10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-K

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S ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2005

OR

£ 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: 000-21394

GelStat Corporation

(Exact name of registrant as specified in its charter)

Delaware	90-0075732
(State or Other Jurisdiction	(I.R.S. Employer
of Incorporation or Organization)	Identification No.)

3557 SW Corporate Parkway Palm City, Florida	34990
(Address of Principal Executive Office)	(Zip Code)

Registrant’s telephone number, including area code: (772) 283-0020

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes £No S

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes £No S

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not 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. £

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

Large accelerated filer	£	Accelerated filer	£
Non-accelerated filer	£	Smaller reporting company	S

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  

Yes £ No S

The number of shares outstanding of the registrant’s common stock, as of date of filing this Report, was 127,447,078.

The aggregate market value of the common stock held by non-affiliates of the registrant on such date, based upon the closing price of the common stock of $0.03 as reported by the OTC Bulletin Board on June 30, 2012 was $1,970,374.

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INDEX

		Page No.
Part I.
Item 1.	Business.	4
Item 1A.	Risk Factors.	8
Item 1B.	Unresolved Staff Comments.		13
Item 2.	Properties.	13
Item 3.	Legal Proceedings.	13
Item 4.	Mine Safety Disclosures	13
Part II.
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	14
Item 6.	Selected Financial Data.		15
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	15
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.	16
Item 8.	Financial Statements and Supplementary Data.	17
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.	29
Item 9A.	Controls and Procedures.	30
Item 9B.	Other Information.	30
Part III.
Item 10.	Directors, Executive Officers and Corporate Governance.	31
Item 11.	Executive Compensation.		32
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	33
Item 13.	Certain Relationships and Related Transactions, and Director Independence.	33
Item 14.	Principal Accounting Fees and Services.	33
Part IV.
Item 15.	Exhibits, Financial Statement Schedules.	34
SIGNATURES		35

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PART I

Explanatory Note. This Report on Form 10-K for the year ended December 31, 2005 has been compiled from information which is believed to be true and correct in all material respects. This Report has been prepared in 2012 in order to correct filing delinquencies.

Certain statements in this Report constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements that address expectations or projections about the future, including without limitation statements about product development, market position, expected expenditures and financial results, are forward-looking statements.

Some of the forward-looking statements may be identified by words such as "expects," "anticipates," "plans," "intends," "projects," "indicates," "believes" and similar expressions. Any statements contained herein that are not statements of historical fact should be deemed to be forward-looking statements. These statements are not guarantees of future performance and involve a large number of risks, uncertainties and assumptions. Accordingly, actual results or performance of Gelstat Corporation ("Gelstat" or the “Company”) will most likely differ significantly, positively or negatively, from forward-looking statements made herein. Unanticipated events and circumstances are likely to occur. Factors that might cause such differences include, but are not limited to, those discussed under Item 1A, Risk Factors.

These factors include, but are not limited to, risks that Gelstat products may not perform as expected or may not receive the level of market acceptance anticipated; anticipated funding may be unavailable; intense market competition may result in lower than anticipated revenues or higher than anticipated costs; and general economic conditions, such as the rate of employment, inflation, interest rates and the condition of the capital markets may change in a way that is not favorable to Gelstat. This list of factors is not exclusive. Gelstat undertakes no obligation to update any forward-looking statements.

The Company cautions the reader not to place undue reliance on any forward-looking statements.

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ITEM 1. DESCRIPTION OF BUSINESS

General

Gelstat was incorporated on November 13, 1991 in the State of Minnesota under the name Developed Technology Resource, Inc. and reincorporated in Delaware on October 27, 2010. The Company's principal executive office is located at 3557 SW Corporate Parkway Palm City, FL (772) 283-0020 and its website is www.Gelstat.com. The information found at the Company's website is not incorporated in or made a part of this report on Form 10-K.

Effective April 30, 2003, the Company acquired Gelstat Corp. ("GC") as a wholly-owned subsidiary. GC was organized in June 2002 for the purpose of developing, manufacturing and marketing over-the-counter ("OTC") and other non-prescription consumer health products related to migraine and sleep. The acquisition was accomplished by merger of GC (a Minnesota corporation) with our wholly-owned subsidiary, NP Acquisition (a Minnesota corporation). In the merger, the former owners of GC received shares of our common stock and GC became our wholly-owned subsidiary. No cash consideration was exchanged. The amount of the merger consideration was negotiated at arm’s length based on the then recent trading price of our common stock and our assessment of the business prospects of GC. In July 2003, the Company changed its name to Gelstat Corporation. On March 17, 2004, GS Corp. was merged into its parent company, Gelstat Corporation. References in this Report to the "Company" or "Gelstat" mean Gelstat Corporation.

In 2004, the Company established a subsidiary called GS Pharma, Inc. On January 5, 2005, GS Pharma assigned all rights in the license previously granted to it by Gelstat to DTLL, Inc. (OTCBB: DTLI) in exchange for 12.5 million shares of DTLL. On November 14, 2005 the Company sold 12.4 million of its shares in DTLL for $500,000. As a result of the transaction, the Company will no longer be consolidating DTLL results in the Company’s future financial statements. Because DTLL failed to pay its required payments to have rights to the pharmaceutical applications, the rights reverted back to Gelstat.

In late 2005, the Company became insolvent and only marketed its products on a limited basis.

In 2006 and through 2007 the Company struggled under the burden of significant debt and accounts payable, declining revenues, negative cash flows from operations and lack of capital.

In April 2008, WSR Consulting, Inc. (WSR) was engaged in an attempt to turn around the Company. In June 2008 a founder of WSR assumed the position as interim CEO of the Company. The Company was quickly downsized and refocused to minimize the Company’s monthly expenses while management attempted to clean up the balance sheet and secure capital.

In July 2008, the Company’s patent #7,192,614 was forced to auction by a creditor and subsequently, purchased by and assigned to that creditor. This was a key asset of the Company and seriously impaired its ability to continue as a going concern. Throughout 2008 the Company’s CEO and one of its board members used personal funds to rigorously negotiate with this creditor to retain rights to the patent.

In November 2009, the Company’s CEO, Mr. Gerald N. Kieft, one of its board members and a few investors were able repurchase the patent from the creditor through an entity named High Alpha Partners, Inc. d/b/a Gelstat Direct. In December 2009, the entire inventory held in Vero Beach, Florida was seized by the owner of the facility due to the Company’s back rent payments. In July 2010, the Company’s CEO, Mr. Gerald N. Kieft, and a few investors were able to repurchase the inventory from the landlord through Gelstat Direct.

In September 2010, Gelstat Direct formally contributed assets it owned relating to Gelstat into a majority-owned subsidiary of High Alpha Partners, Inc. named GSC Direct, Inc. In September 2011, 100% of the outstanding shares of GSC Direct, Inc. were acquired by Gelstat in exchange for the issuance of 25,000,000 shares of Gelstat common stock. See Item 13, “Certain Relationships and Related Transactions, and Director Independence.”

In September 2011, GSC Direct, Inc. and its assets were merged into Gelstat in a share exchange.

Gelstat is a consumer health care company dedicated to the cost-effective development and marketing of OTC and other non-prescription consumer health care products. When development efforts ceased in 2005 due to lack of capital, its efforts had been focused on proprietary, innovative products that addressed multi-billion dollar global markets.

The Company's first product is Gelstat® Migraine is a patented homeopathic drug designed to provide acute relief from migraine and migraine-like headaches. Gelstat Migraine was originally launched through distributors into retailers and wholesalers across the United States. In 2008, the Company changed its business model to focus on Direct-to-Consumer sales and marketing efforts. As such, the Company’s products are now sold primarily through its website www.gelstat.com and through a very limited number of retailers.

Gelstat(TM) Sleep is presently under final development and is intended to be marketed as a sleep aid. It was introduced to consumers in 2010 on a test basis to obtain data to determine product viability. Gelstat Sleep is expected to be classified as a dietary supplement. The Company plans to formally launch the product in the fourth quarter of 2012 2012contingent on raising any required capital.

While Gelstat expects to continue developing new products and will be opportunistic in regard to unanticipated opportunities within the OTC health care product field, the two products listed above are expected to account for essentially all of the Company's activity over the next 12 months.

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Overview of Regulations Regarding the Manufacture and Sale of Homeopathic Drugs and Nutritional Supplements.

This overview is a brief summary and does not purport to be complete.

In general, the Company's products are regulated both by the U.S. Food and Drug Administration (the "FDA") and by the U.S. Federal Trade Commission (the "FTC") as well as States through their “little FTC” laws and rules as well as other consumer protection laws. Internationally, the Company must comply with the federal and local laws of each country.

The FDA treats homeopathic drugs, both prescription and OTC, differently than non-homeopathic drugs. Unlike non-homeopathic drugs, homeopathic drugs are not required to submit to pre-market approval and are not required to be tested for safety and effectiveness. Homeopathic drugs must meet the standards set forth by the Homeopathic Pharmacopoeia of the United States.

In general, the FTC and the FDA prohibit fraud in the marketing of homeopathic drugs, monitor OTC versus prescription use of homeopathic drugs, hold homeopathic drugs to several labeling requirements, and require production incompliance with current good manufacturing practices (with some minor exceptions).

The FDA prohibits "health fraud," defined as:

The deceptive promotion, advertisement, distribution or sale of articles, intended for human or animal use, that are presented as being effective to diagnose, prevent, cure, treat, or mitigate disease (or other conditions), or provide a beneficial effect on health, but which have not been scientifically proven safe and effective for such purposes. Such practices may be deliberate, or done without adequate knowledge or understanding of the article.

Only those homeopathic drugs that treat "self-limiting" conditions that the average consumer can recognize and diagnose are allowed to be marketed as OTC drugs. Homeopathic drugs that claim to treat serious diseases and those that require diagnosis by a physician, such as AIDS or cancer, must be marketed as prescription homeopathic drugs - they cannot be sold as an OTC drug.

The FDA requires that homeopathic drugs be properly labeled. “A drug or device shall be deemed to be misbranded if its labeling is false or misleading in any particular fashion.” Furthermore, Section 352 of the Act requires that the name and place of business of the manufacturer, packer, or distributor be placed on the package. Homeopathic drugs for retail sale must also bear adequate directions for use that can be interpreted by the average lay person, and their ingredients as well as the dilution of each active ingredient must be stated (with dilution stated as the number of 1:10 dilutions required to arrive at the final concentration of active ingredient). The label must also state at least one major indication for the drug, the drug's established name, and any applicable warnings.

The FDA requires that homeopathic drugs be manufactured in general conformance with current good manufacturing practice ("cGMP"). However, there are two exceptions to this requirement. First, homeopathic drugs do not require expiration dating. Second, the FDA does not presently require laboratory determination of the identity and strength of each active ingredient prior to the release and distribution of the drug on the market. For further information on the FDA's regulation of homeopathic drugs, see the FDA's Compliance Policy Guide, "Conditions Under Which Homeopathic Drugs May be Marketed," which is available on the FDA's website, www.fda.gov, are also subject to the U.S. Dietary Supplement Health and Education Act of 1994("DSHEA"). Under DSHEA a manufacturer must only supply the FDA with information adequate to provide "reasonable assurance that the product does not present a significant or unreasonable health risk of illness or injury." This information must be supplied at least 75 days before the product is available to consumers. DSHEA permits the labels of dietary supplements to contain truthful and non-misleading structure/function claims and nutritional support claims that describe the role of the nutrient in supporting wellness. Nutritional supplements are not allowed to make claims to diagnose, prevent, cure, treat, or mitigate disease.

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Products

Gelstat(TM) Migraine

Gelstat Migraine is a patented homeopathic drug intended for use in providing acute relief from the pain and associated symptoms of migraine and migraine-like headaches. It is believed to be more effective if used early in the course of an attack, but may be used at any time. Gelstat Migraine is administered sublingually (under the tongue), where it is held in place briefly before being swallowed. Gelstat Migraine is provided in single dose dispensers, which are intended to ensure ease of use as well as consistent, accurate administration of medication.

In a clinical trial of 30 patients who consistently develop moderate to severe migraine headache pain were treated with Gelstat Migraine early in the course of an attack, while at the mild pain phase. The primary objective of the study was to assess the efficacy of Gelstat Migraine in providing acute relief from migraine headache pain and associated symptoms. Results demonstrated that migraine headache pain two hours after treatment was either mild or none in approximately 83% of patients. Pain-free response was obtained by 48% of patients, with 34% reporting only mild pain. Moderate pain was reported by 17% and severe pain by 0% (none). Of those pain-free at two hours, 71% remained pain-free during the 24 hour post-dose period and 85% remained pain-free or had only mild pain. Moderately painful headache recurred in 14% of patients and severely painful headache in 0%. Migraine associated symptoms such as photophobia, phonophobia and nausea were eliminated in 53% of those patients initially reporting such symptoms. Side effects were infrequent and minor.

Initial clinical trial data suggests that Gelstat Migraine may be more effective than competing OTC migraine relief products, and that it may not be associated with the side effects common to other OTC products, such as stomach upset, or the development of rebound headaches and chronic daily headaches. Prescription medications for migraine are generally associated with significant side effects, none of which have been reported or noted with use of Gelstat Migraine. Further details regarding this initial clinical trial are available on the Company’s website at www.gelstat.com. The information found at the Company's website is not incorporated in or made a part of this report on Form 10-K.

Gelstat(TM) Sleep

Gelstat(TM) Sleep is presently under final development and is intended to be marketed as a sleep aid. It was introduced to consumers in 2010 on a test basis to obtain data to determine product viability. Gelstat Sleep is expected to be marketed as a nutritional supplement for OTC (non-prescription) sales. The company plans to formally launch the product in the fourth quarter of 2012 contingent on raising any required capital.

Gelstat Sleep is provided as an orally dispersible tablet, a form of administration believed to be of particular benefit because of the rapid onset of absorption and the high percent of active ingredient absorbed. It is believed that Gelstat Sleep may offer consumers an effective OTC sleep aid without the risks and side effects associated with other OTC and prescription sleep aids.

The tablets are specifically formulated for effective delivery of active ingredients. Unlike nearly all other non-prescription sleep aids, Gelstat Sleep does not contain antihistamines. Antihistamines cause drowsiness, but they are often ineffective sleep aids, and have side effects that create problems for many users.

Gelstat Sleep is expected to employ a unique combination of active ingredients, each of which has independently been shown in some studies to be effective in promoting healthy sleep. Those ingredients are combined with proprietary adjuncts as part of the delivery system intended to provide rapid, effective and safe administration when used as directed. By utilizing an orally dispersible tablet to deliver the planned combination of ingredients, the Company hopes to offer a product that is substantially advantageous relative to competing products.

Sales and Marketing

Domestic Sales & Marketing

Gelstat intends to market and distribute its products initially through direct-to-consumer marketing efforts and then through drugstores and pharmacies, food stores, and mass merchandise retailers once the products have achieved significant brand recognition and until the Company has the capital to support its marketing efforts. Presently, Gelstat offers Gelstat Migraine for sale through its website and through a very limited number of retailers.

International Sales & Marketing

The global incidence of migraine and other conditions intended to be addressed by the Company's products approximates that found in the United States. Gelstat is pursuing international opportunities for Gelstat Migraine simultaneous with its current domestic sales and marketing activities.

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Competition

There are numerous other companies that manufacture and market products that compete with the present and intended products of the Company. Most of the companies that compete with Gelstat have much greater market exposure, human resources and financial resources than the Company. Most of the products that compete with the Company's products have greater brand recognition, and have already achieved a certain amount of consumer acceptance.

The Company believes that Gelstat Migraine competes primarily with other OTC migraine medications. The OTC migraine market is based almost entirely on common analgesics, some having been slightly modified for use in the treatment of migraine (e.g. by the addition of caffeine). Typical competitors include products like Excedrin Migraine(R), Motrin Migraine(R) and Advil Migraine(R).

Non-steroidal anti-inflammatory drugs (NSAIDs: ibuprofen, aspirin, etc.) have significant harmful side effects. Common side effects of these OTC analgesics include rebound headaches (both caffeine and NSAIDs have been implicated as a cause of rebound headaches), chronic daily headache, liver damage, kidney damage, ulcers and, less serious but more frequently encountered stomach upset. The Company also competes with prescription migraine treatments. Triptans are now recognized as the prescription drug of choice for most migraine patients, and have largely displaced other prescription medications. The proposed mechanism of action for all Triptans is vasoconstriction (narrowing of blood vessels) via binding with serotonin receptors on blood vessels leading to relief of migraine pain and associated symptoms.

Principal Suppliers

Gelstat is dependent on vendors, suppliers and strategic partners. The Company must reach and maintain agreements with third-parties to supply it with the accounting, management, manufacturing, packaging, public relations, advertising, clinical trials, product brokering and distribution, and other products and services necessary to affect its business plan. The Company believes that at least several alternative sources exist for each service and component purchased for and used in the manufacture and marketing of its products. However, Gelstat generally does not have long-term service agreements with those performing services for the Company or long-term supply agreements with suppliers to provide product at any set price or at all. In addition, Gelstat currently does not have the physical or human resources to independently manufacture its products or any other products that might be developed. While believing that alternate vendors could be found, the need to change vendors, should it arise, could have a material adverse effect on the Company. The Company intends to outsource all of its product manufacturing and packaging operations for the foreseeable future.

Intellectual Property

The Company plans to continuously define, expand and defend the intellectual property related to its products and delivery systems. The Company was issued United States patent number 7,192,614 relating to Gelstat Migraine on March 20, 2007. Intellectual property protection may be very important to the successful marketing and distribution of its products. Gelstat will therefore continue to file patent and other intellectual property applications to protect inventions and improvements that are considered important to the development of its products and business. Gelstat also relies on trade secrets, know how, continuing technological innovation and licensing opportunities to develop and maintain its competitive position.

Research and Development

Gelstat is a marketing driven company presently dedicated to products addressing migraine, and problem sleep. Each of these is a multi-billion dollar international market. Nonetheless, potential new product opportunities may be evaluated according to their likely competitive advantage (economic as well as clinical), potential market size, patentability, and suitability for sale as non-prescription products, likely consumer acceptance and perceived ability of the Company to successfully execute development and launch within the constraints of present opportunities.

Gelstat believes that clinical trials are essential to demonstrate efficacy in a manner recognized and accepted by the medical community as well as the consumer and, accordingly, plans to conduct clinical trials on every product it develops.

Due to capital constraints, Gelstat has currently suspended all R&D efforts and clinical trials but hopes to resume efforts in the future once capital is obtained.

Employees

Gelstat maintains an executive office in Palm City, Florida and a warehouse and distribution facility in Stuart, Florida. As of date of filing this Report, the Company had no employees.

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ITEM 1A. RISK FACTORS

Risks Related to Our Business

Our ability to continue as a going concern is in substantial doubt absent obtaining adequate new debt or equity financings.

Our continued existence is dependent upon us obtaining adequate working capital to fund all of our operations. Working capital limitations continue to impinge on our day-to-day operations, thus contributing to continued operating losses. Currently, the Company is entirely dependent on outside investments to support its operations. Thus, if we are unable to raise funds to fund the development, manufacturing and marketing of our products, we may not be able to continue as a going concern and you will lose your investment.

We have a limited recent operating history on which to evaluate our potential for future success and to determine if we will be able to execute our business plan. Therefore, it is difficult to evaluate our future prospects and the risk of success or failure of our business.

Since we encountered severe financial problems in 2005, we have had very limited operations. Revenue has been limited to some website orders since we have lacked the capital for marketing. You must consider our business and prospects in light of the risks and difficulties we will encounter as an early-stage company. These risks include:

· our ability to raise sufficient working capital,

· our ability to effectively and efficiently market and distribute our products,

· our ability to obtain market acceptance of our current products and future products that may be developed by us, and

· our ability to sell our products at competitive prices which exceed our per unit costs.

We may not be able to address these risks and difficulties, which could materially and adversely affect our revenue, operating results and our ability to continue to operate our business.

The success of our products is subject to ongoing and additional clinical trials which may not be successful.

The U.S. Food and Drug Administration (the “FDA”) does not require homeopathic drugs to be submitted to pre-market approval and are not required to be tested for safety and effectiveness. Our GelStat Migraine product has undergone two clinical trials and additional trials may be required. In order to test the efficacy of the GelStat Migraine product, we have put it through a clinical trial and, if we have the necessary funding, anticipate putting the product through additional testing. Although this product has already undergone two clinical trials with favorable results, we cannot assure you that the results will be favorable in the future trials. Additionally, some consumers and retailers may defer purchasing the product until such time, if any, that such additional trials are successfully completed. The results of future clinical trials are expected to strongly affect the economic viability and perceived value of our products. There can be no assurance as to the outcome of future clinical trials on our current or future products. If the clinical trial results for any of the Company’s initial products suggest that any of them are not efficacious, or reveal unexpected problems such as serious side effects, the Company may be unable to successfully market the products even if we desired to do so. In such event, the Company’s results of operations will be adversely affected and you may lose your investment.

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Because successful development of our products is uncertain, our results of operations may be materially harmed.

Our development of current and future products is subject to the risks of failure and delay inherent in the development of non-prescription consumer health care products, including but not limited to the following:

• delays in product development, clinical testing, or manufacturing;

• unplanned expenditures in product development, clinical testing, or manufacturing;

• failure to receive regulatory approvals, if required;

• emergence of superior or equivalent products;

• inability to manufacture our products on a commercial scale on our own, or in collaboration with third parties; and

• failure to achieve market acceptance.

Because of these risks, our development efforts may not result in any commercially viable products. If a significant portion of these development efforts are not successfully completed, required regulatory approvals are not obtained, or any approved products are not commercialized successfully, our business, financial condition, and results of operations may be materially harmed.

Any unanticipated problems with product development and commercialization develop or our products are found to be ineffective or unsafe, our business may fail.

Our successful development of existing and new products is subject to the risks of failure and delay inherent in the development and commercialization of products. We may experience unanticipated or otherwise negative research and development results. Existing or proposed products may be found to be ineffective or unsafe, or may otherwise fail to receive required regulatory clearance or approval. We may find that existing or proposed products, while effective, are uneconomical to commercialize or market. Existing or proposed products may not achieve broad market acceptance.

Because we will need to rely on third parties for the development, manufacture, sales and marketing of our current or future products, our future success will be dependent on the timeliness and effectiveness of the efforts of these third parties.

We do not have the capability and resources to manufacture, market or sell our current products or any future product. We intend to outsource all of our product manufacturing and packaging operations for the foreseeable future. Accordingly, we will seek to enter, at the appropriate time, into agreements with other companies that can assist us and provide certain capabilities that we do not possess. Even if we do succeed in securing these alliances, we may not be able to maintain them if, for example, development results are disappointing or approval of a product (if required) is delayed or sales of a product are below expectations. Furthermore, any delay in entering into agreements could delay the development and commercialization of our products and reduce their competitiveness even if they reach the market. Any such delay related to our agreements could adversely affect our business. Further, failure by such parties to provide the agreed services at an acceptable level could adversely affect our business.

If our products gain widespread commercial acceptance, we could face potential difficulties in locating sufficient manufacturing sources.

We have used third parties to manufacture our products on a limited basis. If we are unable to produce our products in sufficient quantities at an acceptable cost, we may lose customers and our business could be harmed. Our ability to expand production could also be hindered by the availability of materials used to manufacture our products or the availability of qualified personnel. These difficulties could result in reduced quality of our products or reduced sales, which could damage our industry reputation and hurt our ability to generate revenues.

Because the consumer healthcare product market is subject to substantial regulation by regulatory agencies, if we do not obtain the requisite regulatory approvals we need to market our products, we will not be able to commercialize our products.

We believe that all of our current and planned products will be marketed either as homeopathic products or as dietary supplements, and that each will therefore be exempt from the new drug approval process required in the United States for prescription pharmaceuticals. The Company’s products, product development activities and manufacturing processes are nonetheless subject to regulation by the Food and Drug Administration (“FDA”) and by comparable agencies in foreign countries. In the U.S., the FDA regulates manufacturing, labeling and record keeping procedures even for non-prescription products. We use qualified third-party manufacturers to perform these services; however, if these third-parties do not comply with the regulations, we may not be able to sell our products. Nonetheless, the failure of such third parties to adhere to regulations could have a material adverse affect on our business.

In addition, product claims, labels, advertising and other communications with the public are closely monitored by the Federal Trade Commission (“FTC”) and states under their “Little FTC Acts”. Failure to comply with any of the numerous regulations which govern our industry could result in regulatory or enforcement actions which would have a material adverse affect on our business. In addition, we are subject to those risks associated with any highly regulated industry wherein regulations are subject to change that is both substantial and rapid. Regulatory change may force the Company to expend substantial time and money becoming compliant, may make the Company’s business more expensive to operate and the products less profitable, or not profitable at all, and might even prevent the Company from marketing one or more of its products. We are marketing our first product, GelStat Migraine, as an effective solution in alleviating migraine headaches. Under FDA and FTC rules, we are required to obtain scientific and/or clinical data to support any health claims we make concerning our products. Although we have neither provided nor been requested to provide any such data to the regulators in support of this claim, we have in fact obtained supporting scientific and clinical data. We cannot be certain, however, that the scientific and clinical data we have obtained or will obtain in the future in support of our claims will be deemed acceptable or sufficient by any regulator. If the FDA or the FTC requests any supporting information, and we are unable to provide support that is acceptable to the FDA or the FTC, either agency could force us to stop making the claims in question, which would most likely have a negative impact on sales. Regulatory actions may materially adversely affect the Company’s business, financial condition and results of operations.

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If any of our products are alleged to have unacceptable adverse effects, we could be subject to liability which would adversely affect our results of operations.

The Company faces an inherent business risk of exposure to product liability claims in the event that the use of its products is alleged to have resulted in adverse effects. Any such claims would likely have an adverse effect on the Company. The Company currently has product liability insurance for claims against it up to one million dollars,on a per-occurrence basis. However, there can be no assurance that such coverage would protect the Company in every instance, or that a claim might not substantially exceed the limit of coverage beyond the Company’s ability to pay. Additionally, there can be no assurance that such insurance will continue to be available to the Company in the future on commercially reasonable terms, or at all. If the Company is unable to continue its product liability insurance coverage for any reason, it may have a material impact on the retailer’s willingness to stock the Company’s products.

If we lose our Chief Executive Officer, our business may materially suffer.

We are highly dependent on Mr. Gerald Kieft, Chief Executive Officer, who is our sole officer and provides “as needed” services. We do not carry “key-man” life insurance on Mr. Kieft. Furthermore, our future success will also depend in part on our ability to identify, hire, and retain qualified personnel at senior and other management levels. We will experience intense competition for qualified personnel and may be unable to attract and retain the personnel necessary for the development of our business. Because of this competition, our compensation costs may increase significantly and our business may suffer.

If we fail to establish a method to sell, market or distribute our products, our results of operations would be adversely affected.

Because we have limited experience in the sale, marketing and distribution of consumer products, we intend on selling our products through the Internet, direct-to-consumer advertising and certain traditional retail outlets. To achieve this, may work with a number of brokers and distributors currently serving these markets. There can be no assurance that any broker or distributor will be able to place our product with the aforementioned channels, or that once such initial placement is achieved any retailer or other outlet will continue to carry our product, or that any broker or distributor will continue working with the Company and our products.

If we do not obtain protection for our intellectual property rights, our competitors may be able to take advantage of our research and development efforts to develop competing drugs.

Our success will depend, in part, on our ability to maintain the confidentiality of our trade secrets and know how, operate without infringing on the proprietary rights of others and prevent others from infringing our proprietary rights. We have received a United States patent on our GelStat Migraine product however we cannot assure you that this patent will afford adequate protection to us. The Company has hired I.P. counsel to assist us with obtaining I.P. protection on our products in international markets. However, we cannot assure you that we will obtain any such I.P. protection on our products internationally.

Competitors may successfully challenge our intellectual property rights, produce similar drugs or products that do not infringe our patents, or produce drugs in countries where we have not applied for patent protection or that do not respect our patents.

If any of these events occurs, or we otherwise lose protection for our trade secrets or proprietary know-how, the value of this information may be greatly reduced. Patent protection and other intellectual property protection are important to the success of our business and prospects, and there is a substantial risk that such protections will prove inadequate.

If we are subject to intellectual property infringement claims, it could cause us to incur significant expenses, pay substantial damages and prevent us from selling our products.

In the drug development business, third parties accumulate large portfolios of patents. Third parties may claim that our patent and/or products infringe or violate their intellectual property rights. Intellectual property litigation is characterized by unusually large legal fees, consulting and expert fees and other costs. Any claims that we are violating the intellectual property rights of another party could cause us to incur significant expenses which may likely exceed our capacity to pay the fees and costs. If successfully asserted against us, an adverse intellectual property claim is likely to require that we pay substantial damages in excess of our ability to pay and prevent us from using licensed technology that may be fundamental to our business. Even if we were to prevail, any litigation regarding intellectual property could be costly and time-consuming and divert our attention from our business operations. We may also be obligated to indemnify our business partners in any such litigation, which could further exhaust our resources. Furthermore, as a result of an intellectual property challenge, we may be prevented from selling our products unless we enter into royalty, license or other agreements. We may not be able to obtain such agreements at all or on terms acceptable to us, and as a result, we may be precluded from offering some or all of our products.

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If we cannot manage our growth effectively, we may not become profitable.

Businesses, which grow rapidly often, have difficulty managing their growth. If we grow as rapidly as we anticipate, we will need to expand our management by recruiting and employing experienced executives and key employees capable of providing the necessary support. We cannot assure you that our management will be able to manage our growth effectively or successfully. Our failure to meet these challenges could cause us to lose money, and your investment could be lost.

Among other things, implementation of our growth strategy would be adversely affected if we were not able to attract sufficient customers to the products we offer in light of the price and other terms required in order for us to attain the necessary profitability.

Because of our limited experience in commercializing our products, the market acceptance of the Company’s products is uncertain.

Our success depends upon the acceptance by retail consumers of our products. Although we believe that our products are efficacious, and that they will meet with consumer acceptance, we have no assurance of that. There is only limited data by which to gauge consumer acceptance of the Company’s products. Most of the products that compete with the Company’s products have substantial brand recognition, and have already achieved a certain amount of consumer acceptance. Those consumers who presently use a competitor’s product to treat a condition designed to be treated by our products will have to be convinced to switch products, which is often difficult. We believe that the successful completion of clinical trials demonstrating the efficacy of our products or, in the case of GelStat Migraine, additional clinical trials, may be essential for the successful marketing of these products, especially in light of entrenched competition. There can be no assurance that any clinical trials will be completed beyond the initial trials of GelStat Migraine that have already been completed, or that such additional clinical trials will demonstrate the same degree of efficacy as these initial trials, or any efficacy at all. Insufficient market acceptance of our products would have a material adverse effect on our business, financial condition and results of operations.

Although we plan to diversify our product offering, we may not be successful.

The Company proposes as an important part of its business plan to complete development of additional products related to arthritis, sinusitis and problem sleep. Offering new products is subject to a number of risks including:

· Identifying products;

· Acquiring ownership or distribution rights to new products;

· Having sufficient capital to acquire the rights to new products, build inventory and market the products; and

· Our ability to generate effective marketing programs.

No assurance can be given that the Company will ever be able to successfully design, develop, and market any such additional new products.

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If economic conditions in the United States and elsewhere do not materially improve, we may be hampered by our ability to sell our products.

The sharp economic downturn in the United States and elsewhere beginning in 2008 and the resulting unemployment has a tendency to cause consumers to reduce spending except on necessities. While consumer healthcare products may be relatively resistant to this trend, to the extent that consumers lack disposable money we believe that we will be adversely affected. Unless and until the economy materially improves, we may be affected by these factors.

Risks Related to Our Common Stock

Because the market for our Common Stock is limited, persons who purchase our Common Stock may not be able to resell their shares at or above the purchase price paid by them.

Our Common Stock trades on the OTC Markets, which is not a liquid market.  There is currently only a limited public market for our Common Stock.  We cannot assure you that an active public market for our Common Stock will develop or be sustained in the future.  If an active market for our Common Stock does not develop or is not sustained, the price may continue to decline.

Because we are subject to the “penny stock” rules, brokers cannot generally solicit the purchase of our Common Stock which adversely affects its liquidity and market price.

The Securities and Exchange Commision (“SEC”) has adopted regulations which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share, subject to specific exemptions.  The market price of our Common Stock on the OTC Markets has been substantially less than $5.00 per share and therefore we are currently considered a “penny stock” according to SEC rules.  This designation requires any broker-dealer selling these securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities.  These rules limit the ability of broker-dealers to solicit purchases of our Common Stock and therefore reduce the liquidity of the public market for our shares.

Due to factors beyond our control, our stock price may be volatile.

Any of the following factors could affect the market price of our Common Stock:

● Our failure to generate increasing material revenues from our products;

● Our failure to become profitable;

● Our failure to raise adequate working capital;

●     Our public disclosure of the terms of any financing which we consummate in the future;

● Actual or anticipated variations in our quarterly results of operations;

● Announcements by us or our competitors of significant contracts, new products, acquisitions, commercial relationships, joint ventures or capital commitments;

● The loss of significant business relationships;

● Our failure to meet financial analysts’ performance expectations;

● Changes in earnings estimates and recommendations by financial analysts;

● Short selling activities; or

● Changes in market valuations of similar companies.

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted.  A securities class action suit against us could result in substantial costs and divert our management’s time and attention, which would otherwise be used to benefit our business.

We may issue preferred stock without the approval of our shareholders, which could make it more difficult for a third party to acquire us and could depress our stock price.

Our Board may issue, without a vote of our shareholders, one or more additional series of preferred stock that have more than one vote per share.  This could permit our Board to issue preferred stock to investors who support GelStat and our management and give effective control of our business to GelStat and our management.  Additionally, issuance of preferred stock could block an acquisition resulting in both a drop in our stock price and a decline in interest of our Common Stock.  This could make it more difficult for shareholders to sell their Common Stock.  This could also cause the market price of our Common Stock shares to drop significantly, even if our business is performing well.

An investment in GelStat may be diluted in the future as a result of the issuance of additional securities, the exercise of options or warrants or the conversion of outstanding preferred stock.

In order to raise additional capital to meet its working capital needs, GelStat expects to issue additional shares of Common Stock or securities convertible, exchangeable or exercisable into Common Stock from time to time, which could result in substantial dilution to investors.  Investors should anticipate being substantially diluted based upon the current condition of the capital and credit markets.

Because we may not be able to attract the attention of major brokerage firms, it could have a material impact upon the price of our Common Stock.

It is not likely that securities analysts of major brokerage firms will provide research coverage for our Common Stock since the firm itself cannot recommend the purchase of our Common Stock under the penny stock rules referenced in an earlier risk factor.  The absence of such coverage limits the likelihood that an active market will develop for our Common Stock. It may also make it more difficult for us to attract new investors at times when we acquire additional capital.

Since we intend to retain any earnings for development of our business for the foreseeable future, you will likely not receive any dividends for the foreseeable future.

We have never declared or paid any cash dividends or distributions on our capital stock. We currently intend to retain our future earnings to support operations and to finance expansion and therefore we do not anticipate paying any cash dividends on our common stock in the foreseeable future.

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ITEM 1B. UNRESOLVED STAFF COMMENTS 

None

ITEM 2. DESCRIPTION OF PROPERTY

Gelstat presently operates out of an executive office under shared-use arrangement with WSR, a company headed by its Chief Executive Officer, in Palm City, Florida and leases a warehouse/distribution facility of approximately 2,100 square feet in Stuart, Florida. The Company believes that its facilities are adequate for its operations for the foreseeable future and that each of such facilities could be replaced without great difficulty.

ITEM 3. LEGAL PROCEEDINGS

From time to time, we are involved in litigation in the ordinary course of business. We are not party to any material litigation.

On July 30, 2004, the Company and Stephen Roberts, the Company's then chairman and chief executive officer, were served with a Summons and Complaint entitled "Peter Hauser vs. GelStat Corporation and Stephen C. Roberts." Mr. Hauser, a former director of the Company, alleged that he was owed options to purchase Company stock and cash fees in connection with his service as a director. Mr. Hauser asserted a claim for damages in the amount of $725,000 based on the price of the Company stock plus the amount of unpaid cash fees. The case went to trial November 2006. Gelstat prevailed on all accounts except for $5,000 which was paid to Mr. Hauser July 6, 2006.

On September 13, 2004, the Company was served with a Summons and Complaint entitled "Michael C. Borman vs. GelStat Corporation." Mr. Borman, a former employee of the Company, alleged that he was owed wages, severance and options to purchase Company stock and cash fees in connection with his service as an employee. Mr. Borman asserted a claim for damages in the amount of $226,667 based on the price of the Company stock plus the amount of unpaid wages and severance. A pre-trial agreement was reached March 2006 wherein Mr. Borman was issued 175,000 shares of common stock and 50,000 shares of restricted stock pursuant to a Consultant Agreement dated January 26, 2006.

ITEM 4. MINE SAFETY DISCLOSURES

None 

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PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's $0.01 par value common stock is quoted on the OTC Bulletin Board under the symbol "GSAC." The following table sets forth the low and the high closing sales prices for each quarter as reported on the OTC Bulletin Board during the years ended December 31, 2005 and 2004. These quotations reflect inter-dealer prices, without retail mark up, mark down or commissions, and may not represent actual transactions. We had approximately 255 holders of record of our common stock as of the date of filing this Report.

	Closing Price*
CALENDAR 2005	Low		High
First Quarter	$	2.10	$	4.75
Second Quarter	$	0.49	$	2.30
Third Quarter	$	0.35	$	0.80
Fourth Quarter	$	0.21	$	0.77
		Closing Price*
CALENDAR 2004		Low		High
First Quarter	$	1.23	$	4.53
Second Quarter	$	2.07	$	3.90
Third Quarter	$	2.60	$	6.90
Fourth Quarter	$	4.70	$	6.80
* All prices reflect a 3:2 forward stock split effected by means of a 50% dividend and effective August 31, 2004.

Dividends

The Company has never declared or paid a cash dividend on its common stock and does not anticipate paying any dividends in the foreseeable future.

Recent Sales of Unregistered Securities

During the three months ended September 30, 2005 the Company sold 465,000 shares of common stock and 232,500 five-year warrants with an exercise price of $0.75 for gross proceeds of $232,500.

During the three months ended September 30, 2005, the Company sold 845,000 shares of common stock at prices ranging from $.65 to $.50 per share for services rendered or to be rendered valued at $523,450.

During the three months ended September 30, 2005, the Company sold 50,000 shares of common stock at $0.78 per share, for interest in lieu of cash on a short term convertible note payable.

During the three months ended September 30, 2005, the Company sold five-year warrants to purchase 60,000 shares of common stock for services rendered or to be rendered as follows: 20,000 at $1.00 per share, 20,000 at $2.00 per share, and 20,000 at $3.00 per share.

During the three months ended September 30, 2005, the Company also sold a five-year warrant to purchase 50,000 shares of common stock at an exercise price of $1.00 for prepaid financing fees.

During the three months ended September 30, 2005, the Company also sold a five-year warrant to purchase 125,000 shares of common stock at an exercise price of $.75 for services rendered or to be rendered.

During the three months ended June 30, 2005, the Company sold 1,267,001 shares of common stock with gross proceeds of $1,773,801 and expenses of $223,712 in connection with a private placement offering. The Company issued five-year warrants with an exercise price of $1.00 as commission for the equity financing to purchase 123,700 shares of common stock.

During the three months ended June 30, 2005, the Company sold 143,000 shares of common stock at prices ranging from $.70 to $6.45 per share for services rendered or to be rendered valued at $140,140.

During the three months ended June 30, 2005, the Company sold a five-year warrant to purchase 50,000 shares of common stock at an exercise price of $0.50.

During the three months ended March 31, 2005, 54,000 five year warrants were exercised with a weighted average exercise price of $1.32 on a "cashless" or "net exercise" basis (based on the market price of the Company's common stock the day before exercise) resulting in the issuance of 34,523 shares of common stock.

In December 2004, the Company sold 370,092 shares of common stock with gross proceeds of $925,230 in connection with a private placement offering.

During the year ended December 31, 2004, the Company sold 300,500 shares of common stock at prices ranging from $1.16 to $5.03 per share for services rendered or to be rendered.

During the year ended December 31, 2004, 30,000 vested incentive stock options were exercised by an employee at an exercise price of $0.92 per share.

During the year ended December 31, 2004, the Company sold 18,000 three-year warrants with an exercise price of $1.20 for services to be rendered.

During the year ended December 31, 2004, 72,000 five year warrants having an exercise prices ranging from $0.67 to $1.33 were exercised with a weighted average exercise price of $0.20 on a "cashless" or "net exercise" basis (based on the market price of the Company's common stock the day before exercise) resulting in the issuance of 59,547 shares of common stock.

During the year ended December 31, 2004, 123,750 warrants were exercised at an exercise price of $0.007 per share with proceeds of $825.

During the year ended December 31, 2004, the Company issued 270,000 options to an employee exercisable at $3.37.

During the year ended December 31, 2004, the Company issued 110,092 shares of common stock to five investors for $275,230.

In August 2004, the Company sold 1,030,257 shares of common stock with gross proceeds of $2,575,643 and expenses of $320,189 in connection with a private placement offering. The Company sold 103,288 five-year warrants at an exercise price of $2.50 per share, 37,500 five-year warrants at an exercise price of $0.67, and 75,000 shares of common stock as commission for the financing.

On July 19, 2004, the Company's Board of Directors approved a three for two stock splits, payable on or about August 31, 2004 to shareholders of record on August 17, 2004 (the "record date"). All share data is presented to give effect to the retroactive application of the stock dividend as if it occurred on June 25, 2002 (date of inception of GelStat).

In May 2004, the Company sold 776,250 shares of common stock with gross proceeds of $1,105,000 and expenses of $98,150 in connection with a private placement offering. The Company sold 56,625 five-year warrants at an exercise price of $1.33 per share and 7,500 shares of common stock as commission for the financing.

In February 2004, the Company sold 636,000 shares of common stock with gross proceeds of $1,060,000 and expenses of $51,000 in connection with a private placement offering. The Company sold 45,900 five-year warrants at an exercise price of $1.67 per share as commission for financing.

In January 2004, the Company sold 150,000 shares of common stock with gross proceeds of $125,000 and expenses of $12,500 in connection with a private placement offering. The Company issued 22,500 five-year warrants at an exercise price of $0.83 per share as commission for financing.

All of the sales of the securities above were exempt from registration under Section 4(2) of the Securities Act of 1933 and Rule 506 thereunder on the grounds that the securities were only sold to accredited investors who purchased for investment and legends were placed on the securities.

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ITEM 6. SELECTED FINANCIAL DATA

Not applicable for smaller reporting companies.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Please refer to the consolidated financial statements and related notes thereto which is a part of this report for further information regarding the results of operations of the Company.

Company Overview

Gelstat Corporation ("the Company" or "Gelstat") is a consumer health care company dedicated to the cost-effective development and marketing of over-the-counter (OTC) and other non-prescription consumer health care products. The Company's first product is "Gelstat® Migraine", a patented OTC homeopathic drug intended for use as a first-line, acute treatment for migraine and migraine-like headaches. Gelstat Migraine is intended to provide acute (at the time of an attack) relief from headache pain as well as other symptoms frequently associated with migraine. Gelstat(TM) Sleep is presently under final development and is intended to be marketed as a sleep aid. It was introduced to consumers in 2010 on a test basis to obtain data to determine product viability. Gelstat Sleep is expected to be classified as a dietary supplement.

Current sales and marketing efforts are focused primarily on Gelstat Migraine.

Critical Accounting Policies

In response to financial reporting release FR-60, Cautionary Advice Regarding Disclosure About Critical Accounting Policies, from the SEC, we have selected our more subjective accounting estimation processes for purposes of explaining the methodology used in calculating the estimate, in addition to the inherent uncertainties pertaining to the estimate and the possible effects on the our financial condition. The accounting estimates are discussed below and involve certain assumptions that, if incorrect, could have a material adverse impact on our results of operations and financial condition.

Inventories

We value our inventory at the lower of the actual cost or the current estimated market value of the inventory. Management reviews sales, shipped goods and available inventory quantities on a weekly basis and record a provision for excess and obsolete inventory if considered necessary. Changes in the marketplace or introduction of new products could result in an increase in the amount of obsolete inventory quantities.

Revenue Recognition

In accordance with the Securities Exchange Commission's Staff Accounting Bulletin No. 104 (SAB 104) "Revenue Recognition", the Company recognizes revenue when persuasive evidence of a customer or distributor arrangement exists or acceptance occurs, shipment has occurred, the price is fixed or determinable, and the sales revenues are considered collectible. Subject to these criteria, except with respect to customers that buy products on Pay on Scan terms, we recognize revenue at the time of shipment of the merchandise.

Stock-Based Compensation

In accordance with Accounting Principles Board (APB) Opinion No. 25 and related interpretations, the Company uses the intrinsic value-based method for measuring stock-based compensation cost which measures compensation cost as the excess, if any, of the quoted market price of the Company's common stock at the grant date over the amount the employee must pay for the stock. The Company's general policy is to grant stock options at fair value at the date of grant. Options and warrants issued to employees are recorded at fair value, as required by Statement of Financial Accounting Standards (SFAS) No. 123 "Accounting for Stock-Based Compensation," (SFAS No. 123), using the Black Scholes pricing model. The Company has adopted the disclosure only provision of SFAS No. 148, "Accounting for Stock-Based Compensation."

Fair Value of Liabilities for Warrant and Embedded Conversion Option Derivative Instruments

We estimate the fair value of each warrant and embedded conversion option at the issuance date and at each subsequent reporting date by using the Black-Scholes option pricing model based upon certain assumptions which are contained in Notes to the Consolidated Financial Statements contained in this Report. The Black-Scholes model requires the input of highly subjective assumptions including the expected stock price volatility. Because our warrants have characteristics different from those of traded options, and because changes in the subjective input of assumptions can materially affect the fair value estimate, in our management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of such warrants.

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Results of Operations

Year to year operating comparisons are of only limited value since the Company commenced shipping its first product in June 2004 and by late 2005, the Company became insolvent and only marketed its products on a limited basis. However, the following is an overview of income and expenses during the year ended December 31, 2005 compared to the year ended December 31, 2004.

The Company had gross revenues of $504,092, excluding required revenue recognition adjustments of $166,053, for the year ended December 31, 2005. The Company had gross revenues of $598,882, excluding required revenue recognition adjustments of $354,032, for the year ended December 31, 2004. The increase in net revenue in 2005 is attributable to a reduction in 2005 revenue adjustments.

Cost of goods sold for the years ended December 31, 2005 and 2004 were $354,806 and $564,975, respectively. The decrease in cost of goods sold expense in 2005 is attributable to a reduction in production and assembly costs.

Selling, general and administrative expenses for the years ended December 31, 2005 and 2004 were $3,627,627 and $5,384,516, respectively. The decrease in 2005 compared to 2004 is due to the reduction in television and radio advertising in 2005.

The Company incurred $71,464 and $166,905 in research and development expense for the years ended December 31, 2005 and 2004 respectively. The decrease in 2005 compared to 2004 is due to the reduction in clinical trial expense.

The Company incurred $252,772 and $184,986 in interest expense for the years ended December 31, 2005 and 2004 respectively. The increase in 2005 compared to 2004 is due to the increase in notes payable issued.

Liquidity and Capital Resources

Cash flows used in operating activities were $1,982,763 and $5,649,837 for the years ended December31, 2005 and 2004, respectively. Negative cash flows from operations for the year ended December 31, 2005 were due primarily to the net loss of $5,792,011, partially offset by the common stock and warrants issued for services. Negative cash flows from operations for year ended December 31, 2004 were due primarily to the net loss of $6,222,975, partially offset by the amortization of original discount and common stock issued for services.

Cash flows used in investing activities were $83,824 during the year ended December 31, 2005 consisting primarily of patent acquisition costs. Comparatively, cash flows of $134,184 used in investing activities during the period in 2004 were due primarily to the purchase of property and equipment and patent acquisition costs.

Cash flows provided by financing activities were $2,118,816 and $5,539,502 during the years ended December 31, 2005 and 2004, respectively. Positive cash flows from financing activities during the years ended December 31, 2005 and 2004 were due primarily to proceeds from issuance of common stock.

Cash was $225,548 at December 31, 2005, representing an increase of $52,228 from the cash position of the Company as of December 31, 2004, which was $173,320. The change is attributable to the cash flow impact of timing of collections related to sales activity, inventory build and other working capital requirements, partially offset by the proceeds from the sale of common stock and disbursements related to business operations.

As of the date of filing this Report, the Company had $5,000 cash. While planning to raise additional capital, the Company believes that, in the event additional capital is unavailable, cash on hand plus cash flow from operations could fund operations for the next 12 months, though such operations would be substantially reduced in scope from those presently envisioned. There can be no assurance that additional capital will be available on terms acceptable to the Company or on any terms whatsoever. In addition, the Company may evaluate potential acquisitions and alliances, which may require equity or cash resources. The Company's ability to continue the present operations and successfully implement its development plans is contingent upon its ability to increase revenues and ultimately attain and sustain profitable operations and/or raise additional capital.

Cautionary Note Regarding Forward Looking Statements

This report includes forward-looking statements including statements regarding liquidity, revenues andcash flows.

The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements.  We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.  

The results anticipated by any or all of these forward-looking statements might not occur. Important factors, uncertainties and risks that may cause actual results to differ materially from these forward-looking statements are contained in the Risk Factors contained herein. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise. For more information regarding some of the ongoing risks and uncertainties of our business, see the Risk Factors and our other filings with the SEC.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable for smaller reporting companies.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

BONGIOVANNI & ASSOCIATES, C.P.A.’s

19720 Jetton Road, 3 rd Floor

Cornelius, North Carolina 28031 (USA)

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Stockholders of GelStat Corporation and Subsidiary

We have audited the accompanying consolidated balance sheets of GelStat Corporation and Subsidiary (the “Company”) as of December 31, 2005, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the year ended December 31, 2005. 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 audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2005 and the results of its operations and its cash flows for the year ended December 31, 2005 in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 14 to the consolidated financial statements, the Company has suffered losses from operations and has a net capital deficiency as of December 31, 2005. These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 14. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Bongiovanni & Associates, CPA’s

Bongiovanni & Associates, CPA’s

Certified Public Accountants

Cornelius, North Carolina

November 8, 2011

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Stockholders, Audit Committee and Board of Directors of GelStat Corporation and

Subsidiary, Bloomington, Minnesota:

We have audited the accompanying consolidated balance sheets of GelStat Corporation and Subsidiary (a development stage company) as of December 31, 2004 and 2003 and the related consolidated statements of operations, stockholders' equity and cash flows for the years then ended and for the period from June 25, 2002 (inception) to December 31, 2004. 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 audits.

We conducted our audits in accordance with auditing 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 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 consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of GelStat Corporation and Subsidiary as of December 31, 2004 and 2003 and the results of their operations and cash flows for the years then ended and for the period from June 25, 2002 (inception) to December 31, 2004 in conformity with accounting principles generally accepted in the United States of America.

/s/ Virchow, Krause & Company, LLP

Minneapolis, Minnesota

March 25, 2005 (except as to Notes 2 and 13, as to which the date is April 13, 2005)

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Gelstat Corporation
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2005 AND 2004
ASSETS	12/31/2005			12/31/2004
Current Assets
Cash and cash equivalents	$	225,548		$	173,320
Accounts receivable		134,333			206,495
Inventories		—			1,309,561
Prepaid consulting		—			215,841
Prepaid expenses		—			101,597
Other current assets		60,000			60,000
Total Current Assets		419,881			2,066,814
Property and Equipment, net		—			110,708
Other Assets
Patents		11,834			99,807
Lease deposits		10,192			7,692
Total Other Assets		22,026			107,499
TOTAL ASSETS	$	441,908		$	2,285,021
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable	$	709,864		$	446,222
Accrued expenses		416,389			377,042
Notes payable		472,000			187,140
Notes payable - related parties		63,000			102,000
Total Current Liabilities		1,661,253			1,112,404
Stockholder's Equity (Deficit)
Common stock ($0.01 par value; 50,000,000 shares authorized; 15,564,275 and 12,759,751 issued and outstanding at December 31, 2005 and 2004, respectively.		155,642			127,598
Common stock subscriptions receivable		—			(275,230	)
Additional paid in capital		12,634,930			9,169,540
Deferred compensation		(368,615	)		—
Retained deficit		(13,641,302	)		(7,849,291	)
Total Stockholders' Equity (Deficit)		(1,219,345	)		1,172,617
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$	441,908		$	2,285,021

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Gelstat Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
	For the Years ended December 31,
	2005			2004
Revenues	$	338,039		$	244,850
Cost of Goods Sold		354,806			564,975
Gross Profit (Loss)		(16,767	)		(320,125	)
Operating Expenses
Selling, general and administrative expenses		3,627,627			5,384,516
Impairment expenses:
Inventory		1,565,257			—
Property and equipment		52,222			167,000
Patents		169,297			—
Total impairment expenses		1,786,776			—
Research and development		71,464			166,905
Total expenses		5,485,867			5,718,421
Loss from operations		(5,502,634	)		(6,038,546	)
Other Income and (Expense)
Interest expense		(252,772	)		(184,986	)
Interest income		—			557
Net Other Income (Expense)		(252,772	)		(184,429	)
Loss before income taxes		(5,755,406	)		(6,222,975	)
Provision for income taxes		—			—
Income from continuing operations		(5,755,406	)		(6,222,975	)
Discontinued operations
Loss from discontinued operations of subsidiary, net of tax		(536,605	)		—
Extraordinary item-gain on sale of subsidiary, net of tax		500,000			—
Net loss	$	(5,792,011	)	$	(6,222,975	)
Loss per common share:
Basic and fully diluted	($	0.41	)	($	0.56	)
Loss per common share from discontinued operations	($	0.04	)		—
Weighted average common shares outstanding		14,279,061			11,072,006

(20)

Gelstat Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
	Year Ended			Year Ended
	12/31/2005			12/31/2004
Cash Flows from Operating Activities
Net (loss)	$	(5,792,011	)	$	(6,222,975	)
Adjustments to reconcile net (loss) to net cash flows (used in) operating activities:
Depreciation		58,486			20,737
Bad debt expense		165,528			—
Amortization of original discount		184,860			184,860
Common stock issued for services		195,454			966,428
Common stock issued for interest		39,000			—
Warrants issued for services		—			13,920
Warrants issued to extend notes payable		276,000			—
Amortization of deferred compensation		295,175
Stock options issued below fair market value		—			27,000
Loss from discontinued operations of subsidiary in excess of investment		536,605			—
Impairment on property and equipment		52,222			167,000
Impairment on inventory		1,565,257			—
Impairment on patents		169,297			—
Changes in operating assets and liabilitites:		—			—
Accounts receivable		(93,366	)		(206,495	)
Inventories		(255,696	)		(1,309,561	)
Prepaid consulting		215,841			217,672
Prepaid expenses		101,597			(30,585	)
Other current assets		—			(49,752	)
Accounts payable		263,642			313,444
Accrued expenses		39,347			258,470
NET CASH (USED IN) OPERATING ACTIVITIES		(1,982,763	)		(5,649,837	)
Cash Flows from Investing Activities
Purchase of property and equipment		—			(91,495	)
Patent acquisition costs		(81,324	)		(40,689	)
Lease deposits		(2,500	)		(2,000	)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		(83,824	)		(134,184	)
Cash Flows from Financing Activities
Proceeds from short-term convertible notes payable and warrants issued		100,000			474,000
Repayments of notes payable		(39,000	)		—
Issuance of common stock, net of expenses		1,782,586			5,033,802
Exercise of stock options		—			27,500
Exercise of warrants		—			825
Payments received on stock subscription receivable		275,230			3,375
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		2,118,816			5,539,502
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		52,229			(244,519	)
CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR		173,320			417,839
CASH AND CASH EQUIVALENTS, END OF THE YEAR	$	225,548		$	173,320
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the years for:
Interest	$	5,515		$	106
Taxes	$	—		$	—
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING INFORMATION:
Common stock issued for services rendered	$	195,454		$	966,428
Warrants issued for services	$	—		$	13,920

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Gelstat Corporation
CONSOLIDATED STOCKHOLDERS' EQUITY (DEFICIT)
AS OF DECEMBER 31, 2005
	Common Stock Issued				Additional			Subscriptions			Deferred			Retained			Stockholders' equity
	Shares		Amount		Paid In Capital			Receivable			Compensation			(Deficit)			(Deficit)
Balance, December 31, 2003		9,200,805	$	92,008	$	2,470,483		$	—					$	(1,626,316	)	$	936,175
Issuance of common stock for services		300,500		3,006		983,644			—						—			986,650
Issuance of common stock for cash, net of expense		3,045,149		30,451		5,278,581			(275,230	)					—			5,033,802
Exercise of options & warrants for cash		153,750		1,538		26,787			—						—			28,325
Cashless exercise of options / warrants		59,547		595		(595	)		—						—			—
Warrants and options issued for services		—		—		410,640			—						—			410,640
Net loss for the year		—		—		—			—						(6,222,975	)		(6,222,975	)
Balance, December 31, 2004		12,759,751		127,598		9,169,540			(275,230	)		—			(7,849,291	)		1,172,617
Exercise of options		34,523		345		(345	)		—						—			—
Payments received on stock subscription receivable		—		—		—			275,230						—			275,230
Issuance of common stock for cash, net of expense		1,732,001		17,320		1,765,266			—						—			1,782,586
Issuance of common stock for services		260,000		2,600		192,854			—			—			—			195,454
Issuance of common stock for interest		50,000		500		38,500			—			—			—			39,000
Issuance of common stock for prepaid consulting		728,000		7,280		460,860			—			(468,140	)					—
Warrants  issued for prepaid consulting		—		—		195,650			—			(195,650	)		—			—
Amortization of deferred compensation												295,175						295,175
Warrants issued to extend notes payable		—		—		276,000			—						—			276,000
Loss from discontinued operations of subsidiary in excess of investment		—		—		536,605			—						—			536,605
Net loss for the year		—		—		—			—						(5,792,011	)		(5,792,011	)
Balance, December 31, 2005		15,564,275	$	155,642	$	12,634,930		$	—		$	(368,615	)	$	(13,641,302	)	$	(1,219,345	)

(22)

GELSTAT CORPORATION

NOTES TO CONSOLIDATED AUDITED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004

NOTE 1 - Organization and Business Background

GelStat Corporation ("the Company" or "GelStat") is a consumer health care company dedicated to the cost-effective development and marketing of over-the-counter (OTC) and other non-prescription consumer health care products. While development efforts ceased in 2005 due to lack of capital, its efforts were focused on proprietary, innovative products that addressed multi-billion dollar global markets.

On May 9, 2003, Developed Technology Resource, Inc. (DTR) filed a Current Report on Form 8-K with the Securities and Exchange Commission reporting the merger of GelStat Corp. with NP Acquisition Corp. (NP Acquisition), then a wholly owned subsidiary of DTR. The stock exchange transaction has been accounted for as a reverse acquisition and recapitalization of NP Acquisition, whereby Gelstat is deemed to be the accounting acquirer (legal acquiree) and NP Acquisition to be the accounting acquiree (legal acquirer).  The accompanying consolidated financial statements are in substance those of Gelstat, with the assets and liabilities, and revenues and expenses, of NP Acquisition being included effective from the date of stock exchange transaction.  NP Acquisition is deemed to be a continuation of the business of Gelstat.  Accordingly, the accompanying consolidated financial statements include the following:

(1)         The balance sheet consists of the net assets of the accounting acquirer at historical cost and the net assets of the accounting acquiree at historical cost; 

(2)         The financial position, results of operations, and cash flows of the accounting acquirer for all periods presented as if the recapitalization had occurred at the beginning of the earliest period presented and the operations of the accounting acquiree from the date of stock exchange transaction.

On October 6, 2003, the Company's Board of Directors approved a stock dividend in the amount of one share for each share held of record. All share data is presented to give effect to the retroactive application of the stock dividend as if it occurred on June 25, 2002 (date of inception of GelStat Corp.) All share data has been restated to give effect of the merger under which each GelStat Corp. share was converted into .4360083 shares of DTR as adjusted for the stock dividend declared on July 19, 2004.

Effective July 14, 2003, DTR changed its name to GelStat Corporation. Effective March 17, 2004, GS Corp. was merged into its parent, GelStat Corporation.

In 2004, the Company formed a wholly-owned subsidiary, GS Pharma, Inc. (GS Pharma), to pursue various pharmaceutical (prescription drug) opportunities that might exist relative to the Company's intellectual property. During the remainder of 2004, this subsidiary evaluated potential business opportunities, but had no financial activity or licensing agreements in place.

Effective January 1, 2005, GS Pharma entered into a license agreement with DTLL, Inc. ("DTLL"), a Minnesota corporation, in exchange for 12,500,000 shares of DTLL common stock. Effective March 25, 2005, GS Pharma changed its name to GSC Subsidiary, Inc. On November 14, 2005, the Company sold 12.4 million of its shares in DTLL for gross cash proceeds of $500,000. As a result of the transaction, the Company will no longer be consolidating DTLL results in the Company’s future financial statements.

(23)

NOTE 2 - Summary of Significant Accounting Policies

Basis of Presentation

The accompanying financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) under the accrual basis of accounting.

Management's Estimates

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. These accounts and estimates include, but are not limited to, the valuation of accounts receivables, inventories, income taxes and the estimation on useful lives of property, plant and equipment. Actual results could differ from these estimates.

Basis of Consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiary. All inter-company balances and transactions within the Company and subsidiary have been eliminated upon consolidation.

Cash and Cash Equivalents

The Company considers all short-term investments with a maturity of three months or less when purchased to be cash and equivalents for purposes of the statement of cash flows.

Accounts Receivable

Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. As of December 31, 2005, the Company did not record an allowance for uncollectible accounts.

Inventories

Inventories are valued at the lower of cost (using the first-in, first out (FIFO) method) or market. Inventory items replaced by an alternative and rendered unusable or diminished in value are considered to be obsolete. Obsolete inventory items are written down to zero.

Intangible Assets

Patent cost, including legal fees and other costs associated with obtaining this patent, will be amortized over the life of the patent using the straight-line method after the patent is approved by the authorities.

Revenue Recognition

The Company sells its products to a number of leading regional and national retailers, wholesalers, specialty distributors and catalog merchandisers, both directly and through the services of external sales brokers. In accordance with the Securities Exchange Commission's Staff Accounting Bulletin No. 104 (SAB 104) "Revenue Recognition in Financial Statements", the Company recognizes revenue when persuasive evidence of a customer or distributor arrangement exists, shipment has occurred, the price is fixed or determinable, and the sales revenues are considered collectible. Subject to these criteria, except with respect to customers that buy products on Pay on Scan terms, the Company recognizes revenue at the time of shipment of the merchandise. The Company recognizes Pay-on-Scan sales as revenues at the earliest of the following events: 1) the Company is notified of the customer's sales through periodic sales reports; 2) the Company receives payments from the customer; or 3) the customer reorders a specified quantity of the relevant product. Pay-on-Scan revenue recognition treatment typically ends when persuasive evidence exists that a customer or distributor has agreed to terminate the Pay-on-Scan arrangement in favor of a traditional sales arrangement.

Cost of Revenue

Cost of revenues consists primarily of product costs and shipping and handling, which are directly attributable to the sale of products.

Advertising

Advertising costs are charged to operations when incurred.

Research and Development Costs

The company expenses research and development costs as incurred.

Depreciation

Property and equipment are recorded at cost. Depreciation is provided for using the straight-line method over estimated useful lives ranging from three to seven years. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life. Maintenance, repairs and minor renewals are expensed when incurred.

Impairment

Long-lived assets and certain identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

Income Taxes

The Company accounts for income tax using FASB ASC 740 “Accounting for Income Taxes”, which requires the asset and liability approach for financial accounting and reporting for income taxes. Under this approach, deferred income taxes are provided for the estimated future tax effects attributable to temporary differences between financial statement carrying amounts of assets and liabilities and their respective tax bases, and for the expected future tax benefits from loss carry-forwards and provisions, if any. Deferred tax assets and liabilities are measured using the enacted tax rates expected in the years of recovery or reversal and the effect from a change in tax rates is recognized in the statement of operations and comprehensive income in the period of enactment. A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered more likely than not that some portion of, or all of the deferred tax assets will not be realized.

Stock-Based Compensation

In accordance with Accounting Principles Board (APB) Opinion No. 25 and related interpretations, the Company uses the intrinsic value-based method for measuring stock-based compensation cost which measures compensation cost as the excess, if any, of the quoted market price of the Company's common stock at the grant date over the amount the employee must pay for the stock. The Company's general policy is to grant stock options at fair value at the date of grant. Options and warrants issued to employees are recorded at fair value, as required by Statement of Financial Accounting Standards (SFAS) No. 123 "Accounting for Stock-Based Compensation," (SFAS No. 123), using the Black Scholes pricing model. The Company has adopted the disclosure only provision of SFAS No. 148, "Accounting for Stock-Based Compensation."

Net Loss per Common Share

The Company calculates net loss per share in accordance with FASB ASC 260, “Earnings per Share”.  Basic loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding. No diluted loss per share is required to be represented.

Recent Accounting Standards

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

(24)

NOTE 3 – Property and Equipment

	2005			2004
Furniture and equipment	$	—		$	36,975
Production equipment		—			46,101
Computer equipment and software		—			55,324
Leasehold improvements		1,640
Total		—			140,040
Less: accumulated depreciation and amortization		(29,332	)
Total property and equipment, net	$	—		$	110,708

The company recorded a fixed asset impairment of $55,222 and $167,000 during the year ended December 31, 2005 and 2004, respectively.

NOTE 4 – Patents

On June 6, 2003, the Company filed a patent application with the United States Patent and Trademark Office (USPTO) for “Compositions and methods of treatment to alleviate or prevent migrainous headaches and their associated symptoms”. The application was pending as of December 31, 2005. Legal fees and other costs associated with obtaining this patent were capitalized in the amount of $11,834 as of December 31, 2005. These fees and costs will be amortized over the life of the patent using the straight-line method after approval.

NOTE 5 – Accrued Expenses

Accrued expenses consisted of the following at December 31:

	2005		2004
Accrued payroll and payroll taxes	$	81,987	$	81,681
Accrued and deferred rent		8,544		4,563
Accrued trade promotions expense		30,342		77,007
Accrued coupon programs		1,514		47,420
Accrued co-op advertising expense		34,411		61,203
Accrued merchandising programs expense		101,263		62,260
Other accrued revenue reductions		13,392		39,691
Other accrued expense		7,926		3,217
Deferred Revenue-Pay on Scan		45,656		—
Deferred Revenue		69,600		—
Accrued interest expense		21,750		—
Total accrued expenses	$	416,389	$	377,042

(25)

NOTE 6 - Short-Term Convertible Notes Payable

The Company had outstanding balances on its short-term notes payable of the following amounts at the respective dates:

	12/31/2005		12/31/2004
Related Party, interest rate 6%, original due date, February 2, 2005; extended to June 2, 2005.	$	63,000	$	102,000
Non-affiliate third party, interest rate 6%, original due date, February 2, 2005; extended to June 2, 2005.		72,000		72,000
Non-affiliate third party, interest rate 6%, original due date, February 2, 2005; extended to June 2, 2005.		60,000		60,000
Non-affiliate third party, interest rate 6%, original due date, February 2, 2005; extended to June 2, 2005.		60,000		60,000
Non-affiliate third party, interest rate 6%, original due date, February 2, 2005; extended to June 2, 2005.		60,000		60,000
Non-affiliate third party, interest rate 6%, original due date, February 2, 2005; extended to June 2, 2005.		120,000		120,000
Non-affiliate third party, interest rate 6%, original due date, October 5, 2005.		100,000		—
Original issue discount		—		(184,860	)
Total	$	535,000	$	289,140

On December 2, 2004, the Company issued unsecured convertible promissory notes related to a private placement of short term debt. The notes were issued to six individuals in principal amounts ranging from $60,000 to $120,000 for a total of $474,000. The Company agreed to repay the principal amount in its entirety within three business days after the Company closed on net proceeds of at least $2,000,000 obtained through any offering of its securities, including any debt, common stock or preferred stock, or if earlier, on February 2, 2005. If the Company closed on $2,000,000 or more in net proceeds through an offering of its securities, the promissory note holders had the option to convert the principal amount into securities of the Company according to the same terms and provisions. The conversion of the short-term notes payable was contingent upon the closing of a $2,000,000 stock offering and the incremental intrinsic value would have been recognized when the triggering event occurred. In lieu of interest, the Company issued to the note holders five-year warrants to purchase 79,000 shares of common stock at an exercise price of $3.00. The warrants were valued using the Black-Scholes pricing model using the following factors: dividend yield of 0%, expected volatility of 158%, risk-free interest rate of 3.5% and expected lives of five years. The resulting original issue discount and the fair value of the warrants were amortized over the life of the notes using the straight-line method, which approximates the interest method.

The Company paid $24,000 of the principal balance of the notes during the three months ended March 31, 2005. During the first quarter the note holders agreed to extend the payment of the remaining balance of $450,000 to June 2, 2005. In lieu of interest during the period up to the extended due date, the Company issued to the note holders five-year warrants to purchase 75,000 shares of common stock at an exercise price of $1.00. The warrants were valued using the Black-Scholes pricing model using the following factors: dividend yield of 0%, expected volatility of 163%, risk-free interest rate of 3.5% and expected lives of five years. The resulting original issue discount and the fair value of the warrants of $276,000 were amortized over the extended life of the notes using the straight-line method, which approximates the interest method.

The Company paid an additional $15,000 of the principal during the three months ended June 30, 2005. During the six months ended December 31, 2005, the Company did not make any principal payments, and accrued 6% interest on the outstanding balance. The Company negotiated a settlement of the remaining note balance of $435,000 in July 2011.

On July 1, 2005, the Company issued a secured short term convertible promissory note payable in the amount of $100,000. The note was secured by the outstanding receivables of the Company, which, as of July 1, 2005, totaled approximately $200,000. The Company agreed to repay the principal amount in its entirety at the sooner of (i) three business days of that date on which the Company closed on cumulative net proceeds of $2,000,000 or greater which were obtained through any offering of its securities, including without limitation any debt, common stock or preferred stock or (ii) October 1, 2005. If the Company closed on $2,000,000 or more in net proceeds through an offering of its securities, the promissory note holder had the option to convert the principal amount into securities of the Company according to the same terms and provisions. The conversion of the short-term notes payable was contingent upon the closing of a $2,000,000 stock offering and the incremental intrinsic value would be recognized when the triggering event occurred. In lieu of interest, the Company issued to the note holder 50,000 shares of common stock valued at $39,000. The Company negotiated a settlement of the note balance of $100,000 in November 2009.

NOTE 7 – Deferred Compensation

The Company’s deferred compensation includes common stock or warrants issued to consultants for services to be rendered related to public relations, sales distribution consulting, investor relations and general operations conducted in the normal course of business. The following table sets forth the details of deferred compensation:

	12/31/2005			12/31/2004
728,000 shares of common stock at prices ranging from $0.54 - $.98 per share were issued during the year ended December 31, 2005 for consulting services rendered from 05/01/2005 to 10/03/2006.	$	(468,140	)		—
Five-year warrants to purchase 285,000 shares of common stock were granted with exercise prices ranging from $.50-$3.00 per share for services rendered from 5/1/2005 to 10/03/2006.  The Company determined the fair value of the warrants based on the Black Scholes pricing model using the following assumptions: dividend yield of 0%, expected volatility of 201.89%, and risk-free interest rates ranging from 3.63% - 4.1%		(195,650	)		—
Amortization of deferred compensation		295,175
Total	$	(368,615	)		—

(26)

NOTE 8 - Stockholders' Equity

During the three months ended September 30, 2005 the Company issued 465,000 shares of common stock and 232,500 five-year warrants with an exercise price of $.75 for gross proceeds of $232,500. The Company determined the fair value of the warrants to be $109,675, based on the Black Scholes pricing model using the following assumptions: dividend yield of 0%, expected volatility of 201.89%, risk-free interest rates ranging from 3.98% - 4.1% and an expected life of five years.

During the three months ended September 30, 2005, the Company issued 845,000 shares of common stock at prices ranging from $.65 to $.50 per share for services rendered or to be rendered valued at $523,450.

During the three months ended September 30, 2005, the Company issued 50,000 shares of common stock at $.78 per share, valued at $39,000, for interest in lieu of cash on a short term convertible note payable.

During the three months ended September 30, 2005, the Company issued five-year warrants to purchase 60,000 shares of common stock for services rendered or to be rendered as follows: 20,000 at $1.00 per share, 20,000 at $2.00 per share, and 20,000 at $3.00 per share. The Company determined the fair value of the warrants to be $35,400 based on the Black Scholes pricing model using the following assumptions: dividend yield of 0%, expected volatility of 233%, risk-free interest rate of 3.98% and an expected life of five years. The Company recorded expense of $7,375 as of September 30, 2005 and will continue to expense the value of the warrants over the one year term of the agreement.

During the three months ended September 30, 2005, the Company also issued a five-year warrant to purchase 50,000 shares of common stock at an exercise price of $1.00 for prepaid financing fees. The Company determined the fair value of warrant to be $29,500 based on the Black Scholes pricing model using the following assumptions: dividend yield of 0%, expected volatility of 233%, risk-free interest rate of 4.16% and an expected life of five years. There is no expense recorded for these warrants as of September 30, 2005.

During the three months ended September 30, 2005, the Company also issued a five-year warrant to purchase 125,000 shares of common stock at an exercise price of $.75 for services rendered or to be rendered. The Company determined the fair value of warrant to be $61,250 based on the Black Scholes pricing model using the following assumptions: dividend yield of 0%, expected volatility of 233%, risk-free interest rate of 4.10% and an expected life of five years. The Company recorded expense of $12,760 as of September 30, 2005 and will continue to expense the value of the warrants over the one year term of the agreement.

During the three months ended June 30, 2005, the Company issued 1,267,001 shares of common stock with gross proceeds of $1,773,801 and expenses of $223,712 in connection with a private placement offering. The Company issued five-year warrants with an exercise price of $1.00 as commission for the equity financing to purchase 123,700 shares of common stock.

During the three months ended June 30, 2005, the Company issued 143,000 shares of common stock at prices ranging from $.70 to $6.45 per share for services rendered or to be rendered valued at $140,140.

During the three months ended June 30, 2005, the Company issued a five-year warrant to purchase 50,000 shares of common stock at an exercise price of $0.50. The Company determined the fair value of warrant to be $49,500 based on the Black Scholes pricing model using the following assumptions: dividend yield of 0%, expected volatility of 201.89%, risk-free interest rate of 3.9% and an expected life of five years.

During the three months ended March 31, 2005, 54,000 five year warrants were exercised with a weighted average exercise price of $1.32 on a "cashless" or "net exercise" basis (based on the market price of the Company's common stock the day before exercise) resulting in the issuance of 34,523 shares of common stock.

In December 2004, the Company issued 370,092 shares of common stock with gross proceeds of $925,230 in connection with a private placement offering; there was no commission expense or warrant issuance associated with this financing.

During the year ended December 31, 2004, the Company issued 300,500 shares of common stock at prices ranging from $1.16 to $5.03 per share for services rendered or to be rendered valued at $966,428 based on the fair market value of services to be provided or the stock price at the date of issuance, whichever is more determinable.

During the year ended December 31, 2004, 30,000 vested incentive stock options were exercised by an employee at an exercise price of $0.92 per share resulting in the issuance of 30,000 shares of common stock.

During the year ended December 31, 2004, the Company issued 18,000 three-year warrants with an exercise price of $1.20 for services to be rendered. These warrants were valued at $13,920 using the Black Scholes pricing model and are being expensed over the term of the contract.

During the year ended December 31, 2004, 72,000 five year warrants having an exercise prices ranging from $0.67 to $1.33 were exercised with a weighted average exercise price of $0.20 on a "cashless" or "net exercise" basis (based on the market price of the Company's common stock the day before exercise) resulting in the issuance of 59,547 shares of common stock.

During the year ended December 31, 2004, 123,750 warrants were exercised at an exercise price of $0.007 per share with proceeds of $825 and resulting in the issuance of 123,750 shares of common stock.

During the year ended December 31, 2004, the Company issued 270,000 options to an employee below fair market value. In accordance with APB No. 25, the Company recorded and expense of $27,000 during the year ended December 31, 2004.

During the year ended December 31, 2004 110,092 shares of common stock for stock subscriptions receivable of $275,230. Subsequent to year end, the Company collected the entire balance of the stock subscriptions receivable and therefore the balance is classified as a current asset.

In August 2004, the Company issued 1,030,257 shares of common stock with gross proceeds of $2,575,643 and expenses of $320,189 in connection with a private placement offering. The Company issued 103,288 five-year warrants at an exercise price of $2.50 per share, 37,500 five-year warrants at an exercise price of $0.67, and 75,000 shares of common stock as commission for the financing.

On July 19, 2004, the Company's Board of Directors approved a three for two stock split, payable on or about August 31, 2004 to shareholders of record on August 17, 2004 (the "record date"). All share data is presented to give effect to the retroactive application of the stock dividend as if it occurred on June 25, 2002 (date of inception of GelStat).

In May 2004, the Company issued 776,250 shares of common stock with gross proceeds of $1,105,000 and expenses of $98,150 in connection with a private placement offering. The Company issued 56,625 five-year warrants at an exercise price of $1.33 per share and 7,500 shares of common stock as commission for the financing.

In February 2004, the Company issued 636,000 shares of common stock with gross proceeds of $1,060,000 and expenses of $51,000 in connection with a private placement offering. The Company issued 45,900 five-year warrants at an exercise price of $1.67 per share as commission for financing.

In January 2004, the Company issued 150,000 shares of common stock with gross proceeds of $125,000 and expenses of $12,500 in connection with a private placement offering. The Company issued 22,500 five-year warrants at an exercise price of $0.83 per share as commission for financing.

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Stock Option Plan 

The Company had a stock option plan (1997 Plan) in which the Company reserved 100,000 shares of common stock for issuance to outside directors as compensation for their services as board members. During 2003, the Company terminated the 1997 Plan.

During 2003, the Company adopted the 2003 Incentive Plan (the Plan), pursuant to which stock options to acquire an aggregate of 3,600,000 shares of the Company's common stock may be granted to employees, directors and consultants. In general, options vest over a period of up to three years and expire five years from the date of grant.

Information regarding the Company's stock options is summarized below:

				Number of	Weighted Average
				Options	Exercise Price
Options Outstanding -		December 31,	2003	641,250	$                    0.92
	Granted			1,298,500	2.92
	Exercised			(30,000)	0.92
	Canceled/Expired			(270,000)	1.20
Options Outstanding -		December 31,	2004	1,639,750	2.46
	Granted			1,724,000	0.35
	Exercised			-	-
	Canceled/Expired			(705,000)	3.29
Options Outstanding -		December 31,	2005	2,658,750	$                    0.87
Options exercisable -		December 31,	2004	233,750	$                    1.19
Options exercisable -		December 31,	2005	1,068,750	$                    1.73
Weighted average fair value of options granted
during the year-ended			2004		$                    3.20
Weighted average fair value of options granted
during the year-ended			2005		$                    1.31

Options outstanding at December 31,2005:
	Outstanding			Exercisable
		Weighted Average
			Remaining		Weighted
	Number of		Contractual	Number of	Average
Range of exercise prices	Options	Exercise Price	Life Years	Options	Exercise Price
$0.30	1,590,000	$                    0.30	4.88	-	$                    -
$0.92 - $1.20	686,250	0.93	2.73	686,250	0.93
$2.67 -$3.37	382,500	3.16	3.48	382,500	3.16
$0.30 - $3.37	2,658,750	$                    0.87	4.12	1,068,750	$                 1.73

Stock Warrants

The Company has also issued warrants in connection with equity offerings, for services rendered, and with short term notes payable, as summarized below:

					Number of	Weighted Average
					Warrants	Exercise Price
Warrants Outstanding -		December 31,	2003		800,265	$                    0.13
	Granted				362,813	1.96
	Exercised				(195,750)	0.33
	Canceled/Expired				-	-
Warrants Outstanding -		December 31,	2004		967,328	0.80
	Granted				716,201	0.92
	Exercised				-	-
	Canceled/Expired				-	-
Warrants Outstanding -		December 31,	2005		1,683,529	$                    0.85
Weighted average fair value of Warrants granted
during the year-ended			2004			$                    3.96
Weighted average fair value of Warrants granted
during the year-ended			2005			$                    1.09
During the year-end		December 31,	2005	warrants were issued for the following:
641,201 for services, 75,000 for short-term note payable interest and 0 in connection with equity financing.

Warrants outstanding at December 31, 2005:
	Outstanding & Exercisable
		Weighted Average
			Remaining
	Number of		Contractual
Range of exercise prices	Warrants	Exercise Price	Life Years
$0.15	654,015	$                    0.15	2.03
$.50-$1.00	703,201	0.84	4.44
$1.20-$1.67	104,025	1.44	2.88
$2.00-$3.00	222,288	2.68	3.93
$0.15-$3.00	1,683,529	$                  85.00	3.34

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NOTE 9 – Subsidiary

Effective January 1, 2005, GS Pharma, Inc. (n/k/a GSC Subsidiary, Inc.) a wholly-owned subsidiary of GelStat Corporation entered into a license agreement with DTLL, Inc., a Minnesota corporation, in exchange for 12,500,000 shares of DTLL common stock. On November 14, 2005, the Company sold 12.4 million of its shares in DTLL for gross cash proceeds of $500,000. DTLL was consolidated into the Company’s consolidated financial statements from January 1, 2005 through November 14^th, 2005 at which time the Company recorded a loss from discontinue operations of subsidiary, net of tax, in the amount of $(536,605).

NOTE 10 – Income Taxes

Due to the operating loss and the inability to recognize an income tax benefit there is no provision for current or deferred federal or state income taxes for the year ended December 31, 2005.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for federal and state income tax purposes.

Because of the Company’s lack of earnings history, the deferred tax asset has been fully offset by a valuation allowance. The valuation allowance increased by approximately $2,291,415 and $2,295,000 for the years ending December 31, 2005 and 2004, respectively.

Components of the net deferred income taxes are as follows at December 31:

	December 31,
	2005			2004
Deferred income tax assets	$	5,251,901		$	2,925,000
Less:  Valuation allowance		(5,193,415	)		(2,902,000	)
		58,486			23,000
Deferred income tax liabilities
Depreciation		(58,486	)		(23,000	)
Net deferred income tax assets	$	—		$	—
The reconciliation of income taxes computed at the federal statutory income tax rate to total income taxes for the period from inception through December 31, is as follows:
		2005			2004
Income tax computed at the federal statutory rate		-34.00	%		-34.00	%
State income tax, net of federal tax benefit		-4.50	%		-4.50	%
Total		-38.50	%		-38.50	%
Valuation Allowance		38.50	%		38.50	%
Total deferred tax asset		0	%		0	%

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NOTE 11 - Stock-Based Compensation

In accordance with Accounting Principles Board (APB) Opinion No. 25 and related interpretations, the Company uses the intrinsic value-based method for measuring stock-based compensation cost which measures compensation cost as the excess, if any, of the quoted market price of the Company's common stock at the grant date over the amount the employee must pay for the stock. The Company's general policy is to grant stock options at fair value at the date of grant. Options and warrants issued to employees are recorded at fair value, as required by Statement of Financial Accounting Standards (SFAS) No. 123 "Accounting for Stock-Based Compensation," (SFAS No. 123), using the Black Scholes pricing model. The Company has adopted the disclosure only provision of SFAS No. 148, "Accounting for Stock-Based Compensation."

Had compensation cost been recognized based on the fair values of options at the grant dates consistent with the provisions of SFAS No. 123, the Company's net loss and basic and diluted loss per common share would have increased to the following pro forma amounts:

	December 31,
	2005			2004
Net Loss	$	(5,792,011	)	$	(6,222,975	)
Pro forma net loss	$	(7,496,675	)		(7,002,867	)
Basic and diluted net loss per share:
As reported	$	(0.41	)	$	(0.56	)
Pro forma net loss		(0.52	)		(0.63	)
Stock-based compensation:
As reported	$	—		$	27,000
Pro forma net loss		1,704,664			779,892

The estimated fair value of each option grant is estimated on the date of grant using the Black Scholes pricing model with the following weighted-average assumptions used for options granted for the year-ended December 31, 2005: dividend yield of 0%, expected volatility of 201.89%, risk-free interest rate of 4.43% and expected lives of five years; and for options granted for the year-ended December 31, 2004: dividend yield of 0%, expected volatility of 148%, risk-free interest rate of 3.51% and expected lives of five years.

NOTE 12 - Related Party Transactions

On December 2, 2004, the Company borrowed $102,000 from a director of the Company for a term ending on February 2, 2005, or, if earlier, upon a $2,000,000 financing, as discussed in Note 5, above. In lieu of interest, the Company issued to the director a five-year warrant to purchase 17,000 shares of common stock at an exercise price of $3.00. The repayment date for $78,000 of the note was extended to June 2, 2005, and in lieu of interest for the extension period, the Company issued to the director a five-year warrant to purchase 13,000 shares of common stock at an exercise price of $1.00. The Company paid an additional $15,000 of the principal note balance during the three months ended June 30, 2005. During the six months ended December 31, 2005, the Company did not make any principal payments, and accrued 6% interest on the outstanding balance. The Company negotiated a settlement of the remaining note balance of $63,000 outstanding in July 2011.

NOTE 13 - Legal Proceedings

On July 30, 2004, the Company and Stephen Roberts, the Company's chairman and chief executive officer, were served with a Summons and Complaint entitled "Peter Hauser vs. GelStat Corporation and Stephen C. Roberts." Mr. Hauser, a former director of the Company, alleged that he was owed options to purchase Company stock and cash fees in connection with his service as a director. Mr. Hauser asserted a claim for damages in the amount of $725,000 based on the price of the Company stock plus the amount of unpaid cash fees. The case went to trial November 2005. Gelstat prevailed on all accounts except for $5,000 which was paid to Mr. Hauser July 6, 2006.

On September 13, 2004, the Company was served with a Summons and Complaint entitled "Michael C. Borman vs. GelStat Corporation." Mr. Borman, a former employee of the Company, alleged that he was owed wages, severance and options to purchase Company stock and cash fees in connection with his service as an employee. Mr. Borman asserted a claim for damages in the amount of $226,667 based on the price of the Company stock plus the amount of unpaid wages and severance. A pre-trial agreement was reached March 2006 wherein Mr. Borman was issued 175,000 shares of common stock and 50,000 shares of restricted stock pursuant to a Consultant Agreement dated January 26, 2006.

NOTE 14 – Going Concern

As shown in the accompanying audited consolidated financial statements, the Company has suffered recurring losses from operations to date. It experienced a loss of $5,792,011 during 2005. The Company had a net deficiency of $13,641,302 as of December 31, 2005. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management’s plan includes obtaining additional funds by equity financing and/or related party advances; however there is no assurance of additional funding being available. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might arise as a result of this uncertainty. 

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On August 12, 2002, DTR engaged Gallogly, Fernandez and Riley, LLP ("GFR"), with offices in Orlando, Florida, to audit the Company's consolidated financial statements for 2002. At no time prior to August 12, 2002, had DTR consulted with GFR regarding the application of accounting principles to a specific or contemplated transaction, regarding the type of audit opinion that might be rendered on the registrant's financial statements, or regarding any other matter.

On January 6, 2004, Gelstat dismissed GFR as its independent auditor. The dismissal of GFR was recommended and adopted by the Company's Audit Committee and approved by its Board of Directors. GFR audited the Company's financial statements for the fiscal year ended December 31, 2002.

GFR's report on the Company's financial statements for the fiscal year ended December 31, 2002 did not contain any adverse opinion or disclaimer of opinion and was not qualified as to uncertainty, audit scope or accounting principles. During the fiscal years ended December 31, 2003 and 2002, and the subsequent interim period ending January 6, 2004 (i) there were no disagreements between the Company and GFR on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure which, if not resolved to the satisfaction of GFR, would have caused them to make reference tothe subject matter of the disagreement in connection with their reports and (ii)there were no "reportable events," as defined in Item 304(a)(1)(v) of Regulation S-K of the Securities and Exchange Commission (SEC). The decision to replace GFR was not the result of any disagreement between us and GFR on any matter of accounting principle or practice, financial statement disclosure or audit procedure.

Concurrently, on January 6, 2004, the Audit Committee of the Board of Directors and the Board of Directors approved the appointment of Virchow, Krause & Company, LLP ("Virchow Krause") as the Company's independent accountant and auditor, said action to be effective January 5, 2004. Virchow Krause has audited the Company's financial statements included in this Report on Form 10-KSB for the fiscal years ended December 31, 2004 and 2003. The Company did not consult with Virchow Krause on any matters related to accounting principles or practice, financial statement disclosures or audit procedures during the fiscal years ended December 31, 2003 and 2002 and the subsequent interim periods through January 6, 2004 prior to selecting and appointing Virchow Krause as auditor. On May 1, 2007 Virchow Krause resigned as the Company’s auditors due to lack of payment.

On August 23, 2011, the Audit Committee of the Board of Directors and the Board of Directors approved the appointment of Bongiovanni & Associates, CPAs ("Bongiovanni") as the Company's independent accountant and auditor, said action to be effective August 24, 2011. The decision to replace Virchow Krause was not the result of any disagreement between us and Virchow Krause on any matter of accounting principle or practice, financial statement disclosure or audit procedure. The Company did not consult with Bongiovanni regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements; or (ii) any matter that was either the subject of a disagreement as described in Item 304(a)(1)(iv) of Regulation S-K or a reportable event as such term is described in Item 304(a)(1)(v) of Regulation S-K.

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ITEM 9A. CONTROLS AND PROCEDURES

During the course of their audit of our consolidated financial statements for 2005, our independent registered public accounting firm, Bongiovanni advised management and the Audit Committee of our Board of Directors that they had identified deficiencies in internal controls. The deficiencies are considered to be a "material weakness" as defined under standards established by the American Institute of Certified Public Accountants. The material weakness relates to the lack of segregation of duties and financial oversight controls, which in aggregate created an ineffective control environment. Because the company has no employees and only one officer, it is not practical to remediate this material weakness.

We have discussed our corrective actions and future plans with our Audit Committee and Bongiovanni. Further, our management, including our Chief Executive Officer, have conducted an evaluation of the effectiveness of disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation and due to the Company’s limited operations, our Chief Executive Officer and Chief Financial Officer have concluded that the material weakness noted above will not, however, impact the quality of the financial information provided on a quarterly or annual basis. In addition, because of this materials weakness, the Company’s disclosure controls are considered to be ineffective.

In addition, there can be no assurances that our disclosure controls and procedures will detect or uncover all failure of persons with the Company to report material information otherwise required to be set forth in the reports that we file with the Securities and Exchange Commission.

ITEM 9B. OTHER INFORMATION

None 

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth the directors, officers, and significant employees of the Company, their ages and positions with the Company as of the date of filing this Report:

Name	Age	Position
Gerald N. Kieft	44	Chief Executive Officer
William Colucci	73	Chairman of the Board of Directors
Paul W. Bucha	69	Director
Adrian Goldfarb	55	Director

Gerald N. Kieft, Chief Executive Officer

Gerald Kieft has been the CEO of Gelstat since June of 2008. Mr. Kieft was the founder and has been the CEO of Wall Street Resources, Inc. from September of 2003 until present. Mr. Kieft was a co-founder and is the CEO of WSR from December of 2007 until present. Mr. Kieft was the founder and has been the CEO of High Alpha Partners, Inc. from November of 2008 until present. Mr. Kieft was the founder and CEO of GSC Direct, Inc. from September of 2010 to September of 2011.

William R. Colucci,Chairman of the Board

William R. (Bill) Coluccihas been a consultant to and a director since 2007.  From 2008-2010, he advised Ermis Pharmaceuticals in developing a market strategy for their all natural acne and face products. From 2004 to 2007 he served as Corporate Secretary for Universal Capital Management, Inc., a publicly traded Business Development Company.  Since 1999, Mr. Colucci has served as an independent consultant providing business consulting services to emerging growth companies. 

Paul W. Bucha, Director

Paul Bucha has served as a director since 2011. Mr. Bucha, has been the CEO of Terra Mark II, LLC since December 2005. Under his leadership, it was established to continue work on real estate projects in Bermuda and other environmentally sensitive locations after buy out of majority owners of Terra Mark, LLC. joint venture with Greenfield Partners of Norwalk, Connecticut.

In addition, Mr. Bucha has been a director of M Group, USA since 1994. M Group, USA is a family owned real estate and investment company with projects in Switzerland, United Kingdom, Caribbean basin and USA. He has oversight of all aspects of company activities. Mr. Bucha was appointed director because of his business experience.

Adrian G. Goldfarb,Director- (Head of Audit Committee)

Mr. Goldfarb has been a director of Gelstat since April 2008. Mr. Goldfarb has been Chief Financial Officer of Ecosphere Technologies, Inc. (“Ecosphere”) since February 11, 2008. From December 2007 until December 19, 2008, Mr. Goldfarb was the President of WSR a consulting services company WSR also provided Chief Financial Officer services to Ecosphere and Mr. Goldfarb was a consultant. Since December 20, 2008, he has been a full-time employee and resigned from his position as President of WSR.  Mr. Goldfarb has more than 30 years’ experience in a number of different technology companies, including IBM and a subsidiary of Fujitsu.  From June 2002 to December 2007, Mr. Goldfarb was on the Board of Directors of MOWIS GmbH, a Weather Technology Media company. He also was interim Chief Financial Officer where he led the management team in securing seed capital, government grants and loans and bank guarantees. In May 2010, Mr. Goldfarb was elected a director of Information Systems Associates, Inc. and is Chairman of the Audit Committee. Mr. Goldfarb was elected a director of Information Systems Associates, Inc. and is Chairman of the Audit Committee. Mr. Goldfarb was elected director because of his public company experience and his accounting knowledge.

There are no family relationships between any directors or executive officers of the Company, either by blood or by marriage.

The Board of Directors has one standing committee consisting of an Audit Committee.

The Audit Committee is responsible for reviewing the services rendered by the Company's independent auditors and the accounting standards and principles followed by the Company. As of the date of filing this Report, the Company's audit and finance committee is comprised of it one outside board member, Mr. Goldfarb, who is "independent" as defined in the rules of the Nasdaq Stock Market. Mr. Goldfarb is also an "audit committee financial expert" as such term is defined in Item 407(d) of Regulation S-K promulgated by the SEC and (ii) also meets NASDAQ’s financial sophistication requirements.

Compliance with Section 16(A) of the Securities Exchange Act

Section 16(a) of the Exchange Act requires the Company's officers and directors, and persons who own more than 10 % of the registered class of the Company’s equity securities to file reports of ownership on Forms 3, 4, and 5 with the SEC. Officers, directors and greater than 10 % shareholders are required by SEC regulation to furnish the Company with copies of all Forms 3, 4, and 5 they file.

Based upon the Company's review of the copies of such forms, and reports it has received from certain persons that they were not required to file Forms 5 for the year ended December 31, 2005, the Company believes that all of its executive officers, directors and greater than 10% beneficial owners, with the exceptions described below have complied with all filing requirements applicable to them with respect to transactions during 2005.

During the fiscal year ending December 31, 2005 Stephen Roberts failed to timely file one Form 5 related to gifts of Company stock, Richard Ringold failed to timely file one Form 4, and Nicholas Bluhm failed to timely file Form 3. All of these forms have been subsequently filed.

Code of Ethics

The Company has adopted a code of ethics applicable to its principal executive officer, principal financial officer, principal accounting officer, and persons performing similar functions. The code is filed as Exhibit 14to this Report on Form 10-K. A copy of the Code will be provided without charge to any person upon request in writing to Gerald N. Kieft, CEO, at the address of the Company in Palm City, Florida.

(33)

ITEM 11. EXECUTIVE COMPENSATION

The following information related to the compensation paid by us for 2005 and 2004 to our Chief Executive Officer and the two other most highly compensated executive officers serving at the end of the last fiscal year whose compensation exceeded $100,000.

Summary Compensation Table
Name and Principal Position	Year (b)		Salary (c)			Options Awards (g)		Total (j)
Stephen Roberts, CEO		2005	$	156,462		$	198,000	$	354,462
		2004	$	144,000		$	0	$	156,000
Russell Mitchell, President		2005	$	58,945	(1)	$	0	$	58,945
		2004	$	144,000		$	0	$	156,000
Richard Ringold, Vice President		2005	$	158,324		$	156,000	$	314,324
		2004	$	123,000		$	0	$	129,000
(1) Resigned April 29,2005

Outstanding Equity Awards at Fiscal Year-End
Name and Principal Position	Number of Securities Underlying Unexercised Options										Option Exercise Price		Option Expiration Date
	Exercisable					Unexercisable
	#		$			#			$
Stephen Roberts, CEO
		—	$	0			660,000	(1)	$	198,000	$	0.30	11/16/10
Russell Mitchell, President
		—	$	0			—		$	0		na	na
Richard Ringold, Vice President
		360,000	$	330,000	(2)		—		$	0	$	0.92	07/08/08
		11,250	$	13,500	(3)		—		$	0	$	1.20	12/28/08
		270,000	$	909,900	(4)		—		$	0	$	3.37	07/01/09
		—	$	0			520,000	(5)	$	156,000	$	0.30	11/16/10

⁽¹⁾ Vest over two years – 82,500 every three months

⁽²⁾ Fully vested December 31, 2005

⁽³⁾ Fully vested December 31, 2005

⁽⁴⁾ Fully vested December 31, 2005

⁽⁵⁾ Vested over two years – 65,000 every three months

Compensation Agreements

The Company does not have any employment agreements at this time. Its sole officer performs part-time services without compensation.

Compensation of Directors

The Company at present has three outside directors, and does not separately compensate management directors for services related to their participation on the board. The Company grants 500,000 shares of common stock to each outside director at the time of their first election or appointment and 500,000 shares of common stock for each completed year of service. The Company at present provides no cash compensation for any director.

The table below provides information for 2005 in contrast to the above paragraph which is current.

Director Compensation
Name	Option Awards $ (d)(1)		Total (h)
Donald Miller	$	14,500	$	14,500	(1)
K. James Ehlen, M.D.	$	14,500	$	14,500	(1)

⁽¹⁾ Computed in accordance with FASB ASC Topic 718

Equity Compensation Plan

The following table describes the Company's compensation plans under which the Company's common stock are authorized for issuance as of December 31, 2005:

Equity Compensation Plan
Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights.			Weighted-average exercise price of outstanding options, warrants and rights.		Number of securities remaining available for future issuances.
Equity compensation plans approved by security holders		2,658,750	(1)	$	0.87		941,250
Equity compensation plans not approved by security holders		1,683,529		$	0.85		—
							Total    941,250
(1) Employee incentive stock options issued under the Company's 2003 Incentive Plan. Options outstanding at December 31, 2005 have exercise prices ranging from $0.30 to $5.25, vest over a period up to three years, and expire five years from the date of grant, with a weighted average remaining contractual life of 4.12 years.

(34)

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table contains information as of the date of filing this Report, concerning the beneficial ownership of the Company's common stock by persons known to the Company to beneficially own more than 5% of the common stock, by each director, by each executive officer named in the Summary Compensation Table, and by all directors and executive officers as a group. Shares reported as beneficially owned include those for which the named persons may exercise voting power or investment power, and all shares owned by persons having sole voting and investment power over such shares unless otherwise noted.

  

^{Gerald Kieft - 3557 SW Corporate Parkway, Palm City, Fl. 34990, calculation includes, 2.5 million warrants owned by WSR Consulting, Inc. of which Mr. Kieft is the control person and 22.5 million shares owned by High Alpha Partners, Inc. of which Mr. Kieft is the control person.}

^{2. William Colucci - 3557 SW Corporate Parkway, Palm City, Fl. 34990}

^{3. Adrian Goldfarb - 3557 SW Corporate Parkway, Palm City, Fl. 34990, calculation includes 1.175 million shares owned by Ronnie Sue Goldfarb, Mr. Goldfarb’s wife.}

^{4. Paul W. Bucha - P.O. Box 849 Ridgefield, CT 06877}

^{5. William O. Brisben - 3557 SW Corporate Parkway, Palm City, FL 34990, calculation includes 10 million warrants.}

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

In September 2010, GelStat Direct formally contributed assets it owned relating to GelStat into a majority-owned subsidiary of High Alpha Partners, Inc. named GSC Direct, Inc.  In September 2011, 100% of the outstanding shares of GSC Direct, Inc. were acquired by GelStat in exchange for the issuance of 25,000,000 shares of Gelstat common stock.

Gerald N. Kieft (Gelstat’s CEO) is the founder, CEO and majority owner of High Alpha Partners, Inc.  Adrian G. Goldfarb (member of Gelstat’s Board of Directors) is the Treasurer of High Alpha Partners, Inc. High Alpha Partners, Inc. owned 75% of GSC Direct, Inc. prior to its share exchange agreement with Gelstat.  Mr. Kieft is the founder and CEO of GSC Direct, Inc.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Gelstat’s Audit Committee reviews and approves audit and permissible non-audit services performed by its independent registered public accounting firm, as well as the fees charged for such services.  In its review of non-audit service and its appointment of its independent registered public accounting firm, the Audit Committee considered whether the provision of such services is compatible with maintaining independence.  All of the services provided and fees charged by its independent registered public accounting firm in 2005 were approved by the Audit Committee.  The following table shows the fees paid to our principal accountant for the year ended December 31, 2005 and for the year ended December 31, 2004.

	2005		2004
Audit Fees(1)(3)	$	14,416	$	74,641
Audit Related Fees(2)		0
Tax Fees		0		4,035
All Other Fees		0
Total	$	14,416	$	78,676

(1)     Audit fees - these fees relate to the audit of our annual financial statements and internal control over financial reporting and the review of our interim quarterly financial statements.

(2)     Audit related fees - these fees relate primarily to the auditors' review of our registration statements and audit related consulting of our annual financial statements and internal control over financial reporting and the review of our interim quarterly financial statements.

(3)     Audit fees cover multiple periods

(35)

ITEM 15. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES

(a)   Documents filed as part of the report.

(1) Financial Statements.  See Index to Consolidated Financial Statements, which appears on page F-1 hereof.  The financial statements listed in the accompanying Index to Consolidated Financial Statements are filed herewith in response to this Item.

(2) Financial Statements Schedules.  All schedules are omitted because they are not applicable or because the required information is contained in the consolidated financial statements or notes included in this report.

(3) Exhibits

NO. EXHIBIT DESCRIPTION

3.1 Certificate of Incorporation

3.2 Certificate of Amendment to Certificate of Incorporation - Increased Capital

3.3 Plan of Merger and Reorganization - Delaware

3.4 Plan of Merger - Delaware 

3.5 Bylaws 

14.0 Code of Ethics

21.0 List of Subsidiaries

31.1 Certification of Principal Executive Officer (Section 302)

31.2 Certification of Principal Financial Officer (Section 302)

32.1 Certification of Principal Executive Officer and Principal Financial Officer (Section 906)

(36)

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

Date: August 30, 2012

GELSTAT CORPORATION

By: /s/ Gerald N. Kieft

Gerald N. Kieft

Chief Executive Officer

(Principal Executive Officer)

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

Signatures	Title	Date
/s/ GERALD N. KIEFT	Director and Principal Financial Officer and Chief Accounting Officer	October 5, 2012
Gerald N. Kieft
/s/ WILLIAM R. COLUCCI	Chairman of the Board and Director	October 5, 2012
William R. Colucci
/s/ ADRIAN G. GOLDFARB	Director	October 5, 2012
Adrian G. Goldfarb
/s/ PAUL W. BUCHA	Director	October 5, 2012
Paul W. Bucha

(35)

EX-3.1

Exhibit 3.1

CERTIFICATE OF INCORPORATION

OF

GELSTAT CORPORATION

1.                The name of the corporation is GelStat Corporation (the “Company”).

2.                The address of its registered office in the State of Delaware, County of New Castle, is 3411 Silverside Road, Rodney Building #104, Wilmington, Delaware 19810. The name of its registered agent at such address is Corporate Creations Network, Inc.

3.                The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law.

4.                The Company shall have authority to issue:

(a) 50,000,000 shares of common stock, par value $0.01 per share.

(b) 10,000.000 shares of preferred stock, par value $0.01 per share.

with such rights preferences and limitations as may be set from time to time by resolution of the Board of Directors and the filing of a certificate of designation as required by the Delaware General Corporation Law;

5. The name and mailing address of the incorporator is as follows:

Michael D. Harris

1555 Palm Beach Lakes Boulevard

Suite 310

West Palm Beach, FL 33401

6.                The name and mailing address of each person who is to serve as a director until the first annual meeting of the shareholders or until a successor is elected and qualified, is as follows:

Name	Mailing Address
William Colucci	2030 Vallejo Street Unit #505 San Fransisco, CA 94123
Adrian Goldfarb	7111 Cutter Court, Parkland, FL 33067

7.                The Company is to have perpetual existence. In furtherance and not in limitation of the powers conferred by statute, the board of directors is expressly authorized to make, amend, alter or repeal the bylaws of the Company, subject to the limitations of Section 109 of the Delaware General Corporation Law which provides that this delegation of power to the board of directors shall not divest the shareholders of their rights under Section 109.

8.                Elections of directors need not be by written ballot unless the bylaws of the Company shall so provide.

Meetings of shareholders may be held within or without the State of Delaware as the bylaws may provide. The books of the Company may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the board of directors or in the bylaws of the Company.

9.                The Company reserves the right to amend, alter, change or repeal any provision contained in this certificate of incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon shareholders herein are granted subject to this reservation.

10.                No director of this Company shall be personally liable to the Company or its shareholders for monetary damages for breach of fiduciary duty as a director. Nothing in this paragraph shall serve to eliminate or limit the liability of a director (a) for any breach of the director’s duty of loyalty to this Company or its shareholders, (b) for acts or omissions not in good faith or which involves intentional misconduct or a knowing violation of law, (c) under Section 174 of the Delaware General Corporation Law, or (d) for any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation Law is amended after approval by the shareholders of this article to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Company shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended.

Any repeal or modification of the foregoing paragraph by the shareholders of the Company shall not adversely affect any right or protection of a director of the Company existing at the time of such repeal or modification.

11.         (a) Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding (except as provided in Section 11 (f)) whether civil, criminal or administrative, (a “Proceeding”), or is contacted by any governmental or regulatory body in connection with any investigation or inquiry (an “Investigation”), by reason of the fact that he or she is or was a director or executive officer (as such term is utilized pursuant to interpretations under Section 16 of the Securities Exchange Act of 1934) of the Company or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans (an “Indemnitee”), whether the basis of such Proceeding or Investigation is alleged action in an official capacity or in any other capacity as set forth above shall be indemnified and held harmless by the Company to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than such law permitted the Company to provide prior to such amendment), against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith and such indemnification shall continue as to an Indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the Indemnitee’s heirs, executors and administrators. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the Company the expenses incurred in defending any such Proceeding in advance of its final disposition (an “Advancement of Expenses”); provided, however, that an Advancement of Expenses shall be made only upon delivery to the Company of an undertaking, by or on behalf of such Indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such Indemnitee is not entitled to be indemnified for such expenses under this Section or otherwise (an “Undertaking”).

(b) If a claim under Section 11(a) is not paid in full by the Company within 60 days after a written claim has been received by the Company, except in the case of a claim for an Advancement of Expenses, in which case the applicable period shall be 20 days, the Indemnitee may at any time thereafter bring suit against the Company to recover the unpaid amount of the claim. If successful in whole or in part in any such suit or in a suit brought by the Company to recover an Advancement of Expenses pursuant to the terms of an Undertaking, the Indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In

(i) any suit brought by the Indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the Indemnitee to enforce a right to an Advancement of Expenses) it shall be a defense that, and

(ii) any suit by the Company to recover an Advancement of Expenses pursuant to the terms of an Undertaking the Company shall be entitled to recover such expenses upon a final adjudication that,

the Indemnitee has not met the applicable standard of conduct set forth in the Delaware General Corporation Law. Neither the failure of the Company (including its board of directors, independent legal counsel, or its shareholders) to have made a determination prior to the commencement of such suit that indemnification of the Indemnitee is proper in the circumstances because the Indemnitee has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Company (including its board of directors, independent legal counsel, or its shareholders) that the Indemnitee has not met such applicable standard of conduct or, in the case of such a suit brought by the Indemnitee, be a defense to such suit. In any suit brought by the Indemnitee to enforce a right hereunder, or by the Company to recover an Advancement of Expenses pursuant to the terms of an undertaking, the burden of proving that the Indemnitee is not entitled to be indemnified or to such Advancement of Expenses under this Section 11 or otherwise shall be on the Company.

(c) The rights to indemnification and to the Advancement of Expenses conferred in this Section shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, this certificate of incorporation, bylaw, agreement, vote of shareholders or disinterested directors or otherwise.

(d) The Company may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Company or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Company would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law.

(e) The Company may, to the extent authorized from time to time by the board of directors, grant rights to indemnification and to the Advancement of Expenses, to any employee or agent of the Company to the fullest extent of the provisions of this Section with respect to the indemnification and Advancement of Expenses of directors, and executive officers of the Company.

(f) Notwithstanding the indemnification provided for by this Section 11, the Company’s bylaws, or any written agreement, such indemnity shall not include any expenses incurred by such Indemnitees relating to or arising from any Proceeding in which the Company asserts a direct claim against any Indemnitee whether such claim by the Company is termed a complaint, counterclaim, crossclaim, third-party complaint or otherwise.

12.                Special meetings of the shareholders shall be held when directed by the Company’s Board of Directors or upon written request by any beneficial owner, as defined by the Rules of the Securities and Exchange Commission, of 10% or more of the outstanding shares of common stock.

13.               The Company expressly elects not to be governed by Section 203 of the General Corporation Law of the State of Delaware.

I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the Delaware General Corporation Law, do make this certificate, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand this 12^th day of August, 2010.

/s/ Michael D. Harris

Michael D. Harris, Incorporator

G:\MISC CLIENTS\G-I\GelStat Corporation\Corporate Documents\Charters and Bylaws\Certificate of Incorporation - DE Clean rec'd from client 6-28-10.doc

EX-3.2

Exhibit 3.2

CERTIFICATE OF AMENDMENT TO THE

CERTIFICATE OF INCORPORATION

OF

GELSTAT CORPORATION

GelStat Corporation (the “Company”), a corporation organized and existing under the General Corporation Law of the State of Delaware (the “Delaware General Corporation Law”), hereby certifies as follows::

1. The Company was incorporated by the filing of a Certificate of Incorporation with the Secretary of State of Delaware on August 13, 2010.

2. Pursuant to Section 228 of the Delaware General Corporation Law, the Board of Directors of the Company adopted, in writing without a meeting, the amendment herein set forth.

3. Pursuant to a resolution of the Board of Directors and to Section 141(f) of the Delaware General Corporation Law, the shareholders of the Company holding the requisite number of shares of common stock required by law also approved, in writing without a meeting, the amendment herein set forth. Prompt notice has been given as provided by Section 228 of the Delaware General Corporation Law to all shareholders who did not consent.

4. Article 4 of the Certificate of Incorporation of the Company is amended to read as follows:

The Company shall have the authority to issue:

(a) 500,000,000 shares of common stock, par value $0.01 per share.

(b) 10,000,000 shares of preferred stock, par value $0.01 per share with such rights, preferences, and limitations as may be set from time to time by resolution of the Board of Directors and the filing of a certificate of designation as required by the Delaware General Corporation Law.

5. This Certificate of Amendment to Certificate of Incorporation was duly adopted and approved in accordance with Section 242 of the Delaware General Corporation Law.

IN WITNESS WHEREOF, the undersigned has executed this amendment to the Certificate of Incorporation as of the 12th day of May 2011.

GELSTAT CORPORATION

By: /s/ Gerald Kieft

Gerald Kieft, Chief Executive Officer

EX-3.3

Exhibit 3.3

AGREEMENT OF MERGER AND

PLAN OF MERGER AND REORGANIZATION

This Agreement of Merger and Plan of Merger and Reorganization (this “Agreement”) is made as of this 17th day of September 2010, by and between GelStat Corporation (“Gel-MN”) (a Minnesota corporation) and GelStat Corporation (“Gel-DE”) (a Delaware corporation), (together, the “Constituent Corporations”).

WHEREAS, the respective boards of directors of the Constituent Corporations deem it advisable and have recommended that Gel-MN be merged with and into Gel-DE under the laws of the state of Minnesota in the manner provided pursuant to the Minnesota statutes and the Delaware General Corporation Law (“DGCL).

NOW, THEREFORE, in consideration of the premises and of the mutual promises herein, the Constituent Corporations do hereby agree, to merge upon the terms and conditions stated below.

1. Agreement to Merger. The Constituent Corporations hereby agree that Gel-MN shall be merged with and into Gel-DE (hereinafter sometimes referred to as the “Surviving Corporation”).

2. Name of the Surviving Corporation. The name of the Surviving Corporation shall be GelStat Corporation.

3. Ownership Interests. Each ownership interest in the Gel-MN shall be converted into an ownership interest of Gel-DE, such that, immediately following the conversion, each holder of an ownership interest of Gel-MN shall own the same ownership interest in Gel-DE that such shareholder owned in Gel-MN immediately prior to the merger.

4. Certificate of Incorporation. The Certificate of Incorporation of Gel-DE shall continue to be the certificate of Gel-DE.

5. Filing of Articles of Merger. If (a) this Agreement is adopted by the shareholders of Gel-DE, and (b) this Agreement is not thereafter, and has not theretofore been, terminated or abandoned as permitted by the provisions hereof, then duly authorized officers of the respective parties shall make and execute Articles of Merger and a Certificate of Merger and shall cause such documents to be filed with the State of Minnesota and the State of Delaware, respectively, in accordance with the laws of the States of Minnesota and Delaware. The Merger shall become effective on the date on which the Merger becomes effective under the laws of Minnesota or the date on which the Merger becomes effective under the laws of Delaware, whichever occurs later, which date is herein referred to as the “Effective Date.”

6. Certain Effects of Merger. On the Effective Date, the separate existence of Gel-MN shall cease, and Gel-MN shall be merged into Gel-DE which, as the Surviving Corporation, shall possess all the rights, privileges, powers, and franchises, of a public as well as of a private nature, and be subject to all the restrictions, disabilities, duties and liabilities of Gel-MN; and all and singular, the rights, privileges, powers, and franchises of Gel-MN, and all property, real, personal, and mixed, and all debts due to Gel-MN on whatever account, as well as stock subscriptions, liens and all other things in action or belonging to Gel-MN, shall be vested in the Surviving Corporation; and all property, rights, privileges, powers, and franchises, and all and every other interest shall be thereafter as effectually the property of the Surviving Corporation as they were of Gel-MN, and the title to any real estate vested by deed or otherwise, under the laws of Minnesota or any other jurisdiction, shall not revert or be in any way impaired; but all rights of creditors and all liens upon any property of Gel-MN shall be preserved, unimpaired, and all debts, liabilities, and duties of Gel-MN shall thenceforth attach to the Surviving Corporation and may be enforced against it to the same extent as if said debts, liabilities, and duties had been incurred or contracted by it. At any time, or from time to time, after the Effective Date, the last acting officers of Gel-MN or the corresponding officers of the Surviving Corporation, may, in the name of Gel-MN execute and deliver all such proper deeds, assignments, and other instruments and take or cause to be taken all such further or other action as the Surviving Corporation may deem necessary or desirable in order to vest, perfect, or confirm in the Surviving Corporation title to and possession of all Gel-MN’s property, rights, privileges, powers, franchises, immunities, and interests and otherwise to carry out the purposes of this Agreement.

7. Bylaws. The Bylaws of Gel-DE, as in effect immediately before the Effective Date, shall from and after the Effective Date be, and continue to be, the Bylaws of the Surviving Corporation until amended as provided therein.

8. No Appraisal or Dissenters Rights. In accordance with the provisions of Section 262 of the Delaware General Corporation Law and Section 302A.471 of the Minnesota Statutes, no holder of shares of Gel-DE or Gel-MN Stock shall have any appraisal or dissenters rights as a result of the execution and delivery of this Agreement.

IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto on the date first above written.

GELSTAT CORPORATION, a Delaware corporation

By: /s/ Gerald Kieft

Gerald Kieft, Chief Executive Officer

GELSTAT CORPORATION, a Minnesota corporation

By: /s/ Gerald Kieft

Gerald Kieft, Chief Executive Officer

EX-3.4

EXHIBIT 3.4 

STATE OF DELAWARE

CERTIFICATE OF MERGER OF

FOREIGN CORPORATION INTO

A DOMESTIC CORPORATION

Pursuant to Title 8, Section 252 of the Delaware General Corporation Law, the undersigned corporation executed the following Certificate of Merger:

FIRST: The name of the surviving corporation is GelStat Corporation, a Delaware corporation, and the name of the corporation being merged into this surviving corporation is GelStat Corporation, a Minnesota corporation.

SECOND: The Agreement of Merger has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations pursuant to Title 8 Section 252 of the General Corporation Law of the State of Delaware.

THIRD: The name of the surviving corporation is GelStat Corporation, a Delaware corporation.

FOURTH: The Certificate of Incorporation of the surviving corporation shall be its Certificate of Incorporation. (If amendments are affected please set forth)

FIFTH: The authorized stock and par value of the non-Delaware corporation is 50,000,000 shares of common stock, par value $0.01.

SIXTH: The merger is to become effective on September 19, 2010

SEVENTH: The Agreement of Merger is on file at 3557 SW Corporate Parkway, Palm City, FL 34990, an office of the surviving corporation.

EIGHTH: A copy of the Agreement of Merger will be furnished by the surviving corporation on request, without cost, to any stockholder of the constituent corporations.

IN WITNESS WHEREOF, said surviving corporation has caused this certificate to be signed by an authorized officer, the 19^th day of September, A.D., 2010.

By: /s/ Gerald Kieft

Authorized Officer

Name: Gerald Kieft

Print or Type

Title: President

EX-3.5

Exhibit 3.5

BYLAWS

 OF 

GELSTAT CORPORATION

Article I. Meetings of Shareholders

Section 1. Annual Meeting. The annual meeting of the shareholders of this Corporation shall be held at the time and place designated by the Board of Directors of the Corporation. Business transacted at the annual meeting shall include the election of directors of the Corporation.

Section 2. Special Meetings. Special meetings of the shareholders shall be held when directed by the Board of Directors, or when requested in writing by the holders of not less than 10 percent of all the shares entitled to vote at the meeting.

Section 3. Place. Meetings of shareholders may be held within or without the State of Delaware.

Section 4. Notice. Written notice stating the place, day and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than 10 nor more than 60 days before the meeting, either personally or by first class mail, by or at the direction of the president, the secretary, or the officer or persons calling the meeting to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at his address as it appears on the stock transfer books of the Corporation, with postage there on prepaid. The provisions of Section 229 of the Delaware General Corporation Law (the “DGCL”) as to waiver of notice are applicable.

Section 5. Notice of Adjourned Meetings. When a meeting is adjourned to another time or place, it shall not be necessary to give any notice of the adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken, and at the adjourned meeting any business may be transacted that might have been transacted on the original date of the meeting. If, however, after the adjournment the Board of Directors fixes a new record date for the adjourned meeting, a notice of adjourned meeting, shall be given as provided in this section to each shareholder of record on the new record date entitled to vote at such meeting.

Section 6. Closing of Transfer Books and Fixing Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other purpose, the Board of Directors may provide that the stock transfer books shall be closed for a stated period but not to exceed, in any case, 60 days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least 10 days immediately preceding such meeting.

In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for the determination of shareholders, such date in any case to be not more than 60 days and, in case of a meeting of shareholders, not less than 10 days prior to the date on which the particular action requiring such determination of shareholders is to be taken.

If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the day preceding the day on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders.

When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof, unless the Board of Directors fixes a new record date for the adjourned meeting.

Section 7. Shareholder Quorum and Voting. A majority of the outstanding shares of each class or series of voting stock then entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. When a specified item of business is required to be voted on by a class or series of stock, a majority of the outstanding shares of such class or series shall constitute a quorum for the transaction of such item of business by that class or series.

If a quorum is present, the affirmative vote of the majority of the votes cast for or against a proposal (excluding abstentions) shall be the act of the stockholders unless otherwise provided by the Delaware General Corporation Law, by applicable stock exchange rules, by the certificate of incorporation or these bylaws; provided, however that the directors of the Company shall be elected by a plurality of such shares.

After a quorum has been established at a shareholders’ meeting, the subsequent withdrawal of shareholders, so as to reduce the number of shareholders entitled to vote at the meeting below the number required for a quorum, shall not affect the validity of any action taken at the meeting or any adjournment thereof.

Section 8. Voting of Shares. Each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders.

Treasury shares, shares of stock of this Corporation owned by another corporation, the majority of the voting stock of which is owned or controlled by this Corporation, and shares of stock of this Corporation, held by it in a fiduciary capacity shall not be voted, directly or indirectly, at any meeting, and shall not be counted in determining the total number of outstanding shares at any given time.

A shareholder may vote either in person or by proxy executed in writing by the shareholder or his duly authorized attorney-in-fact.

At each election for directors every shareholder entitled to vote at such election shall have the right to vote, in person or by proxy, the number of shares owned by him for as many persons as there are directors to be elected at that time and for whose election he has a right to vote.

Shares standing in the name of another corporation, domestic or foreign, may be voted by the officer, agent, or proxy designated by the bylaws of the corporate shareholder; or, in the absence of any applicable bylaw, by such person as the Board of Directors of the corporate shareholder may designate. Proof of such designation may be made by presentation of a certified copy of the bylaws or other instrument of the corporate shareholder. In the absence of any such designation, or in case of conflicting designation by the corporate shareholder, the chairman of the board, president, any vice president, secretary and treasurer of the corporate shareholder shall be presumed to possess, in that order, authority to vote such shares.

Shares held by an administrator, executor, guardian or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name.

Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority to do so is contained in an appropriate order of the court by which such receiver was appointed.

A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee or his nominee shall be entitled to vote the shares so transferred.

On and after the date on which written notice of redemption of redeemable shares has been mailed to the holders thereof and a sum sufficient to redeem such shares has been deposited with a bank or trust company with irrevocable instruction and authority to pay the redemption price to the holders thereof upon surrender of certificates therefor, such shares shall not be entitled to vote on any matter and shall not be deemed to be outstanding shares.

Section 9. Proxies. Every shareholder entitled to vote at a meeting of shareholders or to express consent or dissent without a meeting of a shareholders’ duly authorized attorney-in-fact may authorize another person or persons to act for him by proxy.

Every proxy must be signed by the shareholder or his attorney in-fact. No proxy shall be valid after the expiration of three years from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the shareholder executing it, except as otherwise provided by law.

The authority of the holder of a proxy to act shall not be revoked by the incompetence or death of the shareholder who executed the proxy unless, before the authority is exercised, written notice of an adjudication of such incompetence or of such death is received by the corporate officer responsible for maintaining the list of shareholders.

If a proxy for the same shares confers authority upon two or more persons and does not otherwise provide, a majority of them present at the meeting, or if only one is present then that one, may exercise all the powers conferred by the proxy; but if the proxy holders present at the meeting are equally divided as to the right and manner of voting in any particular case, the voting of such shares shall be prorated.

If a proxy expressly provides, any proxy holder may appoint in writing a substitute to act in his place.

Section 10. Action by Shareholders without a Meeting. Any action required by law, these bylaws, or the certificate of incorporation of this Corporation to be taken at any annual or special meeting of shareholders of the Corporation, or any action which may be taken at any annual or special meeting of such shareholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. If any class of shares is entitled to vote thereon as a class, such written consent shall be required of the holders of a majority of the shares of each class of shares entitled to vote as a class thereon and of the total shares entitled to vote thereon.

Promptly after obtaining such authorization by written consent, notice shall be given to those shareholders who have not consented in writing. If the action be a merger or consolidation for which appraisal rights are provided under the DGCL, the notice shall be given in accordance with Section 262(d)(2) of the Act, as amended.

Section 11. Advance Notice of Shareholder Nominees and Shareholder Business.

To be properly brought before an annual meeting or special meeting, nominations for the election of directors or other business must be:

(a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors,

(b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or

(c) otherwise properly brought before the meeting by a shareholder.

For such other nominations or other business to be considered properly brought before the meeting by a shareholder, such shareholder must have given timely notice and in proper form of his intent to bring such business before such meeting. To be timely, such shareholder’s notice must be delivered to or mailed and received by the secretary of the Corporation not less than 90 days prior to the meeting; provided, however, that in the event that less than 100 days notice of prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder to be timely must be so received not later than the close of business on the 10^th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. To be in proper form, a shareholder’s notice to the secretary shall set forth:

(i) the name and address of the shareholder who intends to make the nominations, propose the business, and, as the case may be, the name and address of the person or persons to be nominated or the nature of the business to be proposed;

(ii) a representation that the shareholder is a holder of record of stock of the Corporation entitled to vote at such meeting and, if applicable, intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice or introduced the business specified in the notice;

(iii) if applicable, a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder;

(iv) such other information regarding each nominee or each matter of business to be proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had the nominee been nominated, or intended to be nominated, or the matter been proposed, or intended to be proposed by the Board of Directors; and

(v) if applicable, the consent of each nominee to serve as director of the Corporation if so elected.

The chairman of the meeting may refuse to acknowledge the nomination of any person or the proposal of any business not made in compliance with the foregoing procedure.

Article II. Directors

Section 1. Function All corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed under the direction of, the Board of Directors.

Section 2. Qualification. Directors need not be residents of this state or shareholders of this Corporation.

Section 3. Compensation. The Board of Directors shall have authority to fix the compensation of directors.

Section 4. Duties of Directors. A director shall perform his duties as a director, including his duties as a member of any committee of the board upon which he may serve, in good faith, in a manner he reasonably believes to be in the best interests of the Corporation, and with such care as an ordinarily prudent person in a like position would use under similar circumstances.

In performing his duties, a director shall be entitled to rely on information, opinions, reports or statements, including financial statements and other financial data, in each case prepared or presented by:

(a) one or more officers or employees of the Corporation whom the director reasonably believes to be reliable and competent in the matters presented,

(b) counsel, public accountants or other persons as to matters which the director reasonably believes to be within such person’s professional or expert competence, or

(c) a committee of the board upon which he does not serve, duly designated in accordance with a provision of the certificate of incorporation or the bylaws, as to matters within its designated authority, which committee the director reasonably believes to merit confidence.

A director shall not be considered to be acting in good faith if he has knowledge concerning the matter in question that would cause such reliance described above to be unwarranted.

A person who performs his duties in compliance with this section shall have no liability by reason of being or having been a director of the Corporation.

Section 5. Presumption of Assent. A director of the Corporation who is present at a meeting of its Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless he votes against such action or abstains from voting in respect thereto because of an asserted conflict of interest.

Section 6. Number. This Corporation shall have no less than three nor greater than nine directors. The number of directors may be established from time to time by resolution of the Board of Directors, but no decrease shall have the effect of shortening the terms of any incumbent director.

Section 7. Election and Term. Each person named in the certificate of incorporation as a member of the initial Board of Directors and all other directors appointed by the Board of Directors to fill vacancies thereof shall hold office until the first annual meeting of shareholders, and until his successor shall have been elected and qualified or until his earlier resignation, removal from office or death.

At the first annual meeting of shareholders and at each annual meeting thereafter the shareholders shall elect directors to hold office until the next succeeding annual meeting. Each director shall hold office for the term for which he is elected and until his successor shall have been elected and qualified or until his earlier resignation, removal from office or death.

Section 8. Vacancies. Any vacancy occurring in the Board of Directors, including any vacancy created by reason of an increase in the number of directors, may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board of Directors. A director elected to fill a vacancy shall hold office only until the next election of directors by the shareholders.

Section 9. Removal of Directors. At a meeting of the shareholders called expressly for that purpose, any director or the entire Board of Directors may be removed, with or without cause, by a vote of the holders of a majority of the shares of each class or series of voting stock, present in person or by proxy, then entitled to vote at an election of directors.

Section 10. Quorum and Voting. A majority of the number of directors fixed by these bylaws shall constitute a quorum for the transaction of business. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.

Section 11. Director Conflicts of Interest. No contract or other transaction between this Corporation and one or more of its directors or any other corporation, firm, association or entity in which one or more of the directors are directors or officers or are financially interested, shall be either void or voidable because of such relationship or interest or because such director or directors are present at the meeting of the Board of Directors or a committee thereof which authorizes, approves or ratifies such contract or transaction or because his or their votes are counted for such purpose, if:

(a) The fact of such relationship or interest is disclosed or known to the Board of Directors or committee which authorizes, approves or ratifies the contract or transaction by a vote or consent sufficient for the purpose without counting the votes or consents of such interested directors; or

(b) The fact of such relationship or interest is disclosed or known to the shareholders entitled to vote and they authorize, approve or ratify such contract or transaction by vote or written consent; or

(c) The contract or transaction is fair and reasonable as to the Corporation at the time it is authorized by the board, a committee or the shareholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or a committee thereof which authorizes, approves or ratifies such contract or transaction.

Section 12. Place of Meeting. Regular and special meetings by the Board of Directors may be held within or without the State of Delaware.

Section 13. Time, Notice and Call of Meetings. Regular meetings of the Board of Directors shall be held without notice on the second Tuesday of September of each year. Notice of the time and place of special meetings of the Board of Directors shall be given to each director by either personal delivery, any form of electronic notice including facsimile transmission, as long as the director is able to retain a copy of the notice, or telegram at least one day before the meeting.

Notice of a meeting of the Board of Directors need not be given to any director who signs a waiver of notice either before or after the meeting. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting and waiver of any and all obligations to the place of the meeting, the time of the meeting, or the manner in which it has been called or convened, except when a director states, at the beginning of the meeting, any objection to the transaction of business because the meeting is not lawfully called or convened.

Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting.

A majority of the directors present, whether or not a quorum exists, may adjourn any meeting of the Board of Directors to another time and place. Notice of any such adjourned meeting shall be given to the directors who were not present at the time of the adjournment and, unless the time and place of the adjourned meeting are announced at the time of the adjournment, to the other directors.

Meetings of the Board of Directors may be called by the president of the Corporation or by any director.

Members of the Board of Directors may participate in a meeting of such Board by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time. Participation by such means shall constitute presence in person at a meeting.

Section 14. Action Without a Meeting. Any action required to be taken at a meeting of the directors of the Corporation, or any action which may be taken at a meeting of the directors, may be taken without a meeting if a consent in writing, setting forth the action to be taken, signed by all of the directors, is filed in the minutes of the proceedings of the Board. Such consent shall have the same effect as a unanimous vote.

Section 15. Committees. The Board of Directors may designate from among its members such committees it deems prudent, such as, but not limited to, an executive committee, audit committee, compensation committee, finance committee and a litigation committee.

Article III. Officers

Section 1. Officers. The officers of this Corporation shall consist of a chief executive officer, president, vice president of finance and any other vice presidents designated by the Board of Directors, secretary, and treasurer, and such other officers as may be designated by the Board of Directors, each of whom shall be elected by the Board of Directors from time to time. Any two or more offices may be held by the same person. The failure to elect any of the above officers shall not affect the existence of this Corporation.

Section 2. Duties. The officers of this Corporation shall have the following duties and such other duties as delegated by the chief executive officer.

The chief executive officer of the Corporation shall have general and active management of the business and affairs of the Corporation subject to the directions of the Board of Directors, and shall preside at all meetings of the shareholders and the Board of Directors.

The president shall be the chief operating officer of the Corporation, and shall act whenever the chief executive officer shall be unavailable.

The vice president of finance shall be the chief financial and chief accounting officer. He shall keep correct and complete records of account, showing accurately at all times the financial condition of the corporation. He shall furnish at meetings of the Board of Directors, or whenever requested, a statement of the financial condition of the Corporation and shall perform such other duties as the bylaws provide or the Board of Directors may prescribe.

Any other vice president(s) shall perform such duties as may be prescribed by the Board of Directors or the president and shall act whenever the president shall be unavailable.

The secretary shall have custody of and maintain all of the corporate records except the financial records, shall record the minutes of all meetings of the shareholders and whenever else required by the Board of Directors or the president, and shall perform such other duties as may be prescribed by the Board of Directors.

The treasurer shall be the legal custodian of all monies, notes, securities and other valuables that may from time to time come into the possession of the Corporation. He shall immediately deposit all funds of the Corporation coming into his hands in some reliable bank or other depositary to be designated by the Board of Directors and shall keep this bank account in the name of the Corporation.

Section 3. Removal of Officers. Any officer or agent elected or appointed by the Board of Directors may be removed by the Board whenever in its judgment the best interests of the Corporation will be served thereby.

Any officer or agent elected by the shareholders may be removed only by vote of the shareholders, unless the shareholders shall have authorized the directors to remove such officer or agent.

Any vacancy, however, occurring, in any office may be filled by the Board of Directors, unless the bylaws shall have expressly reserved such power to the shareholders.

Removal of any officer shall be without prejudice to the contract rights, if any, of the person so removed; however, election or appointment of an officer or agent shall not of itself create contract rights.

Article IV. Stock Certificates

Section 1. Issuance. Every holder of shares in this Corporation shall be entitled to have a certificate, representing all shares to which he is entitled. No certificate shall be issued for any share until such share is fully paid.

Section 2. Form. Certificates representing shares in this Corporation shall be signed by the chairperson or vice-chairperson of the Board of Directors, or the president or vice president and the secretary or an assistant secretary or treasurer or assistant treasurer and may be sealed with the seal of this Corporation or a facsimile thereof. The signature of the chairperson or vice-chairperson of the Board of Directors, or the president or vice president and the secretary or assistant secretary or treasurer or assistant treasurer may be facsimiles if the certificate is manually signed on behalf of a transfer agent or a registrar, other than the Corporation itself or an employee of the Corporation. In case any officer who signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer at the date of its issuance.

Every certificate representing shares issued by this Corporation shall set forth or fairly summarize upon the face or back of the certificate, or shall state that the Corporation will furnish to any shareholder upon request and without charge a full statement of, the designations, preferences, limitations and relative rights of the shares of each class or series authorized to be issued, and the variations in the relative rights and preferences between the shares of each series so far as the same have been fixed and determined, and the authority of the Board of Directors to fix and determine the relative rights and preferences of subsequent series.

Every certificate representing shares which are restricted as to the sale, disposition, or other transfer of such shares shall state that such shares are restricted as to transfer and shall set forth or fairly summarize upon the certificate, or shall state that the Corporation will furnish to any shareholder upon request and without charge a full statement of, such restrictions.

Each certificate representing shares shall state upon its face: the name of the Corporation; that the Corporation is organized under the laws of this state; the name of the person or persons to whom issued; the number and class of shares, and the designation of the series, if any, which such certificate represents; and the par value of each share represented by such certificate, or a statement that the shares are without par value.

Section 3. Transfer of Stock. Except as provided in Section 4 of this Article, the Corporation shall register a stock certificate presented to it for transfer if the certificate is properly endorsed by the holder of record or by his duly authorized attorney, and the signature of such person has been guaranteed by a commercial bank or trust company or by a member of the New York or American Stock Exchange.

Section 4. Off-Shore Offerings. In all offerings of equity securities pursuant to Regulation S of the Securities Act of 1933 (the “Act”), the Corporation shall require that its stock transfer agent refuse to register any transfer of securities not made in accordance with the provisions of Regulation S, pursuant to registration under the Act or an available exemption under the Act.

Section 5. Lost, Stolen or Destroyed Certificates. The Corporation shall issue a new stock certificate in the place of any certificate previously issued if the holder of record of the certificate (a) makes proof in affidavit form that it has been lost, destroyed or wrongfully taken; (b) requests the issuance of a new certificate before the Corporation has notice that the certificate has been acquired by a purchaser for value in good faith and without notice of any adverse claim; (c) gives bond in such form as the Corporation may direct, to indemnify the Corporation, the transfer agent, and registrar against any claim that may be made on account of the alleged loss, destruction, or theft of a certificate; and (d) satisfies any other reasonable requirements imposed by the Corporation.

Article V. Books and Records

Section 1. Books and Records. This Corporation shall keep correct and complete records and books of account and shall keep minutes of the proceedings of its shareholders, Board of Directors and committees of directors.

This Corporation shall keep at its registered office or principal place of business, or at the office of its transfer agent or registrar, a record of its shareholders, giving the names and addresses of all shareholders, and the number, class and series, if any, of the shares held by each.

Any books, records and minutes may be in written form or in any other form capable of being converted into written form within a reasonable time.

Any person who shall have been a holder of record of shares or of voting trust certificates therefor at least six months immediately preceding his demand or shall be the holder of record of, or the holder of record of voting trust certificates for, at least five percent of the outstanding shares of any class or series of the Corporation, upon written demand stating the purpose thereof, shall have the right to examine, in person or by agent or attorney, at any reasonable time or times, for any proper purpose its relevant books and records of accounts, minutes and records of shareholders and to make extracts therefrom.

Section 2. Financial Information. Not later than three months after the close of each fiscal year, this Corporation shall prepare a balance sheet showing in reasonable detail the financial condition of the Corporation as of the close of its fiscal year, and a profit and loss statement showing the results of the operations of the Corporation during its fiscal year.

Upon the written request of any shareholder or holder of voting trust certificates for shares of the Corporation, the Corporation shall mail to such shareholder or holder of voting trust certificates a copy of the most recent such balance sheet and profit and loss statement.

The balance sheets and profit and loss statements shall be filed in the registered office of the Corporation in this state, shall be kept for at least five years, and shall be subject to inspection during business hours by any shareholder or holder of voting trust certificates, in person or by agent.

Article VI. Dividends

The Board of Directors of this Corporation may, from time to time, declare and the Corporation may pay dividends on its shares in cash, property or its own shares, except when the Corporation is insolvent or when the payment thereof would render the Corporation insolvent or when the declaration or payment thereof would be contrary to any restrictions contained in the certificate of incorporation, subject to the following provisions:

(a) Dividends in cash or property may be declared and paid, except as otherwise provided in this section, only out of the unreserved and unrestricted earned surplus of the Corporation or out of capital surplus, howsoever arising but each dividend paid out of capital surplus shall be identified as a distribution of capital surplus, and the amount per share paid from such surplus shall be disclosed to the shareholders receiving the same concurrently with the distribution.

(b) Dividends may be declared and paid in the Corporation’s own treasury shares.

(c) Dividends may be declared and paid in the Corporation’s own authorized but unissued shares out of any unreserved and unrestricted surplus of the Corporation upon the following conditions:

(1) If a dividend is payable in shares having a par value, such shares shall be issued at not less than the par value thereof and there shall be transferred to stated capital at the time such dividend is paid an amount of surplus equal to the aggregate par value of the shares to be issued as a dividend.

(2) If a dividend is payable in shares without a par value, such shares shall be issued at such stated value as shall be fixed by the Board of Directors by resolution adopted at the time such dividend is declared, and there shall be transferred to stated capital at the time such dividend is paid an amount of surplus equal to the aggregate stated value so fixed in respect of such shares; and the amount per share so transferred to stated capital shall be disclosed to the shareholders receiving such dividend concurrently with the payment thereof.

(d) No dividend payable in shares of any class shall be paid to the holders of shares of any other class unless the certificate of incorporation so provide or such payment is authorized by the affirmative vote or the written consent of the holders of at least a majority of the outstanding shares of the class in which the payment is to be made.

(e) A split-up or division of the issued shares of any class into a greater number of shares of the same class without increasing the stated capital of the Corporation shall not be construed to be a share dividend within the meaning of this section.

Article VII. Corporate Seal

The Board of Directors shall provide a corporate seal which shall be circular in form and shall have inscribed thereon the following:

Article VIII. Amendment

These bylaws may be repealed or amended, and new bylaws maybe adopted, by the Board of Directors or the shareholders in accordance with Section 109 of the Delaware General Corporation Law.

G:\MISC CLIENTS\G-I\GelStat Corporation\Corporate Documents\Charters and Bylaws\Bylaws.doc

EX-14.0

Exhibit 14.0

Code of Ethics

Introduction

These Ethical Guidelines will serve as the Code of Ethics (“Guidelines”) for GelStat Corporation (the “Company”) and as such they cover a wide spectrum of business practices and procedures. They do not cover every issue that may arise, but they set out some basic principles to guide all employees and directors of the Company. We expect all of our employees and directors to comply with them and to seek to avoid even the appearance of improper behavior. These Guidelines should also be provided to and followed by the Company’s agents and representatives, including consultants. Although the Guidelines refer to our employees and sometimes, our officers (each of whom is an employee) and directors, all Guidelines apply to our directors even when we do not specifically refer to them.

If a law conflicts with a policy in these Guidelines, you must comply with the law. If you have any questions about these conflicts, you should ask your supervisor how to handle the situation. Those who violate these Guidelines may be subject to disciplinary action. Depending on the nature of the violation, the disciplinary action may include termination of employment. If you are in a situation, which you believe may violate or lead to a violation of these Guidelines, follow the recommendations described below.

Compliance with Laws, Rules and Regulations

Obeying the law, both in letter and in spirit, is the foundation on which the Company’s ethical standards and our reputation are built. All employees must respect and obey the laws of the cities, states and nations in which we operate. Although not all employees are expected to know the details of these laws, it is important to know enough to determine when to seek advice from supervisors, managers, the Company’s legal counsel or other appropriate personnel. If requested, the Company will hold information and training sessions to promote compliance with laws, rules and regulations, including insider trading laws.

Conflicts of Interest

A “conflict of interest” exists when a person’s private interest interferes in any way with the interests of the Company. A conflict may arise when an employee, officer or director takes actions or has interests that may make it difficult to perform duties for the Company objectively and effectively. Conflicts of interest arise whenever a family member of an officer, director or employee provides goods or services (including as an employee) or otherwise engages in business with the Company. All of these relationships require prior approval of our Audit Committee. Conflicts of interest may also arise when an employee, officer or director, or members of his or her family, receives improper personal benefits as a result of his or her position with the Company. For example, loans to, or guarantees of obligations of, employees and their family members may create conflicts of interest. By law, the Company cannot make any loans to its executive officers and directors. It is almost always a conflict of interest for a the Company employee to work simultaneously for a competitor, client or supplier. You are not allowed to work for a competitor as a consultant or board member. The best policy is to avoid any direct or indirect business connection with our clients, suppliers or competitors, except on our behalf. Conflicts of interest are prohibited as a matter of company policy, except under specific guidelines approved by the Company’s board of directors (the “Board”). Conflicts of interest may not always be clear-cut, so if you have a question, you should consult with higher levels of management or the Company’s legal counsel. Any employee, officer or director who becomes aware of a conflict or potential conflict should bring it to the attention of a supervisor, manager or other appropriate personnel or consult the procedures described below. Our executive officers and directors must also comply with our Policy and our Insider Trading Policy.

Insider Trading

Employees who have access to confidential information are not permitted to use or share that information for trading purposes or for any other purpose except the conduct of our business. All non-public information about the Company should be considered confidential information. To use non-public information for personal benefit (financial or otherwise) or to “tip” others who might make an investment decision on the basis of this information is not only unethical but also illegal under the federal securities laws. In order to comply with the securities laws against insider trading, the Company has adopted a specific policy governing employees’ trading in securities of the Company. The Company is required to provide you with a copy of our Insider Trading Policy. If you have not received this Policy, please notify your supervisor.

Corporate Opportunities

Employees, officers and directors are prohibited from taking for themselves personally, opportunities that are discovered through the use of the Company’s property, information or from their position with the Company without the consent of the Board. No employee may use The Company’s property, information, or their position with the Company, for improper personal gain. Under no circumstances may an employee compete with the Company directly or indirectly. Employees, officers and directors owe a duty of loyalty to the Company to advance its legitimate interests when the opportunity to do so arises.

Competition and Fair Dealing

We seek to outperform our competition fairly and honestly. Stealing proprietary information, possessing trade secret information that was obtained without the owner’s consent, or inducing such disclosures by past or present employees of other companies is prohibited. Each employee should endeavor to respect the rights of and deal fairly with the Company’s clients, suppliers, competitors and other employees. No employee should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other intentional unfair dealing practice. The purpose of business entertainment and gifts in a commercial setting is to create goodwill and sound working relationships, not to gain unfair advantage with clients. No gift or entertainment should be offered, given, provided or accepted by any employee, family member of an employee, or agent unless it: (1) is not a cash gift, (2) is consistent with customary business practices, (3) is not excessive in value, (4) cannot be construed as a bribe or payoff and (5) does not violate any laws or regulations. Please discuss with your supervisor any gifts or proposed gifts which you are not certain are appropriate.

Discrimination and Harassment

The diversity of the Company’s employees is a tremendous asset. We are firmly committed to providing equal opportunity in all aspects of employment and will not tolerate any illegal discrimination or harassment. Examples may include derogatory comments based on racial or ethnic characteristics and unwelcome sexual advances.

Health and Safety

The Company strives to provide each employee with a safe and healthy work environment. Each employee has responsibility for maintaining a safe and healthy workplace for all employees by following safety and health rules and practices and reporting accidents, injuries and unsafe equipment, practices or conditions. Violence and threatening behavior are not permitted. Employees should report to work in condition to perform their duties, free from the influence of illegal drugs or alcohol. The use of alcohol or illegal drugs in the workplace will not be tolerated.

Record-Keeping

The Company requires honest and accurate recording and reporting of information in order to make responsible business decisions. For example, only the true and actual number of hours worked should be reported. Some employees are authorized to use business expense accounts, which must be documented and recorded accurately. If you are not sure whether a certain expense is legitimate, ask your supervisor or our Chief Financial Officer. All of the Company’s books, records, accounts and financial statements must be maintained in reasonable detail, must appropriately reflect the Company’s transactions and must conform both to applicable legal requirements and to the Company’s system of internal controls. Unrecorded or “off the books” funds or assets should not be maintained unless permitted by applicable law or regulation. Business records and communications often become public, and we should avoid exaggeration, derogatory remarks, guesswork, or inappropriate characterizations of people and companies that can be misunderstood. This applies equally to e-mail, internal memos, and formal reports. Records should always be retained or destroyed according to the Company’s record retention policies. In accordance with those policies, in the event of litigation or governmental investigation please consult the Company’s legal counsel.

Confidentiality

Employees must maintain the confidentiality of confidential information entrusted to them by the Company or its clients except when disclosure is authorized by the Company’s legal counsel or required by laws or regulations. Confidential information includes all non-public information that might be of use to competitors, or harmful to the Company or its clients if disclosed. It also includes information that suppliers and clients have entrusted to us. The obligation to preserve confidential information continues even after employment ends.

Protection and Proper Use of the Company’s Assets

All employees should endeavor to protect the Company’s assets and ensure their efficient use. Theft, carelessness, and waste have a direct impact on the Company’s profitability. Any suspected incident of fraud or theft should be immediately reported for investigation. The Company’s equipment should not be used for non-the Company business, though incidental personal use may be permitted. The obligation of employees to protect the Company’s assets includes its proprietary information. Proprietary information includes intellectual property such as trade secrets, patents, trademarks, and copyrights, as well as business, marketing and service plans, ideas, designs, databases, records, salary information and any unpublished financial data and reports. While unauthorized use or distribution of this information would violate company policy, it could also be illegal and result in civil or even criminal penalties.

Payments to Government Personnel

The U.S. Foreign Corrupt Practices Act prohibits giving anything of value, directly or indirectly, to officials of foreign governments or foreign political candidates in order to obtain or retain business. It is strictly prohibited to make illegal payments to government officials of any country. This also applies to the making of improper payments to obtain business from commercial clients in the United States. In addition, the U.S. government has a number of laws and regulations regarding business gratuities which may be accepted by U.S. government personnel. The promise, offer or delivery to an official or employee of the U.S. government of a gift, favor or other gratuity in violation of these rules would not only violate company policy but could also be a criminal offense. State and local governments, as well as foreign governments, may have similar rules. Our legal counsel can provide guidance to you in this area.

Waivers of These Ethical Guidelines

Any waiver of these Guidelines for executive officers or directors may be made only by the Board or a Board committee and may be promptly disclosed as required by law.

Reporting Any Illegal or Unethical Behavior

Employees are encouraged to talk to supervisors, managers or other appropriate personnel about observed illegal or unethical behavior and when in doubt about the best course of action in a particular situation. It is the policy of the Company not to allow retaliation for reports of misconduct by others made in good faith by employees. Employees are expected to cooperate in internal investigations of misconduct. Any employee may submit a good faith concern regarding questionable accounting or auditing matters or other matters without fear of dismissal or retaliation of any kind to the chairman of our Audit Committee or the Company’s legal counsel who are listed on the last page of these Guidelines.

Compliance Procedures

We must all work to ensure prompt and consistent action against violations of these Guidelines. However, in some situations it is difficult to know if a violation has occurred. Since we cannot anticipate every situation that will arise, it is important that we have a way to approach a new question or problem. These are the steps to keep in mind:

· Make sure you have all the facts in order to reach the right solutions; we must be as fully informed as possible.

· Ask yourself: What specifically am I being asked to do? Does it seem unethical or improper? This will enable you to focus on the specific question you are faced with, and the alternatives you have. Use your judgment and common sense; if something seems unethical or improper, it probably is.

· Clarify your responsibility and role. In most situations, there is shared responsibility. Are your colleagues informed? It may help to get others involved and discuss the problem.

· Discuss the problem with your supervisor.

This is the basic guidance for all situations. In many cases, your supervisor will be more knowledgeable about the question, and will appreciate being brought into the decision-making process. Remember that it is your supervisor’s responsibility to help solve problems.

Seek help from Company resources. In the rare case where it may not be appropriate to discuss an issue with your supervisor, or where you do not feel comfortable approaching your supervisor with your question, discuss it with your office manager or with a human resources officer.

You may report ethical violations in confidence and without fear of retaliation. Additionally, if your situation requires that your identity be kept confidential, your anonymity will be protected. Further, you may speak with the Company’s legal counsel on any of these matters. Under no circumstances does the Company permit or tolerate any form of retaliation against employees for good faith reports of potential ethical violations.

Always ask first, act later. If you are unsure of what to do in any situation, seek guidance before you act.

Special Policies with Respect to Certain Officers

The Chief Executive Officer (“CEO”) and all senior financial officers, including the Chief Financial Officer (“CFO”) and principal accounting officer, are bound by the provisions set forth above including those relating to ethical conduct, conflicts of interest and compliance with law. In addition, the CEO, CFO and other senior financial officers are subject to the following additional specific policies:

· The CEO, CFO and all senior financial officers are responsible for full, fair, accurate, timely and understandable disclosure in the periodic reports required to be filed by the Company with the Securities and Exchange Commission. Accordingly, it is the responsibility of the CEO, CFO and each senior financial officer promptly to bring to the attention of the Board or the Audit Committee any material information of which he or she may become aware that affects the disclosures made by the Company in its public filings or otherwise assist the Board and the Audit Committee, in fulfilling their responsibilities.

· The CEO, CFO and each senior financial officer shall promptly bring to the attention of the Board and the Audit Committee, any information he or she may have concerning (a) significant deficiencies in the design or operation of internal controls which could adversely affect the Company’s ability to record, process, summarize and report financial data or (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s financial reporting, disclosures or internal controls.

· The CEO, CFO and each senior financial officer shall promptly bring to the attention of our legal counsel or the CEO and to the Audit Committee any information he or she may have concerning any violation of these Guidelines, including any actual or apparent conflicts of interest between personal and professional relationships, involving any management or other employees who have a significant role in the Company’s financial reporting, disclosures or internal controls.

· The CEO, CFO and each senior financial officer shall promptly bring to the attention of the Company’s legal counsel or the CEO and to the Audit Committee any information he or she may have concerning evidence of a material violation of the securities or other laws, rules or regulations applicable to the Company and the operation of its business, by the Company or any agent thereof, or of violation of these Guidelines or of these additional special policies and procedures.

The Board shall determine, or designate appropriate persons to determine, appropriate actions to be taken in the event of violations of these Guidelines or these additional special procedures by the CEO, CFO and the Company’s senior financial officers. Such actions shall be reasonably designed to deter wrongdoing and to promote accountability for adherence to these Guidelines and to these additional special procedures, and shall include written notices to the individual involved that the Board has determined that there has been a violation, censure by the Board, demotion or re-assignment of the individual involved, suspension with or without pay or benefits (as determined by the Board) and termination of the individual’s employment. In determining what action is appropriate in a particular case, the Board or such designee shall take into account all relevant information, including the nature and severity of the violation, whether the violation was a single occurrence or repeated occurrences, whether the violation appears to have been intentional or inadvertent, whether the individual in question had been advised prior to the violation as to the proper course of action and whether or not the individual in question had committed other violations in the past.

To insure your confidentiality, we have supplied the cell phone numbers of our Chief Executive Officer, Chief Financial Officer, Chairman of our Audit Committee and legal counsel including their personal email addresses.

Chief Executive Officer

Gerald Kieft

Office No.:

Cell No.:

Email:

Chief Financial Officer:

Gerald Kieft

Office No.:

Cell No.:

Email:

Chairman of the Audit Committee:

Office No.:

Cell No.:

Email:

Outside Legal Counsel:

Michael D. Harris, Esq.

Office No.: (561) 686-3307

Cell No.: (561) 644-2222

Email: mharris@nasonyeager.com

H:\9546\Corporate21836\Code of Ethics.doc

EX-21.0

Exhibit 21.0

List of Subsidiaries  

Name	Place of Incorporation
GS Pharma, Inc.	1650 West 82nd Street, Suite 1200 Bloomington, MN 55431

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Gerald N. Kieft, certify that:

1. I have reviewed this annual report on Form 10-K of GelStat Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 5, 2012 

/s/ Gerald N. Kieft

Gerald N. Kieft

Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Gerald N. Kieft, certify that:

1. I have reviewed this annual report on Form 10-K of GelStat Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 5, 2012 

/s/ Gerald N. Kieft

Gerald N. Kieft

Chief Financial Officer

(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report of GelStat Corporation (the “Company”) on Form 10-K for the year ended December 31, 2005, as filed with the Securities and Exchange Commission on the date hereof, I, Gerald N. Kieft, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and

2. The information contained in the quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Gerald N. Kieft

Gerald N. Kieft

Chief Executive Officer

(Principal Executive Officer)

Dated: October 5, 2012 

In connection with the annual report of GelStat Corporation (the “Company”) on Form 10-K for the year ended December 31, 2005, as filed with the Securities and Exchange Commission on the date hereof, I, Gerald N. Kieft, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and

2. The information contained in the quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Gerald N. Kieft

Gerald N. Kieft

Chief Financial Officer

(Principal Financial Officer)

Dated: October 5, 2012