated to our
management, including our Chief Executive Officer and Chief Financial  Officer,
as appropriate, to allow for timely decisions regarding disclosure.

        As   required  by Rule 13a-15(b) under the Exchange Act,  we  conducted
an evaluation, with the  participation  of  our Chief Executive Officer and the
Chief  Financial   Officer,   of   the   effectiveness    of   our   disclosure
controls   and  procedures as  of  December  31, 2006. In connection  with  the
completion of its  audit  of, and the issuance of its  report on, our financial
statements for the year ended  December  31,  2005, De Joya Griffith & Company,
LLC,   our   independent   registered  public  accounting   firm,    identified
deficiencies  that existed in  the  design or operation of our internal control
over financial reporting that it considers  to  be  "material weaknesses."  The
Public Company Accounting  Oversight  Board  has defined  a  material  weakness
as  a "significant deficiency or combination of significant  deficiencies  that
results   in  more than a remote likelihood that a material misstatement of the
annual or interim  financial  statements  will  not  be prevented or detected."
Based on our evaluation and the deficiencies  identified  above,  we  concluded
that, as of December 31, 2006, our disclosure controls  and procedures were not
effective in timely  alerting  us  to  the  material  information  relating  to
us  (or our consolidated  subsidiaries)  required to be included in the reports
we file  or submit under the Exchange Act.
Management  is responsible for establishing and maintaining  adequate  internal
control over financial reporting. Our internal control over financial reporting
is a process designed to provide reasonable assurance regarding the reliability
of  financial   reporting  and  the  preparation  of  financial  statements  in
accordance   with  GAAP.   Management  determined  that  there   were  material
weaknesses in our internal control  over financial reporting as of December 31,
2006.  Although the resources are currently  limited,  the Company is currently
evaluating  its  options  for  improving its material weaknesses  and  internal
controls..



<PAGE>
ITEM 8B. OTHER INFORMATION

         Not applicable


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

       The members of the Board of Directors of Wellstone serve  until the next
annual  meeting  of stockholders, or until their successors have been  elected.
The officers serve  at  the  pleasure of the Board of Directors.  The following
are the directors, executive officers and key employees of Wellstone.

 Learned Jeremiah Hand          48      Chief  Executive  Officer, acting Chief
                                        Financial Officer, and Director

LEARNED JEREMIAH HAND, CHIEF EXECUTIVE OFFICER

       Mr.  Hand joined Wellstone in March, 2000. He has been  Chief  Executive
Officer and a  director  since  March  2000  and Acting Chief Financial Officer
since September, 2006.  From March 2000 to December  2003  he  was  employed by
Warren  Pharmaceuticals, Inc. as its Vice President - Chief Operating  Officer.
From January  2000 to December 2003 he was Executive Director of the Kenneth S.
Warren Institute,  a  non-profit medical research facility.  In 1999 he founded
HFC, a private seed venture  capital  corporation, which has made many internet
and biotechnology related investments and  is  a  founder  of  Medibuy.com.  In
March  2000,  Mr.  Hand  began to devote a significant portion of his  time  to
Wellstone.  He now dedicates 100% of his time to Wellstone.  From 1994 to 1999,
he served as Vice President  at  Morgan  Stanley  Dean Witter.  He has a BA cum
laude from Amherst College.

CODE OF ETHICS

       Wellstone  has not adopted a code of ethics  which  applies to the chief
executive  officer, or principal financial and accounting officer,  because  of
our level of  operations  at  this  time.  Wellstone intends to adopt a code of
ethics during calendar 2007`.

Audit Committee Financial Expert

        Wellstone   does  not have either an Audit  Committee  or  a  financial
expert  on the Board of Directors.    The  Board  of  Directors  believes  that
obtaining   the  services  of  an  audit  committee  financial  expert  is  not
economically  rational  at  this  time  in light of the costs  associated  with
identifying and retaining an individual   who   would   qualify   as   an audit
committee  financial   expert,   the  limited  scope  of our operations and the
relative  simplicity  of our financial statements and accounting procedures .

Section 16(a)  Beneficial Ownership Reporting Compliance

        Section     16(a)   of   the   Exchange   Act   requires    Wellstone's
officers,  directors and  persons   who   own   more  than  ten  percent  of  a
registered class  of  our equity securities to file reports  of  ownership  and
changes  in ownership with  the  SEC.   Officers,  directors  and  ten  percent
stockholders  are  required by regulation  to  furnish Wellstone with copies of
all Section 16(a)  forms   they file.  During the year ended December 31, 2006,
Wellstone believes that Jere  E.  Goyan, Learned Jeremiah  Hand  and  Samuel M.
Veasey failed to file the reports required  by  Section  16(a)  of the Exchange
Act,   including   Forms  3,  4 and 5. Based  on  representations submitted  by
such people.  Wellstone  does  not  believe  that such individuals purchased or
sold any Wellstone Common Stock during 2006.




<PAGE>
ITEM 10. EXECUTIVE COMPENSATION

       The  following  table sets forth the cash  compensation  of  Wellstone's
executive officers and directors  during  each  of the last three fiscal years.
The remuneration described in the table does not  include the cost to Wellstone
of benefits which may be furnished to the named executive  officers,  including
premiums  for  health  insurance and other benefits provided to such individual
that are extended in connection  with the conduct of Wellstone's business.  The
value  of  such  benefits cannot be precisely  determined,  but  the  executive
officers named below  did  not receive such other compensation in the years set
forth below.

<TABLE>
<CAPTION>
<S>				<C>				<C>
                              SUMMARY COMPENSATION TABLE


               ANNUAL COMPENSATION                        LONG TERM COMPENSATION



   Name and                                    	  Other Annual   Restricted	Awards    	   Payouts	 All
   Principal Position	Year  Salary    Bonus     Compensation   Stock ($)      SARs(#)Payouts($)  Options/LTIP  Other
---------------------	----  -------	-----	  ------------	 ----------	-----------------  ------------	 -----
                    	2006  $20,000     0            0      		0         	0   			   0
Learned Jeremiah Hand	2005  $48,000     0            0     		0      		0		0          0
CEO                	2004  $25,000     0            0          	0         		    18,000,000



Samuel Veasey           2006   $20,000
CFO                	2005   $48,000
                   	2004   $10,000                              				       180,000

</TABLE>


..  In connection with his election  as  Chief  Financial  Officer  in September
2004,  Mr.  Veasey was granted options to purchase 180,000 shares at $2.50  per
share. In September  2004 Mr. Hand was also granted options to purchase 720,000
shares at $2.50 per share.  The  above  options  were granted under Wellstone's
1994 Stock Option Plan, as such plan was amended and  restated in 2004. Messrs.
Goyan and Veasey's options lapsed in 2006.

OPTION/SAR GRANTS IN YEAR ENDED DECEMBER 31, 2006 TO NAMED EXECUTIVE OFFICERS

               Number of   % of Total
             Securities    Options/SARs
              Underlying   Granted to
            Options/SARs   Employees in       Exercise or Base   Expiration
Name         Granted (#)   Fiscal Year        Price ($/Sh)       Date

L. Hand               --
S. Veasey             --










<PAGE>
AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR END OPTION/SAR VALUES


                                              Number of
                                              Securities   	Value of
                                              Underlying   	Unexercised
                                              Unexercised  	In-the-Money
                                              Options/SARs at	Options/SARs at
                                              Fiscal Year End	Fiscal Year End
        Shares Acquired                       Exercisable/ 	Exercisable/
Name    on Exercise (#)    Value Realized ($) Unexercisable	Unexercisable
----	---------------	   ------------------ ----------------- ---------------
L. Hand 	0                     $0              720,000(1)   $--(1)
S. Veasey	0                     $0                   --	   $--

(1)All options are exercisable.  Value based on closing  price  of  the  common
stock of $1.31 on December 30, 2004, less exercise price.

   Wellstone  has  no  long term incentive plans other than the plans described
        above.

ITEM 11.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   The  following table sets  forth  information  relating  to  the  beneficial
ownership  of  Company  common  stock as of the date of this report by (i) each
person known by Wellstone to be the  beneficial  owner  of  more than 5% of the
outstanding  shares  of  common  stock  (ii) each of Wellstone's directors  and
executive officers, and (iii) all officers  and  directors  as a group.  Unless
otherwise noted below, Wellstone believes that all persons named  in  the table
have  sole  voting  and  investment  power with respect to all shares of common
stock beneficially owned by them.  For  purposes  hereof, a person is deemed to
be  the  beneficial  owner of securities that can be acquired  by  such  person
within 60 days from the date hereof upon the exercise of warrants or options or
the conversion of convertible  securities.   Each beneficial owner's percentage
ownership is determined by assuming that any warrants,  options  or convertible
securities  that  are  held  by  such  person (but not those held by any  other
person) and which are exercisable within  60  days  from  the date hereof, have
been exercised.

   NAME AND ADDRESS               COMMON STOCK        PERCENTAGE


Learned Jeremiah Hand(1)(2)         7,177,320           66.3%
Chief Executive Officer

Carla Cerami Hand, MD,PhD(1)(2)     7,177,320            66.3%

 Anthony Cerami, PhD(1)(3)          1,157,400            11.5%

All officers and directors
  as a group (2 persons)            7,177,320            66.3%

* less than 1%
(1)The  business  address of each of these persons is300 Market  Street,  Suite
   130-13, Chapel Hill, North Carolina 27516
(2)Ms. Cerami Hand  and  Mr.  Learned  Jeremiah Hand are wife and husband.  The
   7,177,320 shares listed as beneficially  owned  by Mr. Learned Jeremiah Hand
   include  5,533,320  shares which are controlled by  Carla  Cerami  Hand,  as
   stated below; 720,000  shares  issuable  upon exercise of stock options, and
   924,000 shares held through a family limited  partnership controlled by him.
   Mr.  Hand  disclaims beneficial ownership of such  5,533,320   shares.   Ms.
   Cerami is the  sole  limited  partner of a partnership which holds 4,609,320
   shares and also controls 924,000  shares held via a trust, and may be deemed
   to  beneficially own the 1,644,000 shares  controlled  by  Learned  Jeremiah
   Hand.  She disclaims beneficial ownership of the 1,644,000 shares controlled
   by Learned Jeremiah Hand.
(3)Dr. Anthony  Cerami is the father of Carla Cerami Hand. Shares are held in a
   trust.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        Mr. Learned  Hand,  an  officer  and  director,  advanced  $24,298   to
Wellstone  for  expenses which had not been reimbursed as of December 31, 2005.
Mr. Learned Hand  advanced  an  additional  $15,000  to Wellstone for operating
expenses  in September 2006 that has not been reimbursed  as  of  December  31,
2006.   A law  firm  controlled  by a brother of Learned Hand advanced funds on
behalf of  Wellstone from  time  to   time  prior to calendar  2006,  and as of
December 31, 2006 the amount unreimbursed  to  the  law  firm was $16,286.  The
highest amount owing to the law firm during 2006 was $16,286.

        Mr.  Learned J. Hand has advanced the Company additional  funds  during
the first quarter  of  2007 in the amount of $ 41,500.00.  Mr. Hand is under no
commitment to continue to advance funds to the Company.

        Carla  Cerami  Hand   or   Cerami   Consulting   Corporation   and   an
entity  controlled   by   Learned  Hand loaned various amounts to Wellstone for
its capital requirements prior  to  the  year  ended  December  31, 2006.   The
loans  are due on demand, bear interest at 8% per annum and are represented  by
promissory  notes.   As  of December 31, 2006,  $25,199 had accrued as interest
on these  notes,  none  of which  had  been paid.  These  related  party  notes
payable totaled $59,200 as of December 31, 2006.

        The  Company  has  a   licensing   agreement   with  Cerami  Consulting
Corporation,  an  entity owned and controlled by the spouse  of  the  Company's
Chief Executive Officer.   The  licensing  agreement  grants  the  Company  the
exclusive worldwide exploitation rights to practice and utilize the inventions,
technology,  know-  how,  and  patent,  including the rights to manufacture and
market the filters which are the subject of the licensing  agreement, that  are
held by Cerami Consulting Corporation.  In exchange for the license rights, the
Company  agreed  to pay all future  costs  for  development,  manufacture,  and
commercialization  of the technology, including all other future fees and costs
in connection with the patents.








<PAGE>
                                        PART IV


ITEM 13. EXHIBITS

(a) Exhibits.  The following exhibits of the Company are included herein.

         2.  Plan of  acquisition,  reorganization, arrangement, liquidation or
         succession.

             2.1.Agreement and Plan of Reorganization, dated February 25, 2001,
                 between the Registrant and Wellstone LLC.(2)

         3.  Certificate of Incorporation and Bylaws

             3.1.Articles of Incorporation(1)
             3.2 Articles of Amendment(2)
             3.3 Bylaws(1)
             3.4 Articles of Amendment  increasing  authorized  common stock to
		 300,000,000 shares (5)

         10. Material Contracts

             10.1   Stock Option Plan(1)
             102    Amended and Restated Stock Option Plan(5)
             10.3   Funding Agreement with Arrakis Select Fund,(5)
             10.4   Schedule  of  Details,  options granted as of December  31,
                    2004 under Stock Option Plan(5)
             10.5   $1,500,000 Promissory Note (4)
             10.6   Warrants, exercisable for  3,240,000 shares of common stock
                    (4)
             10.7   Lease Agreement, with U.S. Flue-Cured Tobacco Growers Inc.,
                    dated as of September 1, 2004. (5)
             10.8   Marketing  Agreement,  with  H&S  Marketing,  dated  as  of
                    December 28, 2004 (5)
             10.9   License  Agreement,  by  and  between   Cerami   Consulting
                    Corporation   and  Wellstone  Filters,  LLC,  dated  as  of
                    September 14, 1999 (5)
             10.10  Lease Extension  Agreement  with  U.S.  Flue-Cured  Tobacco
                    Growers Inc., dated May 2, 2005 (5)
             10.11  $500,000  Promissory  Note  between Wellstone Filters, Inc.
                    and Carlson Group, Ltd., dated January 25, 2006 (6)
             10.12  Summary of Employment Agreement  with Learned Jeremiah Hand
                    (7)
             10.13  Summary of Employment Agreement with Samuel M. Veasey (7)
             10.14. Patent  License Agreement dated January  17,  2007  between
                    Wellstone and Glycanex BV.(8)

             21.1   Wellstone   Tobacco   Company   is  incorporated  in  North
                    Carolina. Trade names used include Wellstone and Silverton.
                    Wellstone Filters LLC is incorporated in Delaware.

             31.1   Certification  of  Chief  Executive   Officer  Pursuant  to
                    Exchange Act Rule 13a-14(a)(9).

             31.2   Certification  of  Chief  Financial  Officer   Pursuant  to
                    Exchange Act Rule 13a-14(a)(9).

             32.1   Certification  of  Chief Executive Officer pursuant  to  18
                    U.S.C. Section 1350(9).

             32.2   Certification of Chief  Financial  Officer  pursuant  to 18
                    U.S.C. Section 1350(9).

(1) Incorporated  by  reference to the Company's Registration Statement on Form
    10-SB, file no. 0-28161.
(2) Incorporated  by   reference  to  the Company's Current Report on Form 8-K,
    dated May 25, 2001.
(3) Incorporated  by  reference  to  the   Company's Current Report on Form 8-K
    dated August 6, 2001.
(4) Incorporated by reference to the Company's   Current  Report  on  Form 8-K,
    dated December 3, 2004.
(5) Incorporated by reference to the Company's amended Annual  Report   on Form
    10-KSB/A, dated December 31, 2004.
(6) Incorporated by reference  to  the Company's  Current  Report on Form  8-K,
    dated December 25, 2005.
(7) Incorporated  by  reference to the Company's Annual Report  on Form 10-KSB,
    dated December 31, 2004.
(8) Incorporated  by reference  to  the  Company's  Current Report on Form 8-K,
    dated January 22, 2007.
(9) Filed herewith.

ITEM 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES.

AUDIT FEES

Item 14 Principal Accountant Fees and Services.

      During the period covering the fiscal years ended December  31,  2006 and
2005,  our  principal  accounting  firm  performed  the  following professional
services:

                               DeJoya Griffith & Co.        Tanner LC
                               2006         2005           2006       2005

Audit fees                     $24,000      $15,000       $28,117     $37,000
Audit-Related fees               1,345            -         5,265           -
Tax fees                             -            -                     8,000
Other fees                           -            -             -

        Audit  fees  include the year-end audit and review  of   the  Form  10-
KSB, quarterly reviews and  reviews  of  the  Forms  10-QSB.  The 2006 and 2005
fees include the estimated cost to complete the audits of each respective year.

        Tax  fees  relate to the preparation of federal and state tax  filings.
Other fees relate to Edgar services in connection with SEC filings.

Audit Committees pre-approval policies and procedures

        We do not have  an audit committee.  Our engagement of De Joya Griffith
&  Company, LLC, as our independent  registered  public  accounting  firm,  was
approved  by  the  Board  of  Directors.  No services described in Item 9(e)(2)
through 9(e)(4) of Schedule 14A were performed by our auditors.



<PAGE>
SIGNATURES

     Pursuant to the requirements  of  Section  13  or  15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this  report  to be signed
on its behalf by the undersigned, thereunto duly authorized on May 15, 2007.


                                               WELLSTONE FILTERS, INC.


                                               By:/s/ Learned Jeremiah Hand
					       ----------------------------
                                               Learned Jeremiah Hand
                                               CEO

     Pursuant to the requirements of the Securities Exchange Act of  1934, this
report  has  been  signed  below  by  the  following  persons  on behalf of the
Registrant and in the capacities on May 15, 2007.

By:  /s/Learned Jeremiah Hand
     ------------------------
     Learned Jeremiah Hand

CEO and Director
(principal executive officer and
acting accounting  and financial officer)








<PAGE>


            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors
Wellstone Filters, Inc.
Timberlake, North Carolina

We  have  audited  the  accompanying  consolidated  balance sheets of Wellstone
Filters,  Inc.  (a  Development  Stage  Company) as of December  31,  2006  and
December  31,  2005  and  the related consolidated  statements  of  operations,
stockholders'  deficit  and  cash  flows  for  the  years  then  ended.   These
consolidated financial statements  are  the  responsibility  of  the  Company's
management.  Our  responsibility is to express an opinion on these consolidated
financial statements based on our audit.

We conducted our audit  in  accordance with the standards of the Public Company
Accounting Oversight Board (United  States of America). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements  are  free  of  material misstatement. An
audit includes examining, on a test basis, evidence supporting  the amounts and
disclosures  in  the consolidated 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 audit provides a reasonable basis for our opinion.

In  our  opinion,  based  on  our audit, the consolidated financial  statements
referred to above present fairly,  in  all  material respects, the consolidated
financial position of Wellstone Filters, Inc.  as  of  December  31,  2006  and
December  31,  2005,  and  the  results of its consolidated operations and cash
flows  for  the  years then ended, in  conformity  with  accounting  principles
generally accepted in the United States of America.

The accompanying financial  statements  have  been  prepared  assuming that the
Company  will  continue  as  a going concern.  As discussed in Note  2  to  the
financial statements, the Company  has  suffered losses from operations, all of
which  raise  substantial  doubt  about its ability  to  continue  as  a  going
concern.  Management's plans in regards  to these matters are also described in
Note 2.  The financial statements do not include  any  adjustments  that  might
result from the outcome of this uncertainty.


/s/ De Joya Griffith & Company, LLC
-----------------------------------
De Joya Griffith & Company, LLC
CERTIFIED PUBLIC ACCOUNTANTS
Henderson, NV


March 28, 2007



<PAGE>

<TABLE>
<CAPTION>
<S>				<C>				<C>
			      WELLSTONE FILTERS, INC.
                       [A Company in the Development Stage]
                           CONSOLIDATED BALANCE SHEETS

                                                   	    December 31,       December 31,
                                                      	       2006               2005
							    ------------       ------------
                                      ASSETS
CURRENT ASSETS

    Cash and cash equivalents                   	    $        657       $    233,426
    Accounts receivable                                       	      --                 --
    Inventory                                                 	      --            391,796
							    ------------       ------------
        Total current assets                                 	     657            625,222

    Furniture and equipment, net                           	   7,472             13,336
							    ------------       ------------
    Total Assets                                	    $      8,129       $    638,558
							    ============       ============

                         LIABILITIES AND STOCKHOLDER'S DEFICIT
CURRENT LIABILITIES:

    Current portion of long term debt           	    $  2,250,000       $  1,032,500
    Accounts payable                                     	 669,981       $    350,076
    Related party accounts payable                        	  55,584             40,584
    Accrued expenses                                   	       1,104,502            542,755
    Notes payable to affiliate                            	  59,200             59,200
							    ------------       ------------
        Total Current Liabilities                      	       4,139,267          2,025,115
Long-Term Liabilities
    Notes payable net of unamortized debt discount
       of $0.00 and $467,500, respectively             	       2,250,000          1,032,500
    Less: current maturity of long term debt         	      (2,250,000)        (1,032,500)
							    ------------       ------------
    Long term debt                                            	      --                 --

        Total Liabilities                              	       4,139,267          2,025,115

STOCKHOLDERS' DEFICIT:

    Preferred stock, $.001 par value, 1,000,000 shares
       authorized, no shares issued and outstanding           	      --                 --
    Common stock, $.001 par value, 100,000,000
       shares authorized: 10,433,760 and 260,442,991
       issued and outstanding, respectively              	  10,434            260,243
    Additional paid in capital                        	      28,254,012         28,002,203
    Subscription receivable                                   	      --            (26,000)
    Accumulated deficit                             	     (32,395,584)       (29,623,003)
							    ------------       ------------
        Total stockholders' deficit                  	      (4,131,138)        (1,386,557)
							    ------------       ------------
        Total liabilities & stockholders' deficit           $      8,129       $    638,558
							    ============       ============
     The accompanying notes are an integral part of this financial statement.

</TABLE>





<PAGE>

<TABLE>
<CAPTION>
<S>				<C>				<C>
                               WELLSTONE FILTERS, INC.
                        [A Company in the Development Stage]
                        CONSOLIDATED STATEMENT OF OPERATIONS


                                                                            	   Cumulative
                                                      For the Year ended       	    Amounts
                                                         December 31,                Since
						 ---------------------------	   Inception
                                                     2006           2005       	  (Feb. 1998)
						 -----------	------------	 --------------

Revenues                                         $   258,193    $         --   	 $	258,193

Cost of sales                                        273,075              --   		273,075
						 -----------	------------	 --------------
Gross Profit                                         (14,882)             --      	(14,882)
Expenses:
   General and administrative expense              2,389,852       7,893,067	     31,147,552
   Research and development expense                   10,053         207,636   		237,269
						 -----------	------------	 --------------
   Loss from operations                           (2,414,787)     (8,100,703)  	    (31,399,703)
Interest Expense                                     584,868         574,736  	      1,222,955
						 -----------	------------	 --------------
   Loss before income taxes                       (2,999,655)     (8,675,439)  	    (32,622,658)
Other income/<loss>                                  227,074               -   		227,074
						 -----------	------------	 --------------
   Net loss                                      $(2,772,581)   $ (8,675,439)  	 $  (32,395,584)
						 ===========	============	 ==============
Basic number of common shares outstanding         73,036,068     258,996,415
						 ===========	============
Basic net loss per share                         $     (0.04)   $      (0.03)
						 ===========	============






    The accompanying notes are an integral part of these financial statements.

</TABLE>





<PAGE>

<TABLE>
<CAPTION>
<S>				<C>				<C>
                             WELLSTONE FILTERS, INC.
                       [A Company in the Development Stage]
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

                             Common Stock      Additional
                         --------------------    Paid-in    Subscription   Accumulated
                           Shares     Amount     Capital     Receivable      Deficit     	  Total
			-----------  --------  ----------   ------------   -----------		----------
BALANCE,
February 17, 1998        	  -  $      -  $        -   $          -   $         - 		$        -

Restatement for
recapitalization	  8,400,000     8,400	   (8,400)             -             -          	 -

Capital contribution              -         -           -              -           100       	       100
Net loss                          -         -           -              -        (6,675) 	    (6,675)
			-----------  --------  ----------   ------------   -----------		----------
Balance,
December 31, 1998	  8,400,000     8,400	   (8,400)             -        (6,575)		    (6,575)

Net loss                          -         -           -              -          (969) 	      (969)
			-----------  --------  ----------   ------------   -----------		----------
Balance,
December 31, 1999	  8,400,000     8,400	   (8,400)             -        (7,544) 	    (7,544)

Net loss                          -         -           -              -       (21,395) 	   (21,395)
			-----------  --------  ----------   ------------   -----------		----------
Balance,
December 31, 2000	  8,400,000     8,400	   (8,400)             -       (28,939) 	   (28,939)

Acquisition of
Farallon Corporation	    840,000       840	   (3,682)             -             - 		    (2,842)

Stock issued in
cancellation of debt	    238,728       239	   (2,603)             -             - 		     2,842

Reclassification
of members'
contribution to
additional
paid-in-capital                   -         -         100              -      	  (100)          	 -

Net loss                          -         -           -              -        (8,218) 	    (8,218)
			-----------  --------- ----------   ------------   -----------		----------
Balance,
December 31, 2001	  9,478,728      9,478     (9,474)             -       (37,257)		   (37,157)

Rental expense
forgiven by officers		  -         -      16,800              -             - 		    16,800

Net loss                          -         -           -              -       (35,033) 	   (35,033)
			-----------  --------  ----------   ------------   -----------		----------
Balance,
December 31, 2002	  9,478,728     9,478      (8,802)             -

Rental expense
forgiven by officers		  -         -      12,600              -             - 		    12,600

Net loss			  -	    -	        -	       -       (72,694)		   (72,694)
			-----------  --------  ----------   ------------   -----------		----------
Balance,
December 31, 2003	  9,478,728      9,478     (8,298)              -      (72,694) 	   (72,694)

Common stock issued
for:
  Cash                       22,992        23     194,425              -             - 		   195,000

  Services
  (related party)	    600,000       600   6,255,000              -             -		 6,270,000

Stock options issued
to consultants			  -         -     654,946              -             - 		   654,946

Stock options issued
to officers/employees		  -	    -  13,555,000              -             -	        13,555,000

Allocation of debt
proceeds to warrants		  -    	    -   1,020,000              -             - 		 1,020,000

Net loss                          -         -           -              -   (20,802,580)	       (20,820,580)
			-----------  --------- ----------   ------------   -----------		----------
Balance,
December 31, 2004	 10,101,719    10,101     858,876              -   (20,947,564)		   776,882

Common stock issued
for:
  Exercise of
  stock options 	     24,000        24       1,976              -             - 		     2,000

  Services                  180,000       180   4,589,820              -             -		 4,590,000

Stock options issued
to employees 			  -         -   1,920,000              -             - 		 1,920,000

Employee subscription
receivable		    104,000	  104      25,896  	 (26,000)            -          	 -

Net loss                          -         -           -              -    (8,675,439)		(8,675,439)
			-----------  --------  ----------   ------------   -----------		----------
Balance,
December 31, 2005	 10,409,719  $ 10,409  $1,120,088 	 (26,000)  $(29,623,003)      $ (1,386,557)

Stock issued on
exercise of options                       600       1,400					     2,000

Payment of Subscription
Receivable		    600,000   	    -           -    	  26,000             - 		    26,000

Net loss                          -         -           -             -    (2,772,581) 	(2,772,581)
			-----------  --------- ----------   ------------   -----------		----------
Reverse Stock Split    (250,409,230) (250,409)    250,409             -             - 		(1,231,796)
			-----------  --------- ----------   ------------   -----------		----------
Balance,
December 31, 2006	 10,433,760  $ 10,434  $28,254,012             -  $(32,395,584)	      $ (4,131,138)
			===========  ========  ===========  ============   ===========	      ============

     The accompanying notes are an integral part of this financial statement.


</TABLE>




<PAGE>

<TABLE>
<CAPTION>
<S>				<C>				<C>
                             	       WELLSTONE FILTERS, INC.
                       		[A Company in the Development Stage]
                      		CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                            			 Cumulative
                                                    		     For the Year ended        	  Amounts
                                                       		        December 31,               Since
								--------------------------	 Inception
                                                    		    2006           2005       	(Feb. 1998)
								-----------    -----------	------------
Cash from Operating Activities:
    Net income/(loss)                           		$(2,772,581)   $(8,675,439)	$(32,395,584)
    Adjustments to reconcile net loss to net cash used
      in operating activities:
    Issuance of common stock for services                  		  -      4,590,000  	  10,860,000
    Issuance of stock options for services                 		  -              -  	     654,946
    Issuance of stock options to employees as
      compensation                                         		  -      1,920,000  	  15,475,000
    Amortization of debt discount                    		    467,500        510,000  	   1,020,000
    Depreciation                                       		      5,865          5,057  	      18,123
    Rental expense forgiven by officer and board member    		  -              -  	      29,400
    Loss on disposal of furniture                          		  -          1,795 	       1,795
    (Increase) / decrease in inventory               		    391,796       (391,796)            	   -
    Increase / (decrease) in accounts payable        		    319,903        326,187 	     669,981
    Increase in related party accounts payable        		     17,368          4,736 	      50,336
    Increase in accrued expense                      		    559,380        517,291 	   1,098,582
								-----------    -----------	------------
Net cash used in operating activities           		 (1,010,769)    (1,192,169)	  (2,517,421)
Cash flow from investing activities
    Purchase of fixed assets                               		  -         (7,493)  	     (16,222)
								-----------    -----------	------------
Net cash used in investing activities                     		  -         (7,493)  	     (16,222)

Cash flows from financing activities:
    Proceeds from sale of common stock               		     28,000          2,000  	     199,000
    Proceeds from exercise of stock options               		  -              - 	      26,000
    Proceeds from long-term debt                     		    750,000              -  	   2,250,000
    Member contribution of equity                          		  -              -               100
    Proceeds from related party notes payable              		  -              -  	      59,200
								-----------    -----------	------------
    Net cash provided from financing activities      		    778,000          2,000  	   2,534,300
								-----------    -----------	------------
    Net increase/(decrease) in cash and cash equivalents	   (232,769)	(1,197,662)              657
Cash and cash equivalents at beginning of period     		    233,426      1,431,088                 -
								-----------    -----------	------------
Cash and cash equivalents at end of period      		$       657    $   233,426  	$        657
								===========    ===========	============


  The accompanying notes are an integral part of these financial statements.


</TABLE>



<PAGE>
                            WELLSTONE FILTERS, INC.
                         (A Development Stage Company)
                  Notes to Consolidated Financial Statements


1.      ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION
Wellstone  Filters,  LLC  (Wellstone)  was  organized  as  a  Delaware  limited
liability company on February 17, 1998 (date of inception).

On May 25, 2001, Wellstone  Filters,  Inc. (formerly Farallon Corporation) (the
"Registrant")  acquired  Wellstone  pursuant   to  an  Agreement  and  Plan  of
Reorganization (the Agreement), dated as of May 25, 2001.

The  Registrant  acquired  all  of  the  outstanding  membership   interest  of
Wellstone,  in exchange for 8,400,000 shares of the Registrant's common  stock.
In   addition,    the   Company   issued  238,728 shares  of  common  stock  in
cancellation of debt.

The stockholders of Wellstone, after the acquisition, owned the majority of the
combined company.  Accordingly,  the  combination  has  been accounted for as a
reverse  acquisition  whereby,  for  accounting  purposes,  Wellstone   is  the
accounting  acquirer and Registrant is the accounting acquiree. Registrant  and
Wellstone are  collectively  referred  to  as  (the  Company).  The Company has
adopted a December 31 year end. The financial statements from inception through
May 25, 2001, are those of Wellstone, LLC, the accounting acquirer.  Subsequent
to May 25, 2001, the financial statements reflect the consolidated position and
operations of Registrant and Wellstone.

The  Company  is  engaged  in  the  development  and marketing of a proprietary
cigarette  filter technology. Although  the  Company   has  commenced   planned
principal  operations   and   has  recognized  revenues related to such planned
operations, it has halted marketing due to lack of financing.. Accordingly, the
Company is considered  a development  stage  company  as defined in SFAS No. 7.


STOCK SPLITS AND STOCK DIVIDENDS

The Company has declared and affected the following stock splits and dividend:

- A five for one stock split in July 2003
- A four-tenths for one stock dividend in September 2003
- A three for one stock split in September 2004
- A one for 25 reverse stock split in June 2006

All   share  amounts  in  the   consolidated  financial  statements  have  been
retroactively restated to reflect these stock splits and dividend.

CASH AND CASH EQUIVALENTS
For purposes  of  the statement of cash flows, the Company considers all highly
liquid investments  with  a  maturity  of  three  months  or  less  to  be cash
equivalents.

FURNITURE AND EQUIPMENT
Furniture and equipment are carried at cost, less accumulated depreciation  and
amortization.  Depreciation  and  amortization are provided using the straight-
line method over the estimated useful  lives  of  the  assets  of 3 to 5 years.
Expenditures  for  maintenance  and  repairs  are  expensed  when incurred  and
betterments  are  capitalized.  Gains  and  losses  on the sale or disposal  of
furniture and equipment are reflected in operations.

INCOME TAXES
Income taxes are recorded using the asset and liability  method.  Deferred  tax
assets   and  liabilities  are  recognized  for  the  future  tax  consequences
attributable to differences between the financial statement carrying amounts of
existing assets  and  liabilities  and their respective tax bases and operating
loss and tax credit carry-forwards.  Deferred  tax  assets  and liabilities are
measured  using enacted tax rates expected to apply to taxable  income  in  the
years in which  those  temporary  differences  are  expected to be recovered or
settled. The effect on deferred tax assets and liabilities  of  a change in tax
rates is recognized in income in the period that includes the enactment date.

STOCK-BASED COMPENSATION

On January 1, 2006, we adopted the  fair  value  recognition provisions of SFAS
No.  123(R),  "Accounting  for  Stock-Based  Compensation",   to   account  for
compensation  costs  under  our stock option plans. We previously utilized  the
intrinsic  value method under  Accounting  Principles  Board  Opinion  No.  25,
"Accounting for Stock Issued to Employees" (as amended).

We use the fair  value  method  for equity instruments granted to employees and
non-employees and  use the Black  Scholes model for measuring the fair value of
options, if issued.  The stock based  fair  value compensation is determined as
of the date of the grant or the date at which  the  performance of the services
is completed (measurement date) and is recognized over the vesting periods.

For  the  years  ended  December  31, 2006  and  2005,  the  Company had $0 and
$1,290,000 in stock based compensation expenses, respectively.


<PAGE>
RESEARCH AND DEVELOPMENT
The Company expenses research and development costs as incurred.

CONCENTRATION OF CREDIT RISK
The  Company maintains its cash in bank deposit accounts which, at  times,  may
exceed  federally insured limits. The Company has not experienced any losses in
such accounts  and believes it is not exposed to any significant credit risk on
cash and cash equivalents.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The  preparation  of  financial  statements  in  conformity with U.S. generally
accepted  accounting  principles  requires management  to  make  estimates  and
assumptions that affect the reported  amounts  of  assets  and  liabilities and
disclosure  of  contingent assets and liabilities at the date of the  financial
statements and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

LOSS PER SHARE
The computation   of basic loss per common share is computed using the weighted
average number of common shares outstanding during the year.

The computation of  diluted  loss  per  common  share  is based on the weighted
average  number  of  shares  outstanding  during  the year, plus  common  stock
equivalents calculated under the treasury stock method.  The Company has issued
equity  instruments  convertible  into common stock such as stock  options  and
warrants issued to employees, consultants  and  creditors that can be exercised
for approximately 1,462,600 and 720,000 shares  of common stock at December 31,
2006 and 2005, respectively,  with  conversion prices of $2.50  per share as of
December 31, 2006 and  between  $0.01675   and  $12.50  at  December  31, 2005.
Common  stock equivalents have not been included in the diluted loss per  share
calculation  for  the years ended December 31, 2006 and 2005 because the effect
would be antidilutive.

PRINCIPLES OF CONSOLIDATION
The consolidated financial  statements  include  the accounts of the Registrant
and its wholly-owned subsidiaries, Wellstone Filters LLC and Wellstone Tobacco,
Inc.  All  significant  inter-company  transactions  have  been  eliminated  in
consolidation.

2.      GOING CONCERN

The Company  incurred net losses of approximately  $2,772,581  from  the period
from  January  1,  2006  through  December  31,  2006,  and currently  has   no
source of revenue, raising substantial  doubt  about  the  Company's ability to
continue   as   a  going  concern.  The Company will seek additional sources of
capital through the  issuance  of debt or equity financing, but there can be no
assurance the Company will be successful  in accomplishing its objectives.  The
ability  of  the Company to continue as a going    concern    is  dependent  on
additional sources  of  capital  and  the  success  of the Company's plan.  The
financial statements do not include any adjustments that  might be necessary if
the Company is unable to continue as a going concern.

3.      PROPERTY AND EQUIPMENT

Property and equipment consists of the following at December 31, 2006 and 2005:

                                            2006               2005
					-------------	  -------------
Equipment                               $      19,421     $      15,718
Furniture and fixtures                              -             4,178
                                               19,421            19,896
Less accumulated depreciation                  11,949            (5,549)
                                        $       7,472     $      13,336

The  Company  disposed  of  furniture and equipment and recognized  a  loss  on
disposal of $1,795 in 2005.

4.      ACCRUED EXPENSES

The Company had accrued expenses  for  years  ended 2006 and 2005 of $1,104,502
and $542,755, respectively.  The amounts for 2006 and 2005 were  primarily  the
result  of deferred salaries  of  Company   executives   and  interest on notes
payable.

5.      LONG-TERM DEBT

Long-term debt consists of the following at December 31, 2006 and 2005:

                                                        2006        2005
						     ----------  ----------
Note payable to an entity bearing interest
 at 4%,  with  principal and interest due
 on November 30, 2006.  The note holder also
 received a warrant to purchase 129,600 shares
 of the Company's common stock for $12.50 per share  $2,250,000  $1,500,000

Unamortized discount on debt                                       (467,500)
Current portion of long term debt                     2,250,000  (1,032,500)
Long term debt                                 	     $        -  $  522,500

The Company is currently in discussion with debtors.

6.      RELATED PARTY TRANSACTIONS

Mr.  Learned Hand, an officer and director, advanced $24,298 to the Company for
expenses   which   had   not   been  reimbursed as of December  31,  2005.  Mr.
Learned Hand advanced an additional $15,000 to Wellstone for operating expenses
in  September 2006.  The unreimbursed  amount  as  of  December  31,  2006  was
$39,298.   A law firm controlled by a brother of Learned Hand advanced funds on
behalf of the  Company  from  time  to  time  in  calendar  2004,   and  as  of
December  31, 2006 the amount unreimbursed to the law firm was $16,286.

Pacific  Coast Distributors, a distributor owned and operated by Adam  Hand,  a
brother of  the  Company's CEO, accounted for $ 39,311, or 15% of the Company's
sales in 2006. The  sales  terms to this distributor were the same as any other
distributor.  As of December  31,  2006,  this  distributor  owed  the  Company
$39,311, which  was  15%  of the Company's accounts receivable as of that date.
However, in connection with its cessation of sales, the Company has written off
all of its accounts receivables as uncollectible.

Pursuant  to  an  Agreement  and  Plan  of Reorganization dated May  25,  2001,
Wellstone  Filters, Inc., a Delaware corporation  formerly  known  as  Farallon
Corporation  ("Wellstone") acquired all of the outstanding membership interests
of Wellstone LLC  in  exchange  for  210,000,000  shares  of Wellstone's Common
Stock.  In  addition, Wellstone issued 5,968,200 shares of common  stock  to  a
stockholder of  Farallon  in  cancellation  of debt of $2,842. The terms of the
acquisition  were  determined between the parties,  who  are  related  in  that
Learned Jeremiah Hand,  the CEO of Wellstone, LLC, is the brother of Jehu Hand,
the founder and president  of Farallon. Prior to the acquisition, Wellstone LLC
and Farallon had no affiliation or relationship.

Carla Cerami Hand or Cerami  Consulting Corporation and an entity controlled by
Learned  Hand have loaned various  amounts  to  the  Company  for  its  capital
requirements,  as follows. The loans are due on demand, bear interest at 8% per
annum and are represented by promissory notes. As of December 31, 2004, $20,463
had accrued as interest  on  these  notes,  none  of which had been paid. These
related party notes payable totaled $59,200 as of December 31, 2005.

During  2005  Wellstone  issued   20,000  shares  of common  stock,  valued  at
$510,000,  to the brother of the Company's Chief Executive  Officer  for  legal
services that he provided to the Company

In 2004, we  issued  to  Jehu  Hand,  a brother of our Chief Executive Officer,
600,000 shares of common stock as compensation   for   legal  services which he
provided to the Company. The Company's issuance of shares  of  its common stock
to Mr. Hand resulted in an expense of approximately $6,270,000.  On  January 2,
2004, Arrakis Select, Inc., a company controlled by Jehu Hand, a brother of our
Chief  Executive  Officer,  entered  into  a  Funding Agreement whereby Arrakis
provided $195,000 to Wellstone between January and October 2004 in exchange for
22,992  shares of common stock. The Company issued  common  stock   to  Arrakis
monthly at  a price per share equal to the closing bid price of common stock as
of the 15th day of the month in which Arrakis invested the money.

The Company has  a  licensing  agreement with Cerami Consulting Corporation, an
entity owned and controlled by the  spouse  of  the  Company's  Chief Executive
Officer.  The  licensing  agreement grants the Company the exclusive  worldwide
exploitation rights to practice  and  utilize the inventions, technology, know-
how,  and  patent,  including  the rights to manufacture and market the filters
which are the subject of the  licensing  agreement,  that  are  held  by Cerami
Consulting Corporation. In exchange  for the license rights, the Company agreed
to     pay     all     future   costs   for   development,    manufacture,  and
commercialization of the technology,  including all other future fees and costs
in connection with the patents.

In the fiscal years ended December 31,  2003  and  2002, Ms. Cerami Hand and/or
Mr. Learned Hand advanced $8,899 and $16,072, respectively,  on  behalf  of the
Company  for its corporate expenses. The Warren Institute, affiliated with  the
above officers,  provided from time to time  office  space  and  occasional use
of a  1,200  square foot lab to the Company at a cost of $1,400 per month  from
January 2002  to  September 30, 2003, all  of  which  has  been  accounted  for
as a contribution to capital  by the controlling stockholders. Such amounts are
not  represented by any promissory note and bear no interest.

7.      SUPPLEMENTAL CASH FLOW INFORMATION

No cash amounts were paid  for  interest or income taxes during the period from
February 17, 1998, (date of inception) to December 31, 2006.

During the year ended December 31,  2004,  the  Company  issued  warrants  with
debt.  The warrants were valued at $1,020,000, which amount was recorded  as  a
discount  on  long-term  debt.  During  2005  and  2004,  $510,000 and $42,500,
respectively, of the debt discount was accreted as interest expense.

During  the  years  ended  December  31, 2003 and 2002, the  Company recorded a
contribution of capital of $12,600 and  $16,800,  respectively,  for the use of
office  space  provided  by  an  officer  and board member of the Company.  The
arrangement for the use of office space was  mutually  terminated  on September
30, 2003.

During   the   year   ended December 31, 2003, the Company purchased  furniture
and equipment through an   increase   in   the  related  party accounts payable
totaling $67,705.

During  the  year ended December 31, 2002, the Company acquired  furniture  and
equipment in exchange  for  an  increase  in related party accounts payable  of
$11,167.

During the year ended December 31, 2001 the  Company  issued  238,728 shares of
common stock in settlement of $2,842 of debt.

8.      INCOME TAXES

The  Company  accounts for income taxes using the liability method, under which
deferred tax liabilities  and  assets  are  determined  based on the difference
between the financial statement carrying amounts and the  tax  basis  of assets
and  liabilities  using  enacted tax rates in effect in the years in which  the
differences are expected to reverse.

As of December 31, 2006, the  Company  had  net operating loss carryforwards of
approximately $10,560,000, which expire in varying  amounts  between  2016  and
2026.   Realization  of  this  potential  future  tax  benefit  is dependent on
generating   sufficient   taxable  income  prior  to  expiration  of  the  loss
carryforward. The deferred  tax  asset  related  to  this  potential future tax
benefit has been offset by a valuation allowance in the same amount. The amount
of the deferred tax asset ultimately realizable could be increased  in the near
term  if estimates of future taxable income during the carryforward period  are
revised.

Deferred  income  tax  assets of $5,973,200 and $5,171,800 at December 31, 2006
and 2005, respectively were  offset  in  full  by  a  valuation allowance.  The
valuation allowance was increased by $801,400 in the year  ended  December  31,
2006.

The  components of the Company's net deferred tax assets, including a valuation
allowance, are as follows:

<TABLE>
<CAPTION>
<S>		<C>			<C>
                                                  As of December 31, 2006	As of December 31, 2005
Deferred tax assets:
   Net operating loss carryforwards                      $      3,694,700       	$     2,893,300
   Stock based compensation                                     2,278,500           	      2,278,500
      Total deferred tax assets                                 5,973,200              	      5,171,800

Net deferred tax assets before valuation allowance              5,973,200              	      5,171,800
Less: Valuation allowance                                     (5,973,200)            	    (5,171,800)
Net deferred tax assets                                               --                     	    --
</TABLE>


A reconciliation  between  the  amounts  of  income  tax  benefit determined by
applying  the applicable U.S. and State statutory income tax  rate  to  pre-tax
loss is as follows:

<TABLE>
<CAPTION>
<S>				<C>				<C>
                                                    As of December 31, 2006	As of December 31, 2005

Statutory federal income tax                                        (35.0%)     		(35.0%)
Statutory state income tax                                           (8.7%)      		 (8.7%)
Change in valuation allowance on deferred tax assets                 43.7%                 	 43.7%
</TABLE>


9.      CAPITAL STOCK

Preferred Stock
The  Company  has  authorized  1,000,000  shares of preferred stock, $.001  par
value, with such rights, preferences and designations and to be issued  in such
series  as determined by the Board of  Directors.  No  shares  are  issued  and
outstanding at December 31, 2006.

Stock Split and Stock Dividend
A three for one stock split was approved on September 27, 2004 and subsequently
effected  on  October  6,  2004. The stock split resulted in the issuance of an
additional 157,978,800 shares  of  common  stock.  On September 15, 2003 a four
tenths for one stock dividend was declared and subsequently issued on September
30,  2003.  The  stock  dividend  resulted  in the issuance  of  an  additional
22,568,400 shares of common stock.

A  five  for  one stock split was approved on July  9,  2003  and  subsequently
effected on July  19,  2003.   The  stock  split resulted in the issuance of an
additional 45,136,800 shares of common stock.

A 0n-for-25 reverse stock split was approved  on  May  17, 2006 and effected on
June 19, 2006. The reverse stock split resulted in a reclassification of common
stock from 280,842,991 to 10,433,720

Issuances of Common Stock

There  was  only one issuance of common stock in 2006. On  March  6,  2006,  an
employee exercised  stock options to purchase 24,000 shares of common stock for
$2,000.

During  2005, the Company  issued  180,000  shares  of  common  stock  to  non-
employees  for  services  resulting in $4,590,000 of general and administrative
expense.

During 2004, the Company issued  to Jehu Hand, a brother of our Chief Executive
Officer, 600,000 shares of common  stock   as  compensation  for legal services
which he provided to the Company.  The Company's  issuance  of  shares  of  its
common stock to Mr. Hand resulted in an expense of approximately $6,270,000.

During 2004, Arrakis Select, Inc., a company controlled by Jehu Hand, a brother
of  our  Chief  Executive  Officer,  entered  into  a Funding Agreement whereby
Arrakis  provided $195,000 to Wellstone between January  and  October  2004  in
exchange for  22,992  shares of common stock.  The Company issued  common stock
to Arrakis monthly at a  price  per  share  equal  to  the closing bid price of
common  stock  as  of the 15th day of the month in which Arrakis  invested  the
money.

Issuance of Stock Options Resulting in Expense

During  2005,  the Company granted stock options to purchase 180,000 shares  of
common stock to employees with  exercise  prices  below the market price on the
measurement  date.  Because the options vested immediately,  they  resulted  in
compensation expense of $1,920,000 in 2005. No options were granted in 2006.

During 2004, options to purchase 26,500,000 shares with exercise prices ranging
from $.003 to $.01 per  share  were  issued  to  three officers of the Company,
resulting in an expense of approximately $13,555,000.   Also,  during the year,
options were issued to a scientific advisor to purchase 4,800,000  shares at an
exercise  price  of  $.0007  per  share  resulting  in expense of approximately
$655,000.  The expense for the issuance of these stock  options  to the advisor
was calculated based on the Black-Scholes option pricing model

10.     STOCK OPTION PLAN

On April 1, 1994,  the  Company  adopted  the 1994 Stock Option Plan.  The plan
provides for the granting of awards of up to  1,680,000  shares of common stock
to officers, directors, employees, advisors, and employees  of  other companies
that  do business with the Company as non-qualified stock options.   The  Stock
Option  Committee  of the Board of Directors determines the option price, which
cannot be less than  the  fair market value at the date of the grant or 110% of
the fair market value if the  recipient  of  the grant holds 10% or more of the
Company's common stock. The exercise price per  share  of  shares  subject to a
Non-Qualified option cannot be less than 85% of the fair market value.  Options
granted  under  the  plan  will typically expire ten years from the date of the
grant (five years if the recipient  of  the  grant  holds  10%  or  more of the
Company's  common  stock  on  the  date  of  the  grant)  or three months after
termination   of   employment.   The plan was amended and restated in 2003  for
technical updates to confirm with law.








<PAGE>
A schedule of the options is as follows:

                                                               EXERCISE
                                              NUMBER OF          PRICE
                                               OPTIONS         PER SHARE
					      ---------	    ------------
Outstanding at December 31, 2004              1,273,000        .17 - .25
Granted                                         180,000          0.08325
Exercised                                       128,000     .08325  0.25

Outstanding at December 31, 2005              1,325,000        .17 - .25
Granted                                              --               --
Exercised                                        24,000         -.08333-
Lapsed                                          581,000

Outstanding at December 31, 2006                720,000             2.50

On December 31, 2006, the Company  had 960,000 shares available for grant under
the Option Plan.

During 2004, the Company issued warrants  to  purchase 129,600 shares of common
stock with an exercise price of $12.50  per  share   in   connection   with   a
note  payable.  See  Note  3.  All  of  these warrants were vested and remained
outstanding at December 31, 2006.

The  following  table summarizes information about stock options outstanding at
December 31, 2006:

<TABLE>
<CAPTION>
<S>			<C>			<C>

				Weighted
				Average				Weighted
Range of			Remaining	Weighted	Average
Exercise	Number		Contractual	Average		Number		Exercise
Prices		Outstanding	Life (Years)	Exercise Price	Exercisable	Price
--------	-----------	-----------	--------------	-----------	--------
$2.50		720,000		2.50		720,000				$2.50

</TABLE>

11.     FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial  instruments  consist  of  ca


In February 2006, the FASB issued Statement of Financial  Accounting  Standards
No. 155, Accounting for Certain Hybrid Financial Instruments  ("SFAS No. 155"),
which amends Statement of Financial  Accounting  Standards No. 133,  Accounting
for Derivative Instruments and Hedging Activities("SFAS No. 133") and Statement
of  Financial  Accounting  Standards  No. 140,  Accounting  for  Transfers  and
Servicing of Financial Assets and Extinguishments of Liabilities("SFASNo.140").
SFAS No. 155 permits fair value measurement for any hybrid financial instrument
that contains an embedded derivative that otherwise would require  bifurcation,
establishes a requirement to evaluate interests in securitized financial assets
to identify interests that are  freestanding  derivatives or  hybrid  financial
instruments containing embedded derivatives. We expect the adoption of SFAS 155
to have a material impact on its  consolidated financial  position, results  of
operations or cash flows.

In March 2006, the FASB issued Statement of Financial Accounting  Standards No.
156,  Accounting  for  Servicing  of  Financial Assets ("SFAS No. 156"),  which
amends FASB Statement No. 140 ("SFAS No. 140"). SFAS  156  may  be  adopted  as
early as January 1, 2006, for  calendar  year-end entities,  provided  that  no
interim financial  statements  have been  issued. Those not choosing  to  early
adopt are required  to apply  the provisions as of the beginning of  the  first
fiscal year that  begins after  September 15, 2006  (e.g., January 1, 2007, for
calendar year-end entities).  The intention of the new statement is to simplify
accounting for separately recognized servicing assets and liabilities, such  as
those common with  mortgage securitization  activities, as  well as to simplify
efforts to obtain hedge-like accounting.  Specifically, the FASB  said FAS  No.
156 permits a servicer  using derivative  financial instruments  to report both
the derivative financial instrument and  related  servicing  asset or liability
by using a consistent measurement attribute, or fair  value.  We do  not expect
the  adoption of  SFAS 155 to  have  a  material  impact  on  its  consolidated
financial position, results of operations or cash flows.
sh,  accounts payable, and
notes  payable.  The carrying amount of cash and accounts payable  approximates
fair-value because of the short-term nature of these items. The carrying amount
of notes payable approximates fair  value  as  the  individual borrowings  bear
interest at market interest rates.


RECENT ACCOUNTING PRONOUNCEMENT

In  October  2006,  the  FASB  issued  SFAS  No.  157,  "Statement of Financial
Accounting  Standards" ("SFAS 157").  The purpose of SFAS  157  is  to  provide
users of financial statements with better information about the extent to which
fair value is  used  to  measure  recognized assets and liabilities, the inputs
used to develop the measurements, and the effect of certain of the measurements
on  earnings  for the period.  SFAS No.  157  also  provides  guidance  on  the
definition of fair  value,  the  methods  used  to  measure fair value, and the
expanded disclosures about fair value measurements. This changes the definition
of fair value to be the price that would be received  to  sell an asset or paid
to transfer a liability, an exit price, as opposed to the price  that  would be
paid to acquire the asset or received to assume the liability, an entry price.
SFAS  No.  157  is  effective  for financial statements issued for fiscal years
beginning after November 15, 2007,  and interim periods with those fiscal years
(e.g., January 1, 2008, for calendar  year-end entities.)  We do not expect the
adoption  of  SFAS  No.  157  to have a material  impact  on  our  consolidated
financial position, results of operations or cash flows.


In  September 2006, the FASB issued  SFAS  No.  158,  "Statement  of  Financial
Accounting  Standards"  ("SFAS  158")  which  amends  SFAS No. 87, 88, 106, and
132(R).  Post application of SFAS 158, an employer should continue to apply the
provisions in Statements 87, 88, and 106 in measuring plan  assets  and benefit
obligations  as  of  the  date  of  its statement of financial position and  in
determining the amount of net periodic benefit cost.  SFAS 158 requires amounts
to  be  recognized  as the funded status  of  a  benefit  plan,  that  is,  the
difference between plan  assets at fair value and the benefit obligation.  SFAS
158 further requires recognition  of  gains/losses  and  prior service costs or
credits not recognized pursuant to SFAS No. 87 or SFAS No.  106.  Additionally,
the  measurement  date  is  to be the date of the employer's fiscal  year-end.
Lastly, SFAS 158 requires disclosure  in  the financial statements effects from
delayed  recognition  of gains/losses, prior  service  costs  or  credits,  and
transition assets or obligations.   SFAS  No. 158 is effective for years ending
after December 15, 2006 for employers with  publicly  traded  equity securities
and  as of the end of the fiscal year ended after June 15, 2007  for  employers
without  publicly  traded  equity securities.  We do not expect the adoption of
SFAS No. 158 to have a material  impact on our consolidated financial position,
results of operations or cash flows.

In February 2007, the FASB issued Statement No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities,  including  an  amendment  of  FASB
Statement  No.  115"  (FAS 159). FAS 159 permits companies to choose to measure
many financial instruments  and  certain other items at fair value that are not
currently required to be measured  at  fair  value and establishes presentation
and  disclosure  requirements  designed  to  facilitate   comparisons   between
companies  that  choose  different measurement attributes for similar types  of
assets and liabilities. The  provisions  of  FAS 159 become effective as of the
beginning of our 2009 fiscal year. We do not expect  that  the adoption of SFAS
159  will  have  a  material  impact on our financial condition or  results  of
operations.


13.     SUBSEQUENT EVENTS

        On January 17, 2007, Wellstone  entered into a Patent License Agreement
with Glycanex,  BV,  the  supplier  of  the   patented filter compound used  in
Wellstone cigarettes. Under the Patent License  Agreement, Wellstone granted to
Glycanex an exclusive right to the patent rights  for  all  countries excepting
the  United  States  of  America and its territories and possessions.  Glycanex
agreed to pay Wellstone a  3%  royalty  on  net  sales which exceed the minimum
threshold of Euro 500,000.  The consideration for  the  granting of the license
to Glycanex was the cancellation of $120,000 owed  to Glycanex for purchases of
the filter compound.