SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C. 20549

                                  FORM 10-KSB

[x]   Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
      Act of 1934

For the fiscal year ended December 31, 2005

[ ]   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

CIK 0001092082

                         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.)

250 Crown Boulevard    Timberlake, North Carolina     27583
           (Address of principal executive offices)(Zip Code)

Registrant's telephone number, including area code:             (336) 597-8300
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  issuer  is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act {square}.

       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.    {square}

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

       Indicate  by  check mark whether the registrant is a shell  company  (as
defined in rule 12b-2 of the Exchange Act).
YES [ ]      NO [X]

       The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March  29,  2006  was $31,619,197   based on a closing bid
price of $.32 per share as of March 29, 2006.

       The number of shares outstanding of the issuer's classes of Common Stock
as of February 28, 2005:

Common Stock, $.001 Par Value - 260,242,991 Shares

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



<PAGE>



                  DOCUMENTS INCORPORATED BY REFERENCE:  NONE







<PAGE>







                                    PART I
ITEM 1.DESCRIPTION OF BUSINESS.

      When  used  in  this  Form  10-KSB,  the  words "may," "will," "expects,"
"anticipates," "believes," "estimates," "continues" 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.

       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 210,000,000 shares of
common  stock of Farallon Corporation.  In addition,  in  connection  with  the
transaction,  Farallon  Corporation  issued 5,968,200 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.

      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.

      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.

      On January 5, 2005, Wellstone created a wholly-owned subsidiary operating
company, Wellstone Tobacco, Inc., a North Carolina corporation.

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  generated any
revenues.

In  2005,  Wellstone's  activities  were  primarily  limited  to  research  and
development, product testing and initial marketing.  We have not generated  any
revenues  since inception and, sales and marketing of the Wellstone brand began
in the first  quarter  of  calendar  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, operating results will be adversely affected if
significant sales do not materialize.  Wellstone may not be able to grow in the
future 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,  2005 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 from 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.
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 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 cost.
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  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, or the  Company's  Chief  Financial Officer, Samuel Veasey could
have a serious negative impact upon our business  and operating results.  We do
not have an employment agreement with Mr. Hand or with  Mr. Veasey, and we have
not obtained "key-man" life insurance with respect to either of their lives.

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 188,458,000 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  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 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
from 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.

International Markets; Acquisitions

      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. 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 the year,
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.

EMPLOYEES

      As  of  December  31,  2005, we had five full-time employees and a  sales
force of four independent contractors;  we  intend  to  expand  our independent
contract sales force significantly over the next few months.  We  consider  our
relations  with  our  employees and independent contractors to be satisfactory.
No union represents any of our employees.

Legal PROCEEDINGS.

      Wellstone is not a party to any pending legal proceeding.

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 utilized from time to time a minimal amount
of office and a lab  room of 1,200 square feet space of  an  affiliate, Kenneth
Warren  Institute.  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.  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. 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  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  asneeded, 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.   Monthly rental is $3,375.00 per month, on a month to month basis.

Item 3.LEGAL PROCEEDINGS.

      Wellstone is not a party to any pending legal proceeding.

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, 2005.

                                    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  since May, 2003.  The high and low closing bid prices for
the common stock were as follows:

      Quarter Ended                    High       Low

      December 31, 2005                $  .51     $ .42
      September 30, 2005               $  .60     $ .52
      June 30, 2005                    $  .62     $ .41
      March 31, 2005                   $  .98     $ .72
      December 31, 2004                $ 1.90     $ .54
      September 30, 2004               $  .80     $ .21
      June 30, 2004                    $ 1.88     $ .26
      March 31, 2004                   $  .55     $ .46

      All  share  information   is   adjusted  for  stock  splits.   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 February  22,  2006, there were approximately 139 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.

(d)  Equity Compensation Plans

<TABLE>
<CAPTION>

<S>					<C>					<C>
           Equity Compensation Plan Information as of December 31, 2005

                                                        		Number of Securities
                                                        		remaining available
                                                        		for future issuance
                      Number of securities              		under equity
                      To be issued upon		Weighted Average 	compensation plans
                      exercise of outstanding	exercise price of	(excluding securities
                      options          		outstanding options	reflected  in  column (a))
                            (a)              		(b)              	(c)

 Equity compensation		33,325,000    		$.0046           	5,675,000
 Plans approved by
 Security holders

 Equity compensation   			 0         	     0                		0(1)
 Plans not approved
 By security holders
 Total           		33,325,000       	$.0046           	5,675,000

</TABLE>

      (1)  After  December  31, 2004, the board of directors reserved 2 million
      shares of common stock for issuance to employees, consultants or advisors
      for services which will  be  recorded at fair market value as of the date
      of issue.

   (a)Sales of Unregistered Securities during the year ended December 31, 2005

        During  2004,  the  Company  received  $1,500,000  in  exchange  for  a
$1,500,000 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. In
addition, the Company issued  Carlson  Group  warrants  to  purchase  3,240,000
shares  of  common stock at an exercise price of $.50 per  share (approximately
80%  of  the  market  value  of  the  common  stock  on the date of the funding
commitment), resulting in a debt discount of $1,020,000  based  on the relative
fair value of the warrants. The warrants are exercisable for 5 years  and  have
piggyback  registration  rights.   No underwriter was involved. The transaction
was exempt from registration under Section  4(6)  of the Securities Act of 1933
since  the  purchaser  is  an  accredited  investor  and there  was  no  public
solicitation  or advertising. In the year ended December  31,  2004,  Wellstone
issued restricted  shares  for  cash to Arrakis Select, Inc. In accordance with
the Funding Agreement between Wellstone  and Arrakis dated January 2, 2004, the
purchase price for each issuance was fixed  at 100% of the closing bid price of
the common stock on the 15th day of the month in which funding was received. No
underwriter was involved in this offering and  no  commissions  were  paid. The
control  person  of  Arrakis  is  a  brother  of  an officer and director.  The
transactions were exempt from registration under Section 4(6) of the Securities
Act  of 1933 since the purchaser is an accredited investor  and  there  was  no
public solicitation or advertising.  Pursuant to the Funding Agreement, Arrakis
agreed  to  provide  Wellstone with its cash needs of approximately $15,000 per
month for a period of 90 days, and the agreement was renewed for two additional
90 day periods (until  September  2004)  and  then  Wellstone  agreed to accept
$45,000 in October 2004 as the final installment.

Month of issuance     Cash purchase price  Number of Shares     Price per Share

January               $15,000          		125,000          	$  .12
February               15,000           	 62,500               	   .24
March                  15,000           	 36,585               	   .41
April                  15,000           	 14,064              	 1.067
May                    15,000           	 42,057                  .3567
June                   30,000           	 88,236               	   .34
July                   15,000           	 45,000               	  .333
August                 15,000           	 54,879               	 .2733
September              15,000           	 31,470               	 .4766
 October               45,000           	 75,000               	   .60

           Total     $195,000 			574,791

        On  January  25, 2006, the Company received $500,000 from  the  Carlson
Group, Ltd., pursuant  to  a  promissory  note,  dated  January 25, 2006.  This
promissory note is not associated with the prior promissory  note in the
previous paragraph.  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.

   (b)Company repurchases of common stock

           There were no Company repurchases of common stock  during  the years
   ended December 31, 2005 and 2004.

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

      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.  We did not record any sales of the Wellstone brand in 2005.

      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.  Management expects to be
added to the list of approved brands in all fifty  states  by  the  end  of the
first  quarter  of  2006.   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 sources.

      Commercialization  of  the  Wellstone  brand began in the US in 2006 with
shipments to several states during the first quarter  of  2006.   Wellstone  is
currently  in  conversations  with  tobacco  distributors  in Europe, Asia, and
Africa.

      Our  operations  to  date have consisted of developing and  refining  our
proprietary filter formulation,  obtaining  the  exclusive  license to U.S. and
international  patents  on  that  formulation,  seeking  to market  the  filter
technology, and formulating a tobacco blend, in combination  with  our  filter,
that delivers a satisfying smoking experience.

      Substantially all of our losses for the year ended December 31, 2005  are
the   result   of  general  operating  expense,  legal  fees,  and  stock-based
compensation expense  for  the issuance of stock and stock options.  Options to
purchase 4,500,000 shares with  exercise  prices of $.003 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
4,000,000 shares of stock  to  an  unrelated individual as certain compensation
for consulting services that he provided  to  the Company and 500,000 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 $1.02
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 2,600,000 shares of common  stock  upon the exercise of stock options at
an exercise price of $.01 and 600,000 shares  of common stock upon the exercise
of stock options at an exercise price of $.003333.   As the Company intensifies
its sales and marketing efforts, general and administrative costs will increase
in future quarters as a result of leasing new offices in North Carolina, hiring
new administrative employees, marketing and technical  employees, and increased
travel and office expenses related to the Company's anticipated  expansion into
cigarette manufacturing.

      Substantially all of our losses for the year ended December  31, 2004 are
the  result  of stock-based compensation expense for the issuance of stock  and
stock options.   During  2004  options  were  issued to a scientific advisor to
purchase 4,800,000 shares at a price of $0.0007  per share resulting in expense
of approximately $655,000.  In addition, options to  purchase 26,500,000 shares
with  exercise prices ranging from $0.003 to $0.01 per  share  were  issued  to
three officer  employees  resulting in an expense of approximately $13,555,000.
In addition, the Company issued  to Jehu Hand, a brother of our Chief Executive
Officer, 15,000,000 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.  Jehu  Hand  resulted  in  an  expense  of approximately
$6,270,000.

LIQUIDITY AND CAPITAL RESOURCES

      We have never earned revenues from operations; however, we began shipping
cigarettes in the US during the first quarter of 2006 with shipments to several
states.   Wellstone is currently in conversations with tobacco distributors  in
Europe, Asia, and Africa.

      During 2004, the Company received $1,500,000 in exchange for a $1,500,000
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. In addition, the Company
issued Carlson Group warrants to purchase 3,240,000   shares   of  common stock
at an exercise price of $.50 per  share (approximately  80% of the market value
of the common stock on the date of the funding commitment), resulting in a debt
discount  of  $1,020,000 based on the relative fair value of the warrants.  The
warrants are exercisable  for  5  years and have piggyback registration rights.
No underwriter was involved. The transaction was exempt from registration under
Section 4(6) of the Securities Act of 1933 since the purchaser is an accredited
investor and there was no public solicitation or advertising.

       On January 25, 2006, the Company  received  $500,000  from  the  Carlson
Group,  Ltd.,  pursuant  to  a  promissory note , dated January 25, 2006.  This
promissory  note is not associated  with  the  prior  promissory  note  in  the
previous paragraph.   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.

      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.

      We are a development  stage company as that term is defined in paragraphs
8 and 9 of SFAS No. 7.  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.  Management believes that it will be able to raise the
required funds for operations from one or more future offerings, and to be able
to affect our business  plan.   However,  Management  believes that Wellstone's
ability  to  raise  significant  amounts  of  financing will  be  dependent  on
favorable capital markets and also on obtaining  either a small supply contract
or other validation of our technology by an independent source, and other risks
inherent  in  the business as discussed under the caption  "Risk  Factors"  may
affect the outcome  of  Management's  plans.  There can be no assurance that we
will be able to raise the necessary capital  with  suitable  terms.   If we are
unsuccessful  at  raising  the  necessary  capital,  we  will have to cease our
operations.

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, 2005. 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 & Co, 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."

      The  deficiencies  in our internal controls  related  to  accounting  for
equity transactions, including  the  issuance  of  stock  and stock options for
services.   The disclosure controls deficiencies related to  the  statement  of
stockholders  equity  and  footnote  disclosure of information required by U.S.
generally  accepted  accounting principles.   The  adjustments  to  record  the
issuances of stock and  stock  options  for  services  or  compensation and the
footnote disclosure deficiencies were detected in the audit  process  and  have
been  appropriately  recorded  and disclosed in this Form 10-KSB.  Based on our
evaluation and the deficiencies  identified  above,  we  concluded  that, as of
December 31, 2005, 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.  We are in the process of improving our internal
control over financial reporting  in  an effort to remediate these deficiencies
through improved supervision and training  of  our  staff  as  well as required
notices  provided to senior management simultaneous with all equity  issuances.
These deficiencies  have  been disclosed to our Board of Directors.  Additional
effort is needed to fully remedy  these  deficiencies and we are continuing our
efforts to improve and strengthen our control processes and procedures.  We are
implementing  the  following  controls and procedures  to  ensure  that  future
issuances of securities are properly  disclosed on Current Reports and included
in and reflected on Quarterly and Annual Reports:

        -       The  Chief  Financial Officer  of  the  Company  shall  receive
           written notification  simultaneous  with  or  immediately  after all
           issuances  of  securities  authorized  by the Board of Directors  or
           granted by the Chief Executive Officer of  the Company, in the event
           that the Board of Directors grants the Chief  Executive  Officer the
           ability to issue securities;

-       Prior  to  providing  any  Quarterly or Annual Reports to the Company's
      independent  registered  public  accounting  firm,  the  Chief  Financial
      Officer  shall  contact  the  Company's  transfer  agent  and  request  a
      statement specifying the number  of  outstanding shares at the end of the
      period, a list of all issuances during  such period and a list of parties
      to whom such securities were issued;

-       The Chief Financial Officer shall prepare a report detailing the number
      of  securities  issued  during  the  period  based   upon   the   written
      notification  it  received  from  the  Chief  Executive  Officer  and the
      information provided by the transfer agent;

-       The Chief Financial Officer shall deliver to the Company's  independent
      registered  public accounting firm its report of the number of securities
      issued during the period simultaneous with its delivery of a draft of the
      Quarterly or Annual Reports.

-       The Chief Financial Officer shall deliver to the Board of Directors its
      report of the  number of securities issued during the period simultaneous
      with its delivery  of  the  Quarterly  or Annual Reports and the Board of
      Directors shall review such report and the  Quarterly  or  Annual Reports
      prior to such Quarterly or Annual Reports being filed with the Securities
      and Exchange Commission.

      These  controls  and  procedures  are a work in progress and the  Company
intends to refine and improve upon them over time.  Our management and Board of
Directors will continue to work with our auditors and other outside advisors to
ensure that our controls and procedures are adequate and effective.

       There was no change in our internal  control  over  financial  reporting
during the fourth quarter ended December 31, 2005 that was materially affected,
or  was  reasonably  likely  to  materially  affect,  our internal control over
financial reporting.

ITEM 8B.OTHER INFORMATION

      None.

                                   PART III

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.


 Jere E. Goyan        		74     Chairman of the Board of Directors
 Learned Jeremiah Hand		47     Chief Executive Officer and Director
 Samuel M. Veasey        	61     Chief Operating Officer and
				       Chief Financial Officer


JERE E. GOYAN, CHAIRMAN

      Dr. Jere E. Goyan, 74, has  served  as  Chairman  of  the  Company  since
January  2003.  Dr.  Goyan has served as President of Goyan and Hart Associates
since January 1999. Dr.  Goyan  served as President and Chief Operating Officer
of Alteon, Inc., a pharmaceutical  company,  from  1993  to  1998. From 1979 to
1981,  Dr. Goyan served as a Commissioner of the Food and Drug  Administration.
Dr. Goyan  is  currently  Dean Emeritus and Professor Emeritus of the School of
Pharmacy, University of California,  San  Francisco where he was Dean from 1967
to 1992 and a Professor from 1956 to 1992.  Dr.  Goyan  is a member of numerous
associations and served as President of the American Association of Colleges of
Pharmacy  in 1978 and of the American Association of Pharmaceutical  Scientists
in 1990. He  has  received meritorious awards, including from the University of
California,  San  Francisco,   the  American  Pharmaceutical  Association,  the
Department of Health and Human Services. Dr. Goyan is the Chairman of the Board
of  SciClone  Pharmaceuticals, a biopharmaceutical  firm,  and  a  director  of
Emisphere  Technologies,  Inc.,  a   biopharmaceutical   company,  and  Penwest
Pharmaceuticals  Co.,  a  drug  delivery  technology  company, all of which are
publicly-held  companies.  He is also a director of PharmQuest  Corporation,  a
drug development  company, Boehringer Ingelheim Pharmaceuticals Corporation and
Slil  Pharmaceuticals,   an  early-stage  drug  discovery  company,  which  are
privately-held companies.  Dr. Goyan obtained a Bachelor of Science degree from
the School of Pharmacy, University  of  California, San Francisco and a PhD. in
Pharmaceutical Chemistry from the University of California, Berkeley.

LEARNED JEREMIAH HAND, CHIEF EXECUTIVE OFFICER AND DIRECTOR

      Mr. Hand joined Wellstone in March,  2000.   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 March 2000 Mr. Hand began to  devote a  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.

Samuel M. Veasey, Chief Operating Officer and Chief Financial Officer

      Mr.  Veasey  was elected as Chief Financial Officer on September 9, 2004.
Mr. Veasey was Senior  Vice  President  and  Chief Financial Officer for Vector
Tobacco (USA) Ltd. from October, 2000 until his retirement in July 2001. Vector
Tobacco (USA) Ltd. marketed a "reduced carcinogen"  cigarette  utilizing carbon
and  catalytic  filters.   From  July  2001  to  September 2004 Mr. Veasey  was
retired.  Vector  Tobacco was an operating subsidiary  of  Vector  Group,  Ltd.
(NYSE: VGR). Mr. Veasey  was  Senior Vice President - Finance of Liggett Group,
Inc.  from  January 1997 to September  2000,  and  was  Vice  President,  Chief
Financial Officer  and  Treasurer  of  Liggett  Group,  Inc.  from June 1996 to
December 1996. He was the Director of Corporate Accounting of Liggett from July
1993  to  May 1996. Mr. Veasey joined Liggett in August 1967 and  held  various
positions in  the  Finance  Department.  The  Liggett Group, Inc. is one of the
longest established tobacco companies in the United  States.   Mr.  Veasey  was
responsible  for  all  financial  activities  of  The  Liggett  Group including
accounting, budgeting, internal control, debt compliance, internal and external
reporting, cash management as well as human resources and information systems.

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 2006.

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, 2005, 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 2005.

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>
                       SUMMARY COMPENSATION TABLE


          		 ANNUAL COMPENSATION                  			LONG TERM COMPENSATION
------------------------------------------------------------	-------------------------------------------------
       Name and					Other Annual
  Principal Position	Year	Salary 	Bonus	Compensation            Awards       	   Payouts   	All Other
----------------------  ----	------- -----	------------	----------------------	 ------------	---------
                                                                Restricted   SARs(#)  	 Options/LTIP
								Stock(4)    Payouts($)
								----------  ----------
<S>					<C>				<C>				<C>
Carla Cerami Hand       2005	$     0 $  0           $  0         0           0             	   0
President               2004	$     0 $  0           $  0         0           0             	   0         0
(resigned January 2004) 2003	$     0 $  0           $  0         0           0             	   0


Learned Jeremiah Hand   2005	$48,000 $  0           $  0         0           0                  0         0
CEO                     2004	$25,000 $  0           $  0         0           0         18,000,000         0
                        2003	$     0 $  0           $  0         0           0


Samuel Veasey           2005	$48,000                                                    4,000,000
CFO                     2004	$10,000                                                    4,500,000

</TABLE>

(1) Mr. Hand's employment agreement with  Wellstone  provides for payment of an
annual salary of $300,000 as compensation for his services  as  Chief Executive
Officer.   Mr.  Hand  received  $48,000  during  the 2005 fiscal year with  the
balance of $252,000 to be paid at a later date.


(2) Mr. Veasey's employment agreement with Wellstone provides for payment of an
annual salary of $120,000 as compensation for his  services  as Chief Financial
Officer.   Mr.  Veasey  received $48,000 during the 2005 fiscal year  with  the
balance of $72,000 to be paid at a later date.


In connection with his appointment  to  the  Board of Directors of Wellstone in
January 2003, Dr. Goyan was granted incentive stock options to purchase 525,000
shares of common stock for $.000476 per share.  In connection with his election
as Chief Financial Officer in September 2004, Mr. Veasey was granted options to
purchase 4,500,000 shares at $.003 per share.  In  September  2004 Mr. Hand was
also  granted  options  to purchase 18,000,000 shares at $.003 per  share.   In
December 2005 Mr. Veasey  was also granted options to purchase 4,000,000 shares
at $.003 per share. The above options were granted under Wellstone's 1994 Stock
Option Plan, as such plan was amended and restated in 2003.

Option/SAR Grants in Year ended December 31, 2005 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

S. Veasey(1) 4,000,000       88.9%           $.003           	12/2009




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
              Shares                    Fiscal Year End		Fiscal Year End
       	      Acquired          Value   Exercisable/		Exercisable/
Name   	      on Exercise (#) Realized  ($)Unexercisable	Unexercisable
---------     --------------- --------	----------------	---------------
S. Veasey	  0               $0        4,000,000(2)	$ 1,746,668(2)

(1)   On December 1, 2005,  Mr. Veasey entered into an oral, at-will employment
      agreement with Wellstone pursuant to which he is paid an annual salary of
      $120,000 as compensation for his services as Chief Financial Officer.  In
      2005, Mr. Veasey received  $48,000  and  the  balance of $72,000 is to be
      paid at a later date.  In addition, Mr. Veasey  has  been granted options
      under the 1994 Stock Option Plan as amended, and is eligible  to  receive
      additional grants on a going-forward basis.

(2)   All  options are exercisable.  Value based on closing price of the common
      stock of $ .44 on  December 30, 2005, 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

Jere E. Goyan(1)(2)                  525,000        		 *
Chairman

Learned Jeremiah Hand(1)(3)   	 179,433,000		     64.5%
Chief Executive Officer

Samuel Veasey(1)(5)                8,500,000       	      3.2%
Chief Financial Officer

Carla Cerami Hand, MD,PhD(1)(3)  179,433,000     	     64.5%

Anthony Cerami, PhD(1)(5)      	  22,132,892       	      8.5%

All officers and directors
  as a group (3 persons)     	 188,458,000        	     65.7%

* less than 1%
(1)   The  business  address of each of these persons is 250  Crown  Boulevard,
      Timberlake, North Carolina
(2)   Includes options to purchase 525,000 shares of common stock.
(3)   Mr. Learned Jeremiah Hand and Ms. Carla Cerami Hand are husband and wife.
      Mr. Hand owns 141,333,000  shares of common stock and options to purchase
      an additional 18,000,000 shares  of  common  stock.  Ms. Cerami Hand owns
      3,300,000  shares  of  common  stock  and  through  her  company,  Cerami
      Consulting Co., may be deemed to beneficially own an additional 16,800,00
      shares of common stock.
(4)   Dr. Anthony Cerami is the father of Carla Cerami Hand. Shares are held in
      a trust.
(5)   Includes options to purchase 8,500,000 shares of common stock.

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.  A law firm
controlled  by a brother of Learned Hand advanced funds on behalf of  Wellstone
from time to  time  in  calendar  2005,  and as of December 31, 2004 the amount
unreimbursed to the law firm was $16,286.  The  highest amount owing to the law
firm during 2005 was $16,286. The unreimbursed amount  as  of December 31, 2005
was $16,286. Such amounts do not bear interest.  An investment  fund controlled
by  the  brother  invested  funds in Wellstone pursuant to a Funding  Agreement
described in Part II, Item 5 of this Annual Report.

      Pursuant to an Agreement  and  Plan of Reorganization dated May 25, 2001,
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 Wellstone 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,
2005,  $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.

      In  2005 Wellstone issued 500,000  shares  of  common  stock,  valued  at
$510,000, to  Joel Hand, a 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, 15,000,000 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 574,791  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
Wellstone  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 Wellstone  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.




<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 May 25, 2001,
      between the Company 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)

10.2  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(6)

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  Wellston  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)

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).

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

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

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

(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) Filed herewith.



Item 14 Principal Accountant Fees and Services.

      During the period covering the fiscal years ended December  31,  2005 and
2004,  our  principal  accounting  firm  performed  the  following professional
services:

<TABLE>
<CAPTION>
                    DeJoya Griffith & Co.         Tanner LC      Tanner LC
<S>                <C>                        <C>                   <C>
                             2005                   2005            2004
		    ---------------------	  ---------	 ---------
Audit fees         	$   15,000 		  $  37,000      $  23,000
Audit-Related fees                                        -              -
Tax fees                                              8,000              -
Other fees                                                          	 -

</TABLE>

      Audit  fees  include the year-end audit and review of  the  Form  10-KSB,
quarterly reviews and  reviews  of  the  Forms  10-QSB.  The 2005 and 2004 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 &
Co., 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 Company has duly caused this report to  be  signed on
its behalf by the undersigned, thereunto duly authorized on March 31, 2006.


                                        WELLSTONE FILTERS, INC.


                                        /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  Company
and in the capacities on April 5, 2006.


By: /s/ Learned Jeremiah Hand           CEO and Director
        Learned Jeremiah Hand           (principal executive officer)

By: /s/ Samuel M. Veasey                Chief Financial Officer
        Samuel M. Veasey                (principal accounting and
					financial officer)

By: /s/ Jere Goyan                      Chairman
        Jere Goyan



<PAGE>


                                 EXHIBIT INDEX


<TABLE>
<CAPTION>

<S>			<C>					<C>

2.1   Agreement and Plan of Reorganization, dated	Incorporated by reference to the Company's Current
      February May 25, 2001, between the  Company     	Report on Form 8-K, dated May 25, 2001
      and Wellstone LLC(2)

3.1   Articles of Incorporation                         Incorporated by reference to the Company's Registration
                                                        Statement on Form 10-SB, file no. 0-28161

3.2   Articles of Amendment                             Incorporated by reference to the Company's Current
                                                        Report on Form 8-K, dated May 25, 2001

3.3   Bylaws                                            Incorporated by reference to the Company's Registration
                                                        Statement on Form 10-SB, file no. 0-28161

3.4   Articles of Amendment increasing authorized       Incorporated by reference to the Company's amended
      common stock to 300,000,000 shares                Annual Report of Form 10-KSB/A, dated December 31, 2004.

10.1  Stock Option Plan                                 Incorporated by reference to the Company's Registration
                                                        Statement on Form 10-SB, file no. 0-28161

10.2  Amended and Restated Stock Option Plan            Incorporated by reference to the Company's amended
                                                        Annual Report of Form 10-KSB/A, dated December 31, 2004.

10.3  Funding Agreement with Arrakis Select Fund        Incorporated by reference to the Company's amended
                                                        Annual Report of Form 10-KSB/A, dated December 31, 2004.

10.4  Schedule of Details, options granted as of    	Incorporated by reference to the Company's amended
      December 31, 2004 under Stock Option Plan         Annual Report of Form 10-KSB/A, dated December 31, 004.

10.5  $1,500,000 Promissory Note                        Incorporated by reference to the Company's Current
                                                        Report on Form 8-K, dated December 3, 2004.

10.6  Warrants, exercisable for 3,240,000 shares        Incorporated by reference to the Company's Current
      of common stock                                   Report on Form 8-K, dated December 3, 2004.

10.7  Lease  Agreement,  with  U.S.   Flue-Cured	dated as Incorporated by reference to the Company's amended
      Tobacco Growers, Inc.,of September 1, 2004        Annual Report of Form 10-KSB/A, dated December 31, 2004.

10.8  Marketing  Agreement,  with H&S Marketing, 	Incorporated by reference to the Company's amended
      dated as of December 28, 2004                     Annual Report of Form 10-KSB/A, dated December 31, 2004.

10.9  License Agreement, by and  between  Cerami 	Incorporated by reference to the Company's amended
      Consulting   Corporation   and   Wellstone        Annual Report of Form 10-KSB/A, dated December 31, 2004.
      Filters,  LLC,  dated  as of September 14,
      1999

10.10 Extension Agreement with U.S.  Flue-Cured		Incorporated by reference to the Company's amended
      Tobacco Growers Inc., dated May 2, 2005           Annual Report of Form 10-KSB/A, dated December 31, 2004.

10.11 $500,000 Promissory Note between Wellston    	Incorporated by reference to the Company's Current
      Filters,  Inc.  and Carlson Group,  Ltd.,         Report on Form 8-K, dated December 25, 2005.
      dated January 25, 2006

10.12 Summary  of  Employment  Agreement   with         Filed herewith
      Learned Jeremiah Hand

10.13 Summary  of   Employment  Agreement  with         Filed herewith
      Samuel Veasey

21.1  List of Subsidiaries                              Filed herewith

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

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

32.1  Certification of Chief Executive  Officer 	Filed herewith
      pursuant to 18 U.S.C. Section 1350.

32.2  Certification of Chief Financial  Officer		Filed herewith
      pursuant to 18 U.S.C. Section 1350.


</TABLE>






            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors
Wellstone Filters, Inc.
Las Vegas, Nevada

We  have  audited  the  accompanying  consolidated  balance  sheet of Wellstone
Filters,  Inc. (a Development Stage Company) as of December 31,  2005  and  the
related consolidated  statements  of operations, stockholders' deficit and cash
flows for the year 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 did
not audit the financial statements of Wellstone  Filters,  Inc.  as of December
31,  2004.   Those  statements were audited by other auditors whose report  has
been furnished to us,  and  our  opinion,  insofar as it relates to the amounts
included in the period ending December 31, 2004,  is based solely on the report
of the other auditors.

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  and  the  report  of  other  auditors, 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, 2005, and the results of its consolidated  operations
and cash flows  for  the  years  ended  December 31, 2005 and 2004, and for the
period from June 26, 1998 (Inception) through  December 31, 2005, 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 1 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  1.   The financial statements do not include any adjustments  that  might
result from the outcome of this uncertainty.


/s/ De Joya Griffith & Company LLC
CERTIFIED PUBLIC ACCOUNTANTS
Las Vegas, NV

March 30, 2006





            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
WELLSTONE FILTERS, INC.


We  have  audited  the  accompanying  consolidated  balance  sheet of WELLSTONE
FILTERS, INC. (a development stage company), as of December 31,  2004  and  the
related  consolidated  statements  of operations, stockholders' equity and cash
flows for the year 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). Those standards  require  that  we
plan and perform  the  audit  to  obtain reasonable assurance about whether the
financial  statements  are free of material  misstatement.  An  audit  includes
examining, on a test basis,  evidence supporting the amounts and disclosures in
the  financial statements. An audit  also  includes  assessing  the  accounting
principles  used  and  significant  estimates  made  by  management, as well as
evaluating the overall financial statement presentation. We  believe  that  our
audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly,  in  all  material  respects,  the  consolidated  financial position of
WELLSTONE FILTERS, INC. (a development stage company), as of  December 31, 2004
and  the  results  of their operations and their cash flows for the  year  then
ended, in conformity with U.S. generally accepted accounting principles.


/s/ Tanner LC
Salt Lake City, Utah
March 18, 2005





<TABLE>
<CAPTION>


					Wellstone Filters, Inc.
				    (A Development Stage Company)
				     Consolidated Balance Sheets


								December 31,	December 31,
								    2005	    2004
								------------	------------
<S>									<C>		<C>
Assets
  Current assets
  Cash and cash equivalents 	 				$    233,426 	$  1,431,088
  Inventory 	            					     391,796 	           -
								------------	------------
     Total current assets 	            			     625,222 	   1,431,088

  Furniture and equipment, net 	              			      13,336 	      12,695
								------------	------------
     Total Assets 	 					$    638,558 	$  1,443,783
								============	============
Liabilities
 Current liabilities
   Current portion of long term debt 				$  1,032,500 	$          -
   Accounts payable 	            				     350,076 	      23,890
   Related party accounts payable 	              		      40,584 	      40,584
   Accrued expenses 	            				     542,755 	      20,727
   Related party notes payable 	              			      59,200 	      59,200
								------------	------------
     Total current liabilities 	         			   2,025,115 	     144,401

   Note payable net of unamortized debt discount of
    $467,500 and $977,500, respectively 	         	   1,032,500 	     522,500
   Less: Current portion of long term debt 	        	  (1,032,500)	           -
								------------	------------
     Total long term debt 	                       			   - 	     522,500

     Total liabilities 	         				   2,025,115 	     666,901
								------------	------------
Stockholders' equity (deficit)
   Preferred stock, $.001 par value, 1,000,000
    shares authorizes; no shares issued and outstanding 	           - 	           -
   Common stock, $.001 par value, 300,000,000 shares
    authorized; 260,442,991and 252,542,991 outstanding
    respectively. 	            				     260,243 	     252,543
   Additional paid in capital 	       				  28,002,203 	  21,471,903
   Subscription receivable	             			     (26,000)	           -
   Accumulated deficit 	       					 (29,623,003)	 (20,947,564)
								------------	------------
     Total stockholders equity (deficit)	         	  (1,386,557)	     776,882
								------------	------------
     Total liabilities and stockholders equity (deficit) 	$    638,558 	$  1,443,783
								============	============
 See accompanying notes to consolidated financial statements.


</TABLE>



<TABLE>
<CAPTION>

		 			Wellstone Filters, Inc.
	 			    (A Development Stage Company)
	 			Consolidated Statements of Operations


			 						       Cumulative
						     Years Ended	 	 Amounts
						     December 31	 	  Since
		 				2005 	 	2004 	 	Inception
					    ------------  -------------	     --------------
<S>						<C>		<C>		<C>

 Revenue 				    $          -  $           -      $            -

 General and administrative expense 	       7,888,010     20,727,519 	 28,745,442

 Depreciation expense	                  	   5,057	  3,245	             12,258

 Research and development expense 	         207,636 	 19,580 	    227,216
					    ------------  -------------	     --------------
   Loss from operations	         	      (8,100,703)   (20,750,344)        (28,984,916)

 Interest expense 	              		 574,736 	 52,236 	    638,087
					    ------------  -------------	     --------------
   Loss before income taxes 	              (8,675,439)   (20,802,580)	(29,623,003)

 Income tax benefit 	                               -   	      -   	          -
					    ------------  -------------	     --------------
   Net loss 				    $ (8,675,439) $ (20,802,580)     $  (29,623,003)
					    ============  =============	     ==============
   Net loss per share -
	basic and diluted   		    $      (0.03) $       (0.09)
					    ============  =============
   Weighted average shares -
	basic and diluted 	       	     258,996,415    240,915,000
					    ============  =============


See accompanying notes to consolidated financial statements.


</TABLE>











<PAGE>

<TABLE>
<CAPTION>

							Wellstone Filters, Inc.
						    (A Development Stage Company)
					   Consolidated Statements of Stockholders deficit
							As of December 31, 2005



								       Additional
					         Common Stock	       Paid-In		Subscription   Accumulated
	 				    Shares 	   Amount      Capital		Receivable     Deficit	         Total
					    -----------	   ----------- -----------	------------   ------------	 -----------
<S>						<C>			<C>			<C>			<C>


Balance, February 17, 1998	              	      -    $         - $         - 	$          -    $         -   	 $         -
Restatement for recapitalization	    210,000,000        210,000 	  (210,000)	           -	          -   	           -
Capital contribution	                       	      - 	     -   	 - 	           -	        100 	         100
Net loss	                       		      - 	     -   	 - 	           -         (6,675)	      (6,675)
					    -----------	   ----------- -----------	------------   ------------	 -----------
Balance, December 31, 1998	    	    210,000,000        210,000 	  (210,000)	           -         (6,575)	      (6,575)

Net loss	                       		      - 	     -   	 - 	           -	       (969)	        (969)
					    -----------	   ----------- -----------	------------   ------------	 -----------
Balance, December 31, 1999	    	    210,000,000        210,000 	  (210,000)	           -	     (7,544)	      (7,544)

Net loss	                       		      - 	     -   	 - 	           -	    (21,395)	     (21,395)
					    -----------	   ----------- -----------	------------   ------------	 -----------
Balance, December 31, 2000	    	    210,000,000        210,000 	  (210,000)	           -	    (28,939)	     (28,939)

Acquisition of Farallon Corporation	     21,000,000 	21,000 	   (23,842)	           -	          -   	      (2,842)
Stock issued in cancellation of debt	      5,968,200 	 5,968 	    (3,126)	           -	          -   	       2,842
Reclassification of members'
  contribution to additional paid-in
  capital	                       		      - 	     -         100 	           -	       (100)
Net loss	                       		      - 	     -   	 - 	           -	     (8,218)	      (8,218)
					    -----------	   ----------- -----------	------------   ------------	 -----------
Balance, December 31, 2001	   	    236,968,200        236,968 	  (236,868)	           -	    (37,257)	     (37,157)

Rental expense forgiven by officers	              - 	     -      16,800 	           -	          -   	      16,800
Net loss	                       		      - 	     -   	 - 	           -	    (35,033)	     (35,033)
					    -----------	   ----------- -----------	------------   ------------	 -----------
Balance, December 31, 2002	    	    236,968,200        236,968 	  (220,068)	           -	    (72,290)	     (55,390)

Rental expense forgiven by officers	              -	             -	    12,600 	           -	          -   	      12,600
Net loss	                       		      -	             		 -	           -	    (72,694)	     (72,694)
					    -----------	   ----------- -----------	------------   ------------	 -----------
Balance, December 31, 2003	    	    236,968,200        236,968 	  (207,468)	           -	   (144,984)	    (115,484)

Common stock issued for:
   Cash	           				574,791 	   575 	   194,425 	           -	          -   	     195,000
   Services (related party)	      	     15,000,000 	15,000 	 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)	 (20,802,580)
					    -----------	   ----------- -----------	------------   ------------	 -----------
Balance, December 31, 2004	    	    252,542,991        252,543 	21,471,903 	           -	(20,947,564)	     776,882

Common stock issued for:
   Exercise of stock options	           	600,000 	   600 	     1,400 	           -	          -   	       2,000
   Services	        		      4,500,000 	 4,500	 4,585,500 	           -	          -   	   4,590,000
Stock options issued to employees	              -	             -	 1,920,000	           -	          -   	   1,920,000
Employee subscription receivable	      2,600,000	         2,600	    23,400	     (26,000)	          -   	           -
Net loss	                       		      -	             -   	 -	           -	 (8,675,439)	  (8,675,439)
					    -----------	   ----------- -----------	------------   ------------	 -----------
Balance, December 31, 2005	    	    260,242,991    $   260,243 $28,002,203 	     (26,000)  $(29,623,003)	 $(1,386,557)
					    ===========	   =========== ===========	============   ============	 ===========
See accompanying notes to consolidated financial statements.


</TABLE>

<PAGE>




<TABLE>
<CAPTION>



						WELLSTONE FILTERS, INC.
 					    (A Development Stage Company)
 					 Consolidated Statement of Cash Flows

					 						   Cumulative
							  Year Ended	  Year Ended	     Amount
		                           		 December 31,	 December 31,	     Since
							     2005 	     2004 	   Inception
							 ------------	 ------------	  ------------
<S>								<C>		<C>		<C>

 Cash flows from operating activities:
   Net loss 	 					 $ (8,675,439)	 $(20,802,580)	  $(29,623,003)
   Adjustments to reconcile net loss to
     net cash used in operating activities:
   Issuance of common stock for services 	            4,590,000 	    6,270,000 	    10,860,000
   Issuance of stock options for services 	                    - 	      654,946 	       654,946
   Issuance of stock options to employees
     as compensation 	          			    1,920,000 	   13,555,000 	    15,475,000
   Amortization of debt discount 	              	      510,000 	       42,500 	       552,500
   Depreciation 	                  			5,057 	        3,245 	        12,258
   Rental expense forgiven by officer and
     board member 	                         		    - 	            - 	        29,400
   Loss on disposal of furniture 	                  	1,795 	            - 	         1,795
   (Increase) in inventory 	            		     (391,796)	            - 	      (391,796)
   Increase/(decrease) in accounts payable 	              326,186 	       (1,499)	       350,076
   Increase in related party accounts payable 	                4,736 	       10,360 	        34,153
   Increase in accrued expense 	              		      517,291 	        9,736 	       538,019
							 ------------	 ------------	  ------------
	Net cash used in operating activity 	           (1,192,168)	     (258,292)	    (1,506,652)
							 ------------	 ------------	  ------------
 Cash flows from investing activities
   Purchase of fixed assets 	                	       (7,493)	       (8,729)	       (16,222)
							 ------------	 ------------	  ------------
 Cash flows form financing activities:
   Proceeds from sale of common stock 	                 	2,000 	      195,000 	       197,000
   Proceeds form long-term debt 	                            - 	    1,500,000 	     1,500,000
   Members contribution of equity 	                            - 	            - 	           100
   Proceeds form related party notes payable 	                    - 	            - 	        59,200
							 ------------	 ------------	  ------------
	Net cash provided from financing activities 	        2,000 	    1,695,000 	     1,756,300

	Net increase/(decrease) in cash
	    and cash equivalents 	         	   (1,197,661)	    1,427,979 	       233,426
							 ------------	 ------------	  ------------
 Cash and cash equivalents at beginning of period 	    1,431,088 	        3,109 	             -
							 ------------	 ------------	  ------------
 Cash and cash equivalents at end of period 	 	 $    233,426 	 $  1,431,088 	  $    233,426
							 ============	 ============	  ============

See accompanying notes to consolidated financial statements.


</TABLE>


                            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 210,000,000 shares of the Registrant's common stock.
In   addition,   the  Company  issued  5,968,200  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; however, the Company  has  not  commenced  planned
principal  operations  and  has  not  recognized  any  revenues related to such
planned operations. 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

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.

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

STOCK-BASED COMPENSATION
The  Company  accounts  for  its  employee  stock-based compensation using  the
intrinsic value method, as prescribed by APB  Opinion  No.  25,  Accounting for
Stock  Issued  to  Employees,  and  related  Interpretations. Accordingly,  the
Company  records  deferred compensation costs related  to  its  employee  stock
options when the current  market  price  of  the  underlying  stock exceeds the
exercise price of each stock option on the measurement date (usually  the  date
of  grant).  The  Company  records and measures deferred compensation for stock
options granted to non-employees,  other than members of the Company's Board of
Directors, using the fair value based method. Deferred compensation is expensed
on a straight-line basis over the vesting period of the related stock option.

An alternative method to the intrinsic  value  method  of accounting for stock-
based compensation is the fair value based method prescribed  by  Statement  of
Financial  Accounting  Standards  (SFAS)  No.  123,  Accounting for Stock-Based
Compensation,   as  amended  by  SFAS  No.  148,  Accounting  for   Stock-Based
Compensation - Transition  and  Disclosure.  If the Company used the fair value
based  method, the Company would be required to  record  deferred  compensation
based on  the  fair  value of the stock option at the date of grant as computed
using an option-pricing  model, such as the Black-Scholes option pricing model.
The deferred compensation  calculated  under  the fair value based method would
then be amortized over the vesting period of the stock option.

The following table illustrates the effect on net loss per share if the Company
had applied the fair value based method to account for its employee stock-based
compensation.

<TABLE>
<CAPTION>

                                                   YEARS ENDED DECEMBER 31,
						   -----------------------
                                                     2005            2004
						------------   -------------
<S> 						<C>                     <C>
Net loss as reported                            $ (8,675,439)  $ (20,802,580)

Add stock-based compensation
 expense recognized in the
 consolidated financial statements		   1,920,000  	  13,555,000

Deduct:
   Total stock-based employee compensation
    expense determined under fair value
    based method for all awards, net of
    related tax effects				  (1,921,944)	 (13,659,983)
						------------   -------------
    Pro forma net loss                          $ (8,677,382)  $ (20,907,563)
						------------   -------------
</TABLE>

Loss per share - as reported           		$       (.03)  $       (0.09)
Loss per share - pro forma             		$       (.03)  $       (0.09)

The fair value of each option grant is estimated at the date of grant using the
Black-Scholes option pricing model with the following assumptions:

                                                    December 31,
                                                  2005       2004
						--------   --------
Expected dividend yield                         $      -   $      -
Expected stock price volatility                      54%       222%
Risk-free interest rate                            3.50%      3.40%
Expected life of options                         4 years    5 years



The  weighted  average  fair  value  of  options granted during the years ended
December 31, 2005 and 2004 was $.43 and $.52, respectively.


                            WELLSTONE FILTERS, INC.
                        (A Development Stage Company)
                  Notes to Consolidated Financial Statements
RESEARCH AND DEVELOPMENT
The Company expenses research and development costs as incurred.

CONCENTRATION OF CREDIT RISK
The Company maintains its cash in bank deposits  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 36,565,000 and 35,065,000 shares  of common stock at December
31, 2005 and 2004, respectively, with conversion prices  between  $0.00067  and
$.50  at December 31, 2005 and December 31, 2004. Common stock equivalents have
not been included in the diluted loss per share calculation for the years ended
December 31, 2005 and 2004 because the effect would be antidilutive.

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

2. GOING CONCERN

The Company  incurred net losses of approximately  $8,675,437  from  the period
from  January  1,  2005,   through  December  31,  2005,  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, 2005 and 2004:

                                   2005          2004
				---------     ---------
Equipment                     	$  18,885     $  15,718
Furniture and fixtures                  -         4,178
				---------     ---------
                                   18,885        19,896
Less accumulated depreciation      (5,549)       (7,201)
				---------     ---------
                             	$  13,336     $  12,695
				=========     =========

The  Company  disposed  of  furniture  and equipment and recognized a  loss  on
disposal of $1,795 in 2005.
                            WELLSTONE FILTERS, INC.
                        (A Development Stage Company)
                  Notes to Consolidated Financial Statements

4. ACCRUED EXPENSES

The Company had accrued expenses for years  ended 2005 and 2004 of $542,755 and
$20,727,  respectively.  The amounts for 2005  were  primarily  the  result  of
deferred salaries  of  Company  executives  and  interest on note payable.  The
amount for 2004 was primarily for interest to an affiliate.

5. LONG-TERM DEBT

Long-term debt consists of the following at
December 31, 2005 and 2004:				 2005	      2004
						     -----------  -----------
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 3,240,000 shares
 of the Company's common stock for $0.50 per share   $ 1,500,000  $ 1,500,000

Unamortized discount on debt           			(467,500)    (977,500)
						     -----------  -----------
                                     		       1,032,500      522,500
Current portion of long term debt   		      (1,032,500)           -
						     -----------  -----------
Long term debt                   		     $         -  $   522,500
						     -----------  -----------

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. 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, 2005 the amount
unreimbursed to the law firm was $16,286.

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  500,000  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,
15,000,000 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
574,791  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


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

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, 2005.

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 5,968,200 shares of
common stock in settlement of $2,842 of debt.

8. INCOME TAXES

The provision for income taxes differs  from  the  amount  computed  at federal
statutory rates as follows:


                                         	Years Ended
                                                December 31,
                                           2005              2004
				       -------------   --------------

Income tax benefit at statutory rate   $   3,470,000   $    8,321,000
Change in valuation allowance             (3,470,000)      (8,321,000)
				       -------------   --------------


                                       $           -   $            -
				       -------------   --------------



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

Deferred  tax  assets  (liabilities) are comprised of the following at December
31, 2005 and 2004:


                                      		2005              2004
					   -------------     -------------
Net operating loss carryforward		   $   8,362,000     $   2,661,000
Issuance of stock options and warrants
for compensation and services      	       3,470,000         5,701,000
Valuation allowance             	     (11,832,000)       (8,362,000)
				           -------------     -------------

                               		   $           -     $           -


As of December 31, 2005,  the Company had net operating losses of approximately
$20 million which begin to  expire  in  2016.  If  substantial  changes  in the
Company's  ownership  should  occur, there would be an annual limitation of the
amount  of  net  operating loss carryforwards  which  could  be  utilized.  The
ultimate realization  of these carryforwards is due, in part, on the tax law in
effect at the time of future events which cannot be determined.

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, 2005.

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.

Issuances of Common Stock

During  2005, the Company issued 4,500,000  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, 15,000,000 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  574,791  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 4,500,000 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.


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

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 42,000,000 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.

A schedule of the options is as follows:


                                                               EXERCISE
                                           NUMBER OF             PRICE
                                            OPTIONS            PER SHARE
					  ----------	  -----------------


Outstanding at January 1, 2004               525,000      $         0.00067
Granted                                   31,300,000                0.01000
					  ----------	  -----------------
Outstanding at December 31, 2004          31,825,000        .00067 - .01000
Granted                                    4,500,000                0.00333
Exercised                                  3,200,000       .00333-  0.01000
					  ----------	  -----------------
Outstanding at December 31, 2005          33,125,000        .00067 - .01000



On December 31, 2005 the Company had 5,675,000 available for grant under
the Option Plan.



During 2004, the Company issued warrants to purchase 3,240,000 shares of common
stock with an exercise price of $.50  per  share  in  connection  with  a  note
payable. See Note 3. All of these warrants were vested and remained outstanding
at December 31, 2005.







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


The  following  table summarizes information about stock options outstanding at
December 31, 2005:
<TABLE>
<CAPTION>

<S>				<C>			<C>				<C>
                                      Weighted
                                      Average                                        Weighted
        Range of                      Remaining       Weighted                       Average
       Exercise       Number         Contractual       Average       Number          Exercise
        Prices       Outstanding     Life (Years)   Exercise Price  Exercisable       Price

  $  .00067 - .003     31,725,000          7.8     $     .0023     31,725,000    $        .0023
        .003 - .01      1,400,000          8.9             .01      1,400,000               .01
------------------------------------------------------------------------------------------------

  $   .00067 - .10     33,125,000          8.3     $     .0046     33,125,000    $        .0046
------------------------------------------------------------------------------------------------

</TABLE>


11. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial  instruments  consist  of  cash,  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.

12. RECENT ACCOUNTING PRONOUNCEMENT

In December 2004, the Financial Accounting Standards Board  issued Statement of
Financial  Accounting  Standards  No.  123R,  "Share-Based Payment,"  which  is
effective for public companies for interim or annual  periods  beginning  after
June   15,  2005.  This  statement  will  have  a  significant  impact  on  our
consolidated  statements  of  operations, as we will be required to expense the
fair value of our stock option  grants  rather  than disclose the impact on our
consolidated  net  loss within our footnotes as is  our  current  practice.  We
intend to comply with  the  standard upon its effectiveness; however, we do not
believe that the impact would  be  materially  different  from  our  pro  forma
disclosures as described in Note 1 to the Consolidated Financial Statements.

In 2004, the FASB issued SFAS No. 151, "Inventory Costs." SFAS No. 151 requires
that abnormal idle facility expense and spoilage, freight and handling costs be
recognized  as  current-period charges. In addition, SFAS No. 151 requires that
allocation of fixed  production  overhead  costs to inventories be based on the
normal  capacity of the production facility.  We  are  required  to  adopt  the
provisions  of SFAS No. 151 prospectively after January 1, 2006, but the effect
of adoption is  not  expected  to  have  a  material impact on our consolidated
financial position, results of operations or cash flows.

In  May  2005,  the  FASB issued SFAS No. 154, "Accounting  Changes  and  Error
Corrections - a replacement  of  APB  Opinion  No. 20 and FASB Statement No. 3"
("SFAS No. 154"). SFAS No. 154 changes the requirements  for the accounting for
and  reporting  of  a  change  in  accounting  principle.  The  provisions   of
SFAS No. 154  require, unless impracticable, retrospective application to prior
periods' financial  statements  of  (1) all  voluntary  changes  in  accounting
principles  and  (2) changes required by a new accounting pronouncement,  if  a
specific transition  is  not provided. SFAS No. 154 also requires that a change
in  depreciation,  amortization,  or  depletion  method  for  long-lived,  non-
financial assets be  accounted  for  as  a change in accounting estimate, which
requires prospective application of the new  method.  SFAS No. 154 is effective
for  all accounting changes made in fiscal years beginning  after  December 15,
2005. The application of SFAS No. 154 is not expected to have a material impact
on our consolidated financial position, results of operations or cash flows.

In  March   2005,  the  FASB  issued  Interpretation  No. 47,  "Accounting  for
Conditional Asset  Retirement Obligations - an Interpretation of SFAS Statement
No. 143" ("FIN 47").  FIN 47  clarifies the timing of liability recognition for
legal obligations associated with the retirement of a tangible long-lived asset
when the timing and/or method of  settlement are conditional on a future event.
FIN 47  is  effective for fiscal years  ending  after  December 15,  2005.  The
application of  FIN 47  is  not  expected  to  have  a  material  impact on our
consolidated financial position, results of operations or cash flows.

In  September  2005,  the FASB's Emerging Issues Task Force ("EITF") reached  a
consensus on Issue No. 04-13,  "Inventory  Exchanges."  EITF No. 04-13 required
two  or  more  inventory transactions with the same party to  be  considered  a
single non-monetary  transaction subject to APB Opinion No. 29, "Accounting for
Non-monetary  Transactions,"   if   the   transactions  were  entered  into  in
contemplation  of one another. EITF No. 04-13  is  effective  for  us  for  new
arrangements entered into after April 2, 2006. We do not expect the adoption of
EITF No. 04-13 to  have a material impact on our financial position, results of
operations or cash flows.

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.


  13. SUBSEQUENT EVENTS

On January 25, 2006,  the  Company  received  $500,000  from the Carlson Group,
Ltd., pursuant to a promissory note, dated January 25, 2006.   This  promissory
note  is  not  associated  with  the prior  promissory  note  in  the  previous
paragraph.  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.