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EX-32.1 - SECTION 906 CERTIFICATION - CEO AND CFO - WESCORP ENERGY INCexhibit32-1.htm
EX-31.1 - SECTION 302 CERTIFICATION - CEO - WESCORP ENERGY INCexhibit31-1.htm
EX-31.2 - SECTION 302 CERTIFICATION - CFO - WESCORP ENERGY INCexhibit31-2.htm

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

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended September 30, 2009

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 000-30095

WESCORP ENERGY INC.
(Exact name of registrant as specified in its charter)

Delaware 98-0447716
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)

Suite 770, 435 – 4th Avenue South West, Calgary, Alberta T2P 3A8
(Address of principal executive offices) (Zip Code)

(403) 206 - 3990
Registrant's telephone number, including area code

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

     Indicate by check mark whether the registrant 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [ ]

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

Large accelerated filer ____        Accelerated filer ____
Non-accelerated filer ____  (Do not check if a small reporting Small reporting company X
company)  

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

Number of shares outstanding of the registrant's class of common stock as of November 12, 2009 was 90,907,557.

1



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS PREDICTIONS, PROJECTIONS AND OTHER STATEMENTS ABOUT THE FUTURE THAT ARE INTENDED TO BE “FORWARD- LOOKING STATEMENTS” (COLLECTIVELY, “FORWARD-LOOKING STATEMENTS”). FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES. A NUMBER OF IMPORTANT FACTORS COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE FORWARD- LOOKING STATEMENTS. IN ASSESSING FORWARD-LOOKING STATEMENTS CONTAINED IN THIS QUARTERLY REPORT ON FORM 10-Q, READERS ARE URGED TO READ CAREFULLY ALL CAUTIONARY STATEMENTS – INCLUDING THOSE CONTAINED IN OTHER SECTIONS OF THIS QUARTERLY REPORT AND OF OUR ANNUAL REPORT ON FORM 10-KSB FOR 2008. AMONG THOSE RISKS AND UNCERTAINTIES ARE THE FOLLOWING RISKS:

  • OUR ELECTRONIC FLOW METER TECHNOLOGY MAY NOT REMAIN COMPETITIVE WITHIN OUR CURRENT MARKETS OR WE MAY NOT BE ABLE TO GENERATE SUFFICIENT REVENUE FROM THE TECHNOLOGY TO BECOME PROFITABLE WITHIN THAT DIVISION;
  • WE MAY NOT BE ABLE TO SUCCESSFULLY DELIVER FREE-TRADING SHARES TO COMPLETE THE PURCHASE OF THE FLOWSTAR TECHNOLOGY;
  • THE ELLYCRACK TECHNOLOGY MAY NOT BE TECHNICALLY EFFECTIVE OR COST EFFECTIVE IN THE MARKETS TARGETED BY MANAGEMENT;
  • WE MAY NOT BE ABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY;
  • OUR WATER REMEDIATION TECHNOLOGY MAY NOT RECEIVE SUFFICIENT MARKET DEMAND OR BE COMMERCIALLY SUCCESSFUL, OR IT MAY BE REPLACED IN THE MARKET BY A MORE TECHNICALLY ADVANCED PROCESS OR TECHNOLOGY;
  • OUR WESCORP NAVIGATOR MAY NOT HAVE ADEQUATE DEMAND OR BE PROFITABLE;
  • WE WILL NOT SUCCESSFULLY IDENTIFY OR COMPLETE ANY OTHER SUITABLE ACQUISITIONS;
  • OUR PRIMARY CUSTOMERS ARE ENERGY-RELATED, WHICH TEND TO BE CYCLICAL AND THEREFORE ANY DOWNTURNS IN THIS CYCLICAL INDUSTRY COULD ADVERSELY AFFECT OPERATIONS;
  • THE ENERGY-RELATED INDUSTRY THAT WE SERVICE IS HEAVILY REGULATED (INCLUDING CO2 RELATED ISSUES) AND THE COSTS ASSOCIATED WITH SUCH REGULATED INDUSTRIES INCREASE THE COSTS OF DOING BUSINESS;
  • MANAGEMENT IS ADEQUATE TO INTEGRATE ANY BUSINESSES ACQUIRED;
  • MANAGEMENT IS ADEQUATE TO CARRY OUT ITS BUSINESS PLAN AND TO MANAGE ITS GROWTH EFFECTIVELY AND EFFICIENTLY;
  • MANAGEMENT WILL BE ABLE TO EFFECTIVELY DEAL WITH CURRENT AND FUTURE COMPETITIVE FORCES IN THE MARKET;
  • THERE WILL BE ADEQUATE CAPITAL TO FUND OUR BUSINESS;
  • WE MANAGE ANY FOREIGN EXCHANGE RISK ADEQUATELY;
  • WE COULD FACE SIGNIFICANT LIABILITIES IN CONNECTION WITH OUR TECHNOLOGY AND OPERATIONS THAT, IF INCURRED BEYOND ANY INSURANCE LIMITS, COULD ADVERSELY AFFECT OUR BUSINESS AND FINANCIAL CONDITION;
  • OUR NEED FOR ADDITIONAL CAPITAL MAY HARM OUR FINANCIAL CONDITION OR LIMIT OUR ABILITY TO FUND ACQUISITIONS;

2


  • IF ACQUISITIONS ARE COMPLETED, THEY MAY BE UNSUCCESSFUL FOR TECHNICAL, ECONOMIC, OR OTHER REASONS; AND
  • THE CURRENT AMERICAN AND WORLD FINANCIAL MARKETS AND CREDIT SITUATION MAY MAKE IT DIFFICULT OR IMPOSSIBLE TO ADEQUATELY FINANCE THE ONGOING CAPITAL AND OPERATING REQUIREMENTS FOR THE COMPANY.

3


CURRENCIES

All amounts expressed herein are in U.S. dollars unless otherwise indicated.

Wescorp Energy Inc.

REPORT ON FORM 10-Q

FOR THE PERIOD ENDED SEPTEMBER 30, 2009

Table of Contents

PART I - FINANCIAL INFORMATION  
  Item 1. Financial Statements  
    Consolidated Balance Sheets at September 30, 2009 (Unaudited) and at December 31, 2008 F-1
    Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 30, 2009 and 2008 (Unaudited) F-2
    Consolidated Statements of Cash Flows for nine months ended September 30, 2009 and 2008 (Unaudited) F-3
    Notes to the Consolidated Financial Statements (Unaudited) F-4
  Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation 6
Item 4. Controls and Procedures 18
PART II. OTHER INFORMATION 18
  Item 6. Exhibits 18
  SIGNATURES 21

4


PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

5



WESCORP ENERGY INC.
CONSOLIDATED BALANCE SHEETS

    September 30,     December 31,  
    2009     2008  
    (Unaudited)        
ASSETS            
         CURRENT ASSETS            
                     Cash $  64,217   $  429,171  
                     Accounts receivable   372,006     992,105  
                     Inventories   407,048     621,353  
                     Prepaid expenses   200,204     193,951  
                                 TOTAL CURRENT ASSETS   1,043,475     2,236,580  
             
         EQUIPMENT   556,876     731,335  
             
         OTHER ASSETS            
                     Investments   29,592     29,592  
             
                     TOTAL ASSETS $  1,629,943   $  2,997,507  
             
LIABILITIES AND STOCKHOLDERS' DEFICIT            
         CURRENT LIABILITIES            
                     Bank indebtedness $  27,261   $  -  
                     Accounts payable and accrued liabilities   2,136,069     2,770,933  
                     Current portion of notes payable   333,678     1,290,550  
                     Agreement payable   3,769,071     2,190,474  
                     Due to related parties   101,397     201,397  
                     Related party note payable   1,924,681     1,924,681  
                     Convertible debenture   -     2,250,000  
                     Debentures payable   303,223     382,905  
                                 TOTAL CURRENT LIABILITIES   8,595,380     11,010,940  
             
         NOTES PAYABLE, net of current portion   1,546,545     16,708  
             
         DUE TO RELATED PARTY, net of current portion   116,877     -  
             
         STOCKHOLDERS' DEFICIT            
                     Preferred stock, 50,000,000 shares authorized,          
                                 par value; no shares issued            
                     Common stock, 250,000,000 shares authorized, $0.0001        
                                 par value; 90,507,557 and 88,152,557 shares        
                                 issued and outstanding, respectively   9,052     8,815  
                     Additional paid-in capital   40,483,249     38,745,266  
                     Deferred compensation   (43,217 )   (57,418 )
                     Warrant subscriptions   365,386     166,462  
                     Subscription receivable   (22,500 )   (22,500 )
                     Shares issuable   1,401,164     188,664  
                     Accumulated other comprehensive income   83,567     78,328  
                     Accumulated deficit   (50,905,560 )   (47,137,758 )
    (8,628,859 )   (8,030,141 )
             
                     TOTAL LIABILITIES AND            
                                 STOCKHOLDERS' DEFICIT $  1,629,943   $  2,997,507  

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



WESCORP ENERGY INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2009     2008     2009     2008  
                         
REVENUES $  639,999   $  1,414,976   $  1,581,683   $  3,094,155  
                         
COST OF SALES   429,506     890,732     1,037,001     1,785,578  
                         
GROSS PROFIT   210,493     524,244     544,682     1,308,577  
                         
EXPENSES                        
       Wages and benefits   394,084     609,115     1,318,299     1,910,342  
       Wages stock based   161,600     219,600     197,100     377,200  
       Consulting 3   202,784     169,365     414,237     437,337  
       Research and development   43,936     271,379     124,874     795,069  
       Office   137,728     193,836     406,133     553,436  
       Advertising and investor relations   63,269     226,060     202,920     541,285  
       Advertising and investor relations - stock based   35,600     -     262,200     -  
       Travel   85,911     108,520     216,588     342,707  
       Legal and accounting   97,894     33,743     174,637     300,019  
       Insurance   30,311     32,408     89,633     103,958  
       Depreciation and amortization   58,469     73,184     174,459     218,790  
       Interest, finance and bank charges   107,304     129,682     356,440     425,792  
       Directors fees   15,186     (50 )   45,051     38,726  
       Interest accreted on financial instruments   108,900     77,273     108,900     484,158  
               TOTAL OPERATING EXPENSES   1,542,976     2,144,115     4,091,471     6,528,819  
                         
LOSS FROM OPERATIONS   (1,332,483 )   (1,619,871 )   (3,546,789 )   (5,220,242 )
                         
OTHER INCOME (EXPENSE)                        
       Penalty for late delivery of shares   (888,872 )   (248,996 )   (1,658,597 )   (762,300 )
       Foreign currency translation gain (loss)   (57,154 )   27,142     (91,809 )   (11,657 )
       Interest and other income   -     258     -     47,627  
       Gain on settlement of debt   1,522,515     -     1,522,515     -  
       Gain on disposal of investment   -     -     -     37,838  
       Gain on disposition of assets   -     -     6,878     925  
              TOTAL OTHER INCOME (EXPENSE)   576,489     (221,596 )   (221,013 )   (687,567 )
                         
NET LOSS $  (755,994 ) $  (1,841,467 ) $  (3,767,802 ) $  (5,907,809 )
                         
OTHER COMPREHENSIVE INCOME (LOSS)                        
       Foreign currency translation gain (loss)   10,979     9,403     (74,761 )   111,186  
       Unrealized gain on adjustment of agreement payable to                        
             fair market value   4,000     40,000     80,000     80,000  
    14,979     49,403     5,239     191,186  
                         
COMPREHENSIVE LOSS $  (741,015 ) $  (1,792,064 ) $  (3,762,563 ) $  (5,716,623 )
                         
BASIC AND DILUTED NET LOSS PER SHARE $  (0.01 ) $  (0.02 ) $  (0.04 ) $  (0.08 )
                         
WEIGHTED AVERAGE NUMBER COMMON SHARES                        
       OUTSTANDING - BASIC AND DILUTED   90,477,666     80,094,865     89,607,465     77,899,828  

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



WESCORP ENERGY INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

    Nine Months Ended September 30,  
    2009     2008  
CASH FLOWS FROM OPERATING ACTIVITIES:            
   Net loss $  (3,767,802 ) $  (5,907,809 )
   Adjustments to reconcile net loss            
        to net cash used in operating activities:            
             Depreciation and amortization   174,459     218,790  
             Stock-based compensation   459,300     377,200  
             Common stock issued to pay penalties for late delivery of shares   -     -  
             Research and development acquired   -     -  
             Interest accreted on financial instruments   108,900     484,158  
             Gain on settlement of debt   (1,522,515 )   -  
             Gain on disposal of investment   -     (37,838 )
             Gain on disposition of assets   (6,878 )   (925 )
             Amortization of deferred share compensation   21,451     38,334  
             Fair value of common stock and warrants issued for services   107,150     160,650  
             Penalty for late delivery of shares   1,658,597     762,300  
             Changes in operating assets and liabilities:            
               Restricted cash   -     -  
               Accounts receivable   620,099     (256,372 )
               Inventories   214,305     57,751  
               Work in progress   -     (46,533 )
               Prepaid expenses   (6,253 )   47,754  
               Accounts payable and accrued liabilities   91,251     1,280,146  
             Net cash used in operating activities   (1,847,936 )   (2,822,394 )
CASH FLOWS FROM INVESTING ACTIVITIES:            
             Decrease in short-term investment   -     1,472,223  
             Purchase of equipment   -     (155,690 )
             Proceeds from disposition of investment   -     38,485  
             Proceeds from disposition of assets   6,878     18,925  
             Net cash used in investing activities   6,878     1,373,943  
CASH FLOWS FROM FINANCING ACTIVITIES:            
             Proceeds from bank line of credit   27,261     -  
             Payments on notes payable   (15,378 )   (1,475,645 )
             Proceeds from notes payable   581,710     913,170  
             Proceeds from debentures payable   -     460,000  
             Repayments on debentures payable   (100,000 )   (336,319 )
             Increase in amounts due to related parties   16,877     325,027  
             Proceeds received from exercise of warrants prior to issuing shares   198,924     69,554  
             Proceeds from issuance of common stock   -     988,000  
             Proceeds received from private placement   822,000     314,834  
             Private placement issuance costs   (7,476 )   (25,000 )
             Net cash provided by financing activities   1,523,918     1,233,621  
Effect of exchange rates   (47,814 )   (68,243 )
Net decrease in cash   (364,954 )   (283,073 )
Cash, beginning of period   429,171     455,872  
Cash, end of period $  64,217   $  172,799  
             
SUPPLEMENTAL CASH FLOW DISCLOSURES:            
   Cash paid for:            
       Interest $  47,578   $  184,936  
       Income taxes $  -   $  -  
             
NON-CASH INVESTING AND FINANCING ACTIVITIES:            
       Shares issued to settle accounts payable $   $  

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



WESCORP ENERGY INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2009
 

NOTE 1 – BASIS OF PRESENTATION

These unaudited interim consolidated financial statements may not include all information and footnotes required by US GAAP for complete financial statement disclosure. However, except as disclosed herein, there have been no material changes in the information contained in the notes to the audited consolidated financial statements for the year ended December 31, 2008, included in the Company’s Form 10-K, which was filed with the Securities and Exchange Commission. These unaudited interim consolidated financial statements should be read in conjunction with the audited financial statements included in the Form 10-K. In the opinion of management, all adjustments considered necessary for fair presentation and consisting solely of normal recurring adjustments have been made. Operating results for the nine months ended September 30, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009.

Recent Accounting Pronouncements

On July 1, 2009, we adopted authoritative guidance issued by the Financial Accounting Standards Board (“FASB”) on business combinations. The guidance retains the fundamental requirements that the acquisition method of accounting (previously referred to as the purchase method of accounting) be used for all business combinations, but requires a number of changes, including changes in the way assets and liabilities are recognized and measured as a result of business combinations. It also requires the capitalization of in-process research and development at fair value and requires the expensing of acquisition-related costs as incurred. We have applied this guidance to business combinations completed since July 1, 2009.

On July 1, 2009, we adopted the authoritative guidance issued by the FASB that changes the accounting and reporting for non-controlling interests. Non-controlling interests are to be reported as a component of equity separate from the parent’s equity, and purchases or sales of equity interests that do not result in a change in control are to be accounted for as equity transactions. In addition, net income attributable to a non-controlling interest is to be included in net income and, upon a loss of control, the interest sold, as well as any interest retained, is to be recorded at fair value with any gain or loss recognized in net income. Adoption of the new guidance did not have a material impact on our financial statements.

On July 1, 2009, we adopted the authoritative guidance on fair value measurement for nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Adoption of the new guidance did not have a material impact on our financial statements.

In October 2009, the FASB issued authoritative guidance on revenue recognition that will become effective for us beginning July 1, 2010, with earlier adoption permitted. Under the new guidance on arrangements that include software elements, tangible products that have software components that are essential to the functionality of the tangible product will no longer be within the scope of the software revenue recognition guidance, and software-enabled products will now be subject to other relevant revenue recognition guidance. Additionally, the FASB issued authoritative guidance on revenue arrangements with multiple deliverables that are outside the scope of the software revenue recognition guidance. Under the new guidance, when vendor specific objective evidence or third party evidence for deliverables in an arrangement cannot be determined, a best estimate of the selling price is required to separate deliverables and allocate arrangement consideration using the relative selling price method. The new guidance includes new disclosure requirements on how the application of the relative selling price method affects the timing and amount of revenue recognition. We believe adoption of this new guidance will not have a material impact on our financial statements.


In June 2009, the FASB issued authoritative guidance on the consolidation of variable interest entities, which is effective for us beginning July 1, 2010. The new guidance requires revised evaluations of whether entities represent variable interest entities, ongoing assessments of control over such entities, and additional disclosures for variable interests. We believe adoption of this new guidance will not have a material impact on our financial statements.

NOTE 2 – AGREEMENT PAYABLE

On April 1, 2007, the Company was not able to deliver 800,000 free-trading shares called for under Tranche 2, Stage Three of the purchase agreements to acquire Vasjar Trading Ltd. (“Vasjar”), and thus the Company is required to issue the former Vasjar shareholders an additional 80,000 penalty common shares of the Company, compounded monthly, for each month that the free-trading shares are not delivered resulting in a charge to operations for the fair value of these penalty common shares. The aggregate penalty common shares under this stage resulted in a charge to operations of $1,658,597 for the nine months ended September 30, 2009 ($762,300 for the nine months ended September 30, 2008), based on the fair value of the shares. Through September 2009, the Company had recorded an aggregate charge to operations of $3,553,071 to issue an additional 13,159,522 penalty common shares as the free-trading shares associated with Stage Three have not been issued.

If any of the common shares of the Company to be issued to the former Vasjar shareholders have not been delivered for a period of 182 days after the applicable due date, the former Vasjar shareholders may at their option terminate the share purchase agreements. The former Vasjar shareholders did not exercise these rights, and they received all of the penalty shares that accrued until this obligation had been met under both Stage One and Stage Two. The Company is currently negotiating with the former Vasjar shareholders with respect to its failure to satisfy the obligations that have arisen with respect to Stage Three. In addition, the Company pledged to the former Vasjar shareholders all the Vasjar shares as security to guarantee Wescorp’s performance under the share purchase agreements.

Included in the balance for the agreement payable at September 30, 2009 is $3,553,071 (December 31, 2008 – $1,894,474) for the fair value of the penalty common shares plus the fair value of the 800,000 shares relating to Tranche 2, Stage Three in the amount of $216,000 (December 31, 2008 – $296,000).

NOTE 3 – OPERATING SEGMENTS

The Company recognizes revenues, operating income, depreciation and amortization expense, total assets and capital expenditures by segment. Interest expense and other income (expense) are not monitored by segment. Summarized information for the Company’s reportable segments is contained in the following tables:

As of and for the three months ended September 30, 2009:

    Gas                    
    Measurement     Drilling     Corporate     Total  
Revenues $  504,521   $  135,478   $  -   $  639,999  
Loss from operations   (90,719 )   (57,541 )   (1,110,323 )   (1,258,583 )
Depreciation and amortization   7,285     17,097     34,087     58,469  
Total assets   1,017,928     129,834     482,181     1,629,943  
Capital expenditures   -     -     -     -  


As of and for the three months ended September 30, 2008:

    Gas                    
    Measurement     Drilling     Corporate     Total  
Revenues $  1,006,344   $  408,632   $  -   $  $1,414,976  
Income (loss) from operations   (92,051 )   49,874     (1,577,694 )   (1,619,871 )
Depreciation and amortization   11,597     16,684     44,903     73,184  
Total assets   1,789,588     400,774     1,336,365     3,526,727  
Capital expenditures   30,416     36,209     -     66,625  

As of and for the nine months ended September 30, 2009:

    Gas                    
    Measurement     Drilling     Corporate     Total  
Revenues $  1,172,293   $  409,390   $  -   $  1,581,683  
Loss from operations   (448,117 )   (165,247 )   (2,859,525 )   (3,472,889 )
Depreciation and amortization   22,581     50,731     101,147     174,459  
Total assets   1,017,928     129,834     482,181     1,629,943  
Capital expenditures   -     -     -     -  

As of and for the nine months ended September 30, 2008:

    Gas                    
    Measurement     Drilling     Corporate     Total  
Revenues $  2,307,214   $  786,941   $  -   $  $3,094,155  
Loss from operations   (387,855 )   (20,849 )   (4,811,538 )   (5,220,242 )
Depreciation and amortization   40,006     47,016     131,768     218,790  
Total assets   1,789,588     400,774     1,336,365     3,526,727  
Capital expenditures   71,387     42,678     41,625     155,690  

NOTE 4 – STOCK OPTIONS AND WARRANTS

During the period the Company issued 600,000 warrants valued at $108,900 to debenture holders in exchange for their agreement to extend the due date of their debt instruments to November 16, 2009. These warrants allow the holder to purchase common shares of the Company at a price of $0.40 per share and expire two years from the January 21, 2009.

During the three month period ended September 30, 2009, the Company entered into an investor relations consulting services agreement. As part of this agreement the consultant was granted 500,000 options to purchase common shares of the Company at a price of $0.40 per share. The options expire five years from April 1, 2009. Subject to the agreement being in effect at the vesting dates 125,000 options vest upon the effective date of the agreement, 125,000 options vest on the first anniversary of the effective date of the agreement, 125,000 options vest on the second anniversary of the effective date of the agreement, and 125,000 options vest on the third anniversary of the effective date of the agreement. The options vesting in the three month period ended September 30, 2009 were valued at $35,600.

The valuations of the options and warrants described above was based on a Black-Scholes calculation using a risk free interest rate of 3%, expected dividend yield of nil, and expected stock price volatility of 111%.


NOTE 5 – SETTLEMENT OF DEBENTURE

On September 15, 2009, the Company settled the $2,250,000 convertible debenture in exchange for 4,500,000 common shares of the Company. The fair value of the shares issued was $1,192,500 and as a result there was a gain on the settlement of debt in the amount of $1,057,500. In addition, the convertible debenture holder agreed to waive the balance of accrued interest in the amount of $512,260 in exchange for 2,250,000 warrants of the Company. Each warrant allows the holder to purchase common shares of the Company at a price of $1.00 per share and expire September 15, 2012. The warrants have a fair value of $261,100. As a result of this transaction an additional gain on the settlement of debt in the amount of $251,160 was realized. The valuations of the warrants described above was based on a Black-Scholes calculation using a risk free interest rate of 3%, expected dividend yield of nil, and expected stock price volatility of 111%.

NOTE 6 – AGREEMENT WITH ELLYCRACK AS

On September 16, 2009, the Company and Ellycrack AS restructured the terms of their agreement to develop and commercialize the patented on-site heavy oil upgrading technology. Under the terms of the agreement, Ellycrack AS will have full legal ownership of the VISCOSITOR technology, including its designs, work projects and the 50 barrel-per-day VISCOSITOR test unit that is currently located in western Canada. In return, Ellycrack AS will deliver 725,000 shares of Ellycrack to the Company for and Ellycrack will credit the Company as having satisfied its obligation to Ellycrack. As a result of this agreement, net debt in the amount of $213,855 relating to payables and accrued liabilities was deemed to be paid for nil consideration and resulted in a gain on the settlement of debt.

NOTE 7 – SUBSEQUENT EVENT

We evaluated events occurring between the end of our fiscal quarter, September 30, 2009 and November 20, 2009 when the financial statements were issued. There were no subsequent events that provided additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements.


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION.

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Report on Form 10-Q. This discussion contains forward-looking statements reflecting our current expectations and estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the “Cautionary Note Regarding Forward-Looking Statements” set forth above.

Wescorp Energy Inc. is referred to herein as “we”, “us”, “our”, “Wescorp”, “the Company” or “our Company”.

Overview

We are an oil and gas operations solution and engineering company committed to acquiring, developing and commercializing technologies that are designed to improve the management, environmental and economic performance of field operations for oil and gas producers and to provide solutions to help them overcome the tough operational challenges they face. To this end, our primary business strategy is to acquire, fund and develop new systems and technologies in our field through investments in companies or products for which early stage product development has been completed, and to provide consulting services with respect to these systems and technologies. We prefer investments for which we can control the intellectual property of technologies that have emerged from research and initial development and are essentially market-ready. We also acquire companies with one or more technology products being developed that can benefit from the financial, technical and business development experience of our management to bring those products to market in a meaningful manner after they have been fully developed. Among other strategies, we may attempt to license or form third-party commercial partnerships based on these acquired technologies.

In short, our goal is to generate enhanced capital appreciation for our shareholders by continuing to acquire, develop, and commercialize timely effective product solutions or strategic investment opportunities for energy-related applications that generate real returns with above-average cash flow and margins. To this end, we currently have investments in four projects, including: (i) our subsidiary, Flowstar (as defined below); (ii) our Wescorp NAVIGATOR; (iii) our subsidiary Total Fluid Solutions Inc. (“Total Fluid”); and (iv) our subsidiary Raider Chemical Corporation (“Raider”).

Company Background

In 2004 and 2005, the Company recorded its first operating revenue from the acquired operating businesses of Flowstar Technologies Inc. (“Flowstar”), Flowray and their affiliated companies. Flowstar produces advanced natural gas and gas liquids measurement devices based on electronic flow meters and advanced turbine measurement technology. Flowstar devices are self-contained, energy-efficient flow computers with turndown ratios of 40:1 or more for more precise flow measurements and volume calculations that are installed directly to the wellhead. Currently, these products carry a one-year warranty and have no right of return. There is no price protection plan in place.

On September 11, 2007, we effectively completed an Agreement and Plan of Merger (the “Merger Agreement”) with Strategic Decisions Sciences USA Inc. (“SDS”) and Scott Shemwell, who was the sole shareholder of SDS and who is our current Chief Operating Officer. The transaction was structured as a merger of SDS into Wescorp (the “Merger”), with Wescorp remaining as the surviving entity following the Merger. The technology developed by SDS is operating as Wescorp Navigator, a division of Wescorp. It is a Houston-based engineering business focused on providing process-driven consulting services to help oil and gas operators improve the management, economics and environmental performance of field operations. As part of our acquisition of SDS, we acquired its NAVIGATOR Process Management Solution, a collaborative solution that manages the interactions of people, processes and equipment in complex oil and gas field operations. We believe that the Wescorp NAVIGATOR offers powerful, integrated, field operations capability to drive the development, commercialization and management of various aspects of field operations. Specifically, the Wescorp NAVIGATOR can assist operators to manage field complexities, especially in the areas of oil and gas flow measurement and metering, environmental remediation and compliance, enhanced oil recovery, unconventional oil and gas production, and field intelligence, including radio frequency identification (“RFID”) tagging and implementation.

On December 18, 2007, Wescorp Technologies Ltd., our wholly-owned subsidiary, executed and closed an Asset Purchase Agreement with FEP Services, Inc. (“FEP”), pursuant to which Wescorp Technologies acquired certain rights to three different water remediation technologies and assets that we used to create two new business units - Total Fluid Solutions Inc. (“Total Fluid”) and Raider Chemical Corporation (“Raider”). (The rights owned by Total Fluid are for North America.) The three technologies address remediating three

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separate contaminates in oilfield water as the result of the exploration for, and production of, oil and gas, in particular, solids and hydrocarbon:

a.

Total Fluid – Our wholly-owned subsidiary, Total Fluid, owns a North American patent for certain oil- water separation technology. We are in the process of filing a provisional patent application for additional technology which we have developed in the same area. We also own all of the intellectual property rights for a solids-oil separation technology that is not patented, but is held as a trade secret. With these technologies, we hope to be able to remediate two of the main contaminates (solids, hydrocarbon) in oilfield water as the result of exploration for, and production of, oil and gas. The technology to remove solids from the oilfield water uses a proprietary, environmentally friendly, chemical process to separate drilling solids from the water and hydrocarbon mixtures, which are found in the water as a result of drilling the wells. The solids are cleaned to a standard that allows them to be used in construction. The technology to remove hydrocarbons from the oilfield water uses a patented aeration process that is expected to reduce the hydrocarbon content from the conventional 5,000 to 30,000 parts per million range to less than 100 parts per million. The third technology, to remove salt from the oilfield water, uses a low- energy process of flash distillation to separate the salts from the water.

   
b.

Raider – Our wholly-owned subsidiary, Raider, designs and manufactures specialized chemicals used in the cementing and stimulation services area, within the oil and gas industry. Raider is currently making sales in Canada and is also evaluating possibly expanding operations into the US.

Our sources of revenue now include (a) continued revenues from our subsidiary, Flowstar; (b) revenues from our subsidiary Wescorp Services (Navigator) (c) revenues from our subsidiary, Raider and (d) revenues from our subsidiary, Total Fluid.

Results for 2008 and the first nine months of 2009 were not as strong as anticipated due to the world wide financial situation, and specifically, the sharp downturn in gas drilling and exploration. Performance for Flowstar during the first nine months of 2009 was below average. The Raider division has shown encouraging sales considering the drilling market has been slow. Wescorp Services (Navigator) is a new business with strong potential for the future, but it may take some time for the sales to ramp-up.

Overall, the Company as a whole has yet to reach profitability and during the first nine months ended September 30, 2009, we experienced negative cash flows. If we continue to experience negative cash flows, then we will have to continue to fund our operations by the issuance of new equity and/or the assumption of debt. There can be no assurances that we will be successful in these regards, which would significantly affect our ability to execute our business plan.

Although we are somewhat optimistic regarding our future operations, based on our sales for the last three quarters of 2008, additional cash will be required: (i) to fund the purchase of sufficient inventory; (ii) to finance the build-up of trade accounts receivable; and (iii) to fund the ramp-up of our water remediation technologies. Consequently, forecasting our total cash requirement is difficult at this time due to the contingent nature of the timing and volume of sales we expect over that same period.

In the near future, we intend to raise additional capital by selling new equity, or incurring debt, to finance the following:

  • The business development and expansion of water and soil remediation technologies (Total Fluid and Raider);
  • The potential acquisition of possible new technologies and businesses related to one or more of our existing strategic business units, with the intent that they would add value to our overall business almost immediately upon closing; and
  • Any negative cash flow resulting from operations.

Our current and future opportunities for success depend on, to a great extent, the continued employment of and performance by a highly qualified and committed group of senior management and key personnel. As we continue to grow and/or develop our business, the demands and skill sets of our senior management may change. We intend to hire, as needed, new executives with the skill sets and experience required to enhance those areas which require specialized expertise.

Past Acquisitions

Flowstar and Flowray Terms of Acquisition of Flowstar and Flowray

On March 31, 2004, we, through our Alberta subsidiary 1049265 Alberta Ltd., acquired 100% of the outstanding shares of Flowstar and Flowray for cash payments to the selling shareholders totaling approximately $414,074 (CAD $550,000) pursuant to the share purchase and subscription agreement dated June 9, 2003, as amended effective January 14, 2004.

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Related Agreements to Acquire 100% of Vasjar Trading Ltd.

We also entered into share purchase agreements dated effective January 14, 2004 pursuant to which we acquired 100% of the outstanding shares of Vasjar Trading Ltd. (“Vasjar”). Vasjar in turn owns 100% of the outstanding shares of Quadra, a Barbados corporation. Pursuant to an agreement dated effective as of August 30, 2003, Flowray had transferred to Quadra all of its intellectual property rights, including rights to the technology related to the DCR 900 system, in consideration of a promissory note in the principal amount of CAD $604,500 without interest. Flowstar and Flowray were legally amalgamated on December 31, 2004 into one company that continued under the name Flowstar Technologies Inc.

In consideration of the purchase of all the outstanding shares of Vasjar from its two shareholder entities (that each owned 50% of Vasjar’s outstanding shares), Wescorp issued shares (and will issue additional shares), all of which are required to be registered for resale upon delivery, to each of the two shareholders of Vasjar in equal amounts as follows:

  • Tranche 1: an aggregate of 2,400,000 shares of common stock of the Company (1,200,000 shares to each of the two shareholders) on April 28, 2004; and
  • Tranche 2: an aggregate of 2,080,000 additional shares of common stock of the Company (1,040,000 additional shares to each of the two shareholders) to be issued in stages as follows:

Stage One. On or before April 1, 2005, the Company was required to issue 480,000 additional shares based on sales achieved in the 2004 calendar year (240,000 shares to each shareholder).

Stage Two. On or before April 1, 2006, the Company was required to issue 800,000 additional shares based on sales achieved in the 2005 calendar year (400,000 shares to each shareholder).

Stage Three. On or before April 1, 2007, Wescorp was required to issue 800,000 additional shares based on sales achieved in the 2006 calendar year (400,000 shares to each shareholder).

We were not able to deliver free-trading shares on April 1, 2005, and under the Vasjar purchase agreements we were required to pay an additional 48,000 Wescorp shares for each month that the shares were not delivered, covering the months April through September 2005. In September 2005, a third party acquired the interests of the former Vasjar shareholders in connection with the share delivery requirements of Tranche 2, Stage One. As a result, we owed shares under Tranche 2, Stage One to the third party.

On November 22, 2006, we entered into a letter agreement with a third party (the “Third Party Letter Agreement”), pursuant to which we agreed to pay the third party 1,000,000 shares of our common stock to fulfill the Tranche 2, Stage One debt requirements that the third party acquired from the former Vasjar shareholders. These shares were delivered to, and accepted by, the third party on November 22, 2006.

On April 1, 2006, we were not able to deliver free-trading shares called for under Tranche 2, Stage Two, and thus we were required to pay the former Vasjar shareholders an additional 80,000 Wescorp common shares for each month that the shares were not delivered. In February 2007, the third party acquired the interests of the former Vasjar shareholders in connection with the share delivery requirements of Tranche 2, Stage Two. As a result, the Company owed the shares under Tranche 2, Stage Two to a third party. By December 18, 2007, Wescorp issued 3,654,750 common shares to the third party.

If any of the Wescorp shares to be issued to the former Vasjar shareholders have not been delivered for a period of 182 days after the applicable due date, the former Vasjar shareholders may at their option terminate the share purchase agreements, without notice or prior opportunity to cure. The former Vasjar shareholders did not exercise these rights, and they sold to a third party their rights, including their rights to receive shares and/or penalty shares from the Company under both Stage One and Stage Two. We have also received a written waiver from the third party waiving and canceling any termination rights that the third party may have as a result of his purchase of certain rights under the Vasjar purchase agreements. In addition, we pledged to the former Vasjar shareholders all the Vasjar shares as security to guarantee Wescorp’s performance under the share purchase agreements.

Although the Registration Statement covering the shares became effective in January 2008, as of November 12, 2009, we had not delivered the Vasjar shares because we were involved in discussions with the former Vasjar shareholders concerning the possibility of reaching a mutually acceptable agreement regarding the number of free-trading shares for the Company to deliver under Tranche 2, Stage Three. Under the terms of the agreement, without taking into account the Company’s position that the number of shares should be smaller, the former Vasjar shareholders would be entitled to an additional 80,000 Wescorp common shares for each month that the

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shares are not delivered. Because we were unable to deliver these shares, plus the penalty shares, by October 1, 2007, the former Vasjar shareholders currently have the right to terminate their respective share purchase agreements with us. If they do so, we would no longer own Vasjar or its subsidiary, Quadra, including the intellectual property rights owned by Quadra. With the completion of the acquisition of Vasjar, Wescorp owns, subject to Vasjar’s right to terminate the acquisition agreement, all the proprietary technology originally owned by Flowray (which was subsequently amalgamated with Flowstar) related to the DCR 900 system and other products.

Investment in Ellycrack AS

Pursuant to a letter of intent dated February 10, 2004, Ellycrack AS (“Ellycrack”), of Florø, Norway, had granted Wescorp, or its subsidiary, options to acquire three separate exclusive territorial licenses in Canada, the United States and Mexico to make, use, copy, develop and exploit Ellycrack’s technology and intellectual property and to design, manufacture, market and sell products or systems derived from or utilizing Ellycrack’s technology or sublicense others to do the same in each territory.

However, on September 28, 2004, Ellycrack and the Company signed the MOU to form a 50% / 50% Joint Venture to make, use, copy, develop and exploit Ellycrack's technology and intellectual property and to design, manufacture, market and sell products or systems derived from or utilizing Ellycrack's technology or sublicense others to do the same on a world-wide basis.

The MOU also provides for cancellation of the options to purchase licenses in Canada, the United States and Mexico and the institution of an obligation to build and operate a pilot plant in Canada to determine the overall economics of the technology and, subject to the viability of these economics, to market the technology on a worldwide basis. For further details see our Current Report on Form 8-K filed with the SEC on September 28, 2004.

On September 16, 2009 Wescorp and Ellycrack AS restructured the terms of their joint agreement to develop and commercialize the patented on-site heavy oil upgrading technology. The new agreement benefits both companies by aiding Ellycrack to secure the required funding, which, if obtained, will rapidly advance extensive testing, development and refinement of a commercialized facility.

Under the terms of the new agreement, Ellycrack has full legal ownership of the VISCOSITOR technology, including its designs, work projects and the 50 barrel-per-day VISCOSITOR test unit that is currently located in western Canada.

In return, Ellycrack AS will deliver 725,000 shares of Ellycrack to Wescorp for nominal consideration and Ellycrack will credit Wescorp as having satisfied its obligation to Ellycrack of approximately $214,000. Wescorp is the largest single shareholder of Ellycrack with ownership of 23.72% on a fully diluted basis. Wescorp also has been granted the option to participate in all future Ellycrack share issuances thus allowing Wescorp to maintain its ownership percentage in Ellycrack AS.

Acquisition and Business of Strategic Decision Sciences USA Inc.

On September 11, 2007, we acquired SDS, a Houston-based engineering firm focused on providing process-driven consulting and services to help oil and gas operators improve the management, economics and environmental performance of field operations. As part of our acquisition of SDS, we acquired its NAVIGATOR Process Management Solution, a collaborative solution that manages the interactions of people, processes and equipment in complex oil and gas field operations. We believe that the Wescorp NAVIGATOR offers powerful, integrated, field operations capability to drive the development, commercialization and management of various aspects of field operators. Specifically, the Wescorp NAVIGATOR can assist operators to manage field complexities, especially in the areas of oil and gas flow measurement and metering, environmental remediation and compliance, enhanced oil recovery, unconventional oil and gas production, and field intelligence, including radio frequency identification (“RFID”) tagging and implementation.

SDS focuses on the operations level and is committed to assisting its clients to achieve operational excellence.

Acquisition of Intellectual Property and Other Assets from FEP Services Inc.; Business of Total Fluid Solutions and Raider Chemical Corporation

On December 18, 2007, the Company effectively completed an agreement to purchase intellectual property and other assets from FEP. Different portions of this intellectual property and these other assets were transferred to our newly formed wholly-owned subsidiaries, Total Fluid Solutions and Raider Chemical Corporation, respectively, as described below. Under the terms of the purchase agreement, our wholly-owned subsidiary, Wescorp Technologies, assumed liabilities of approximately CAD $240,000 and delivered to FEP: (i) a two-year promissory note in the face amount of CAD $2,665,000; (ii) 13,900,000 restricted shares of common stock of Wescorp

9


Energy; and (iii) 470,143 shares of common stock of Oilsands at an agreed value of $2,192,277. Also in connection with the Asset Purchase Agreement, Wescorp Technologies entered into a license agreement with a third party and a consulting agreement with each of Messrs. Bowhay and McCaw to provide various consulting services.

Total Fluid Solutions

Our wholly-owned subsidiary, Total Fluid Solutions Inc. (‘Total Fluid”), owns the world-wide rights to certain oil-water separation technology in the oil and gas field. The Canadian patent rights expire in March 2011. We have filed a provisional patent application for the worldwide oil and gas rights for additional technology in the same area. We also own all of the intellectual property rights for a solids-oil separation technology that is not patented, but is held as a trade secret. With these technologies, we hope to be able to remediate two of the main contaminates (solids, hydrocarbon) in oilfield water as the result of exploration for, and production of, oil and gas. We intend to use these technologies independently or in conjunction with each other or other water remediation technologies in order to address the critical water issues facing the oil and gas industry today.

The technology to remove solids from the oilfield water uses a proprietary, environmentally friendly, chemical process to separate drilling solids from the water and hydrocarbon mixtures, which are found in the water as a result of drilling the wells. The solids are cleaned to a standard that allows them to be used in construction. The technology to remove hydrocarbons from the oilfield water uses a patented aeration process that is expected to reduce the hydrocarbon content from the conventional range of 5,000 to 30,000 parts per million to less than 10 parts per million. The third technology, to remove salt from the oilfield water, uses a low-energy process of flash distillation to separate the salts from the water.

The Total Fluid field testing has been completed at our industry-sponsored production facility, involving 120 oil and gas wells. During the last phase of our test period, we maintained over 90% uptime, with minimal interruptions. Our operational results have provided valuable data to our industry sponsors, allowing them to recommend technical improvements to our equipment, resulting in savings in operating costs. These independent third-party verified results showed that the H2Omaxx unit reduced the hydrocarbon content in water down to below 10 parts per million.

We believe that all indications are that our technology is sound and that the market opportunity is vast. We continue to work with the University of Calgary and the Canadian Environmental Technology Advancement Corporation on proving scalability and validating the technology’s use in other areas of applications.

Since the beginning of the second quarter of 2008, we have demonstrated our unit to over 100 investors, clients, industry experts, and government officials. It is hoped that these demonstrations will lead to future sales opportunities of the unit. We have signed our first sales order for one unit with options for up to an additional 255 units over the next five years.

Wescorp has had extensive discussions with interested parties regarding a worldwide strategic marketing and distribution alliance for the H2Omaxx technology in the oil and gas sector. A Letter of Intent for a Worldwide Exclusive Licensing Agreement to market and manufacture the H2Omaxx technology was signed with Weatherford International Inc. The parties currently are negotiating an agreement.

Wescorp has moved its initial H2Omaxx unit to Kansas where it is in operation with an independent oil and gas company that also has ordered a second unit. In addition, Wescorp has received an order for one H2Omaxx unit and one HCXT unit from Western Canadian Oil Sands, Inc. for use in Northern Alberta.

In addition, on July 23, 2009, Wescorp and Cancen Oil Canada Corporation (“Cancen”), an oilfield waste management and processing company based in western Canada, signed a letter of intent to enter into a 50:50 joint venture agreement. Under the terms of the letter of intent a combination of a minimum of 12 H2Omaxx water units and HCXT Solids units will be strategically installed over the next 12 months at Cancen’s facilities to significantly increase efficiency and reduce operating costs. As Cancen expands its operation it will be installing additional units. In addition, the joint venture intends to build additional portable units to provide remote onsite remediation for a number of Cancen’s clients.

On September 2, 2009 Cancen posted a $1,000,000 irrevocable line of credit for the immediate construction of three units to be deployed at Cancen’s facilities.

Under the terms of the letter of intent, Wescorp will be responsible for providing the intellectual property and technical support. Cancen will be responsible for operating and managing the joint venture and funding the operations, including, but not limited to, the construction and deployment costs of all H2Omaxx and HCXT remediation units.

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The joint venture will share in the revenue generated by the use of Wescorp’s H2O Maxx and HCXT units at Cancen’s facilities. Upon initial operation of the remediation units, the revenue will be split 25:75 (Wescorp: Cancen) until 110% of the construction costs are repaid to Cancen. Thereafter, the revenue will be shared on a 50:50 basis.

Raider Chemical Corporation

Our wholly-owned subsidiary, Raider Chemical Corporation (“Raider”), designs and manufactures specialized chemicals used in the cementing and stimulation services area, within the oil and gas industry. Raider is currently making sales in Canada, and the US and has four new chemicals which are being tested by prospective customers.

Operations Summary

Results from Operations – 2009 Compared to 2008

Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008

Revenues

Revenues during the quarter ended September 30, 2009 were $639,999, compared to $1,414,976 for the quarter ended September 30, 2008, a decrease of $774,977, or 54.8% . Revenues attributable to our wholly-owned subsidiary Flowstar were $504,521 (2008 -$1,006,344) while revenues of Raider contributed $135,478 (2008 - $408,632). This decrease is primarily attributed to the decline in the price of natural gas which has resulted in the customers of Flowstar and Raider to either defer or abandon plans to bring new wells into production. Problems continue to be caused by reductions in well licensing, drilling activities, and capital spending which still plague the Canadian natural gas industry. Based on information published by the Canadian Association of Petroleum Producers, well licensing is down 65.4% and well completions are down 74.1% for gas wells in the quarter ended September 30, 2009 when compared to the same period for 2008 in the province of Alberta, Canada.

Also contributing to the decrease in revenue is the decline in the Canadian dollar relative to the US dollar. The average exchange rate of the Canadian dollar for the US dollar decreased by approximately 5.2% in the third quarter of 2009 when compared with the exchange rate for the same period in 2008. As virtually all revenue is from sales to customers in Canada, the decrease in the exchange rate had a detrimental impact on revenue for the three months ended September 30, 2009.

We continue to look for additional product offerings that will further expand our existing product line, and to find new market niches for our existing products. Flowstar has been focusing its sales efforts by identifying applications and markets where its electronic flow measurement systems have advantages over competing products in order to increase its market share in the Canadian natural gas flow measurement market.

Cost of Sales

As a percentage of revenues, cost of sales for the quarter ended September 30, 2009 increased to 67.1% versus 63.0% for the quarter ended September 30, 2008. A significant portion of the inventory is purchased from suppliers in the U.S.A., and the cost of these goods has been higher when compared to the prior year due to the change in the exchange rate as described above. In addition, one of our major suppliers has increased the cost of its products. Given the depressed market in the Canadian natural gas industry and the resulting decrease in drilling activity as described above, these costs could not be passed on to our customers. Also, pricing of products was reduced to try to stimulate demand.

Expenses

Operating expenses for the quarter ended September 30, 2009 were $1,542,976 versus $2,144,115 for the quarter ended September 30, 2008, a decrease of $601,139. The largest decreases in our operating expenses were in research and development, wages and benefits, advertising and investor relations, wages – stock based, office, travel, and interest, finance and bank charges as explained below.

Costs for research and development dropped in the quarter ended September 30, 2009 to $43,936 compared to the $271,379 incurred in the quarter ended September 30, 2008. Most of this decrease can be attributed to a reduction in the costs incurred to develop the H2Omaxx technology of Total Fluid. Expenditures, net of grant funds received, on developing this technology were only $37,992 for

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the three months ended September 30, 2009 while net costs of $148,705 were incurred in the corresponding period in 2008. In addition there was a reduction in costs associated with modifying the VISCOSITOR to be a 20 to 50 barrel-per-day pilot plant. With current efforts being concentrated on completing development of the H2Omaxx technology, only $5,945 in expenditures were  committed to the development of the VISCOSITOR in the quarter ended September 30, 2009, while costs incurred in the third quarter of 2008 totaled approximately $122,600. Two consulting contracts related to this project were terminated in the year ended December 31, 2008 and therefore costs that had been incurred in the quarter ended September 30, 2008 were not incurred in the quarter ended September 30, 2009.

Wages and benefits decreased to $394,084 during the quarter ended September 30, 2009 versus $609,115 during the quarter ended September 30, 2008, a decrease of $215,031. As most of the employees are paid in Canadian dollars, the Company realized a significant decrease in payroll costs due to the decrease in the Canadian dollar when compared to the US dollar as described above. Further savings can be attributed to not replacing employees who left the Company and the laying off of employees. Our Chief Operating Officer stopped receiving compensation effective August 31, 2009. In addition, commencing in October 2008 our Chief Financial Officer, who resigned in August 2009, was no longer receiving any compensation.

During the quarter ended September 30, 2008, 808,758 options to purchase common shares pursuant to employment agreements for executive officers vested and were valued at $219,600. In the same period for 2009, 400,000 options to purchase common shares pursuant to employment agreements for executive officers vested and were valued at $161,600. Thus, the Company had a decrease of $58,000 in stock-based wages during the three months ended September 30, 2009 compared to the three months ended September 30, 2008.

Advertising and investor relations expenses decreased by $162,791 to $63,269 for the quarter ended September 30, 2009, versus $226,060 reported for the quarter ended September 30, 2008. Most of this decrease is a direct result of issuing shares valued at $128,250 pursuant to consulting contracts for investor relations services in the three months ended September 30, 2008, with no corresponding expense being incurred in the comparable 2009 period. Costs that were incurred in the third quarter of 2009 for promotion of the Wescorp Navigator, Flowstar, and Total Fluid product offerings were less than those incurred in the same period of 2008.

Office expenses for the quarter ended September 30, 2009 were $137,728 compared to $193,836 for the quarter ended September 30, 2008. The decrease of $56,108 is a direct result of the decreased cost of rental space for the office in Houston, Texas, reductions in software license fees and decreased spending for the operations of Wescorp Navigator. As a greater portion of the office expenses in the current period were incurred in Canadian dollars instead of US dollars, some additional savings were also realized by the reduction in the exchange rate for the Canadian dollar.

Travel expenses during the quarter ended September 30, 2009 decreased by $22,609 versus the quarter ended September 30, 2008, a direct result of reduced marketing of Wescorp Navigator, Wescorp, and Flowstar in international markets and decreased activity in the Ellycrack project. Due to the downturn in the Alberta natural gas market there has been less activity in Flowstar resulting in a corresponding decrease in travel costs for that division. Travel costs for Flowstar decreased to $14,565 in the quarter ended September 30, 2009 versus the $38,047 incurred in the same period for 2008. As a greater portion of the travel expenses in the current period were incurred in Canadian dollars instead of US dollars, some additional savings were also realized by the reduction in the exchange rate for the Canadian dollar. These savings were offset by an increase in travel expenses for Total Fluid in the amount of $25,780 in the quarter ended September 30, 2009, versus the same period for 2008. These costs were required in order to set up the H2Omaxx unit in Kansas and to ensure it was operating adequately.

We incurred interest, finance and bank charges of $107,304 for the quarter ended September 30, 2009 compared to $129,682 incurred during the quarter ended September 30, 2008. Most of the decrease can be attributed to the fact no financing fees were incurred in the three months ended September 30, 2009 versus the $25,000 incurred in the quarter ended September 30, 2008. In addition there was a reduction in interest-bearing debt from $5,417,305 at September 30, 2008, to $3,994,875 at September 30, 2009.

Depreciation and amortization expense for the quarter ended September 30, 2009 was $58,469 versus $73,184 for the quarter ended September 30, 2008, a decrease of $14,715. This decrease was a direct result of having fully depreciated property and equipment as at December 31, 2008 that were still being utilized by the Company in the third quarter of 2009. The value of property and equipment that was not fully depreciated at September 30, 2008 was higher than at September 30, 2009.

Insurance expense for the quarter ended September 30, 2009 was $30,311 compared to $32,408 for the quarter ended September 30, 2008. The decrease is due to a reduction in our premium for our comprehensive insurance partially offset by a slight increase in our directors’ and officers’ liability insurance.

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The above decreases were partially offset by an increase in legal and accounting, stock-based advertising and investor relations, consulting, directors’ fees, and interest accreted on financial instruments.

Legal and accounting costs for the three months ended September 30, 2009 were $97,894, which was an increase of $64,151 compared to the corresponding period of 2008. The increase in the current period is directly related to a significantly higher accrual for the estimated 2009 audit fees. This increase was offset by lower legal fees required for compliance with various regulatory filings, and for due diligence work undertaken with respect to potential business acquisitions and other contracts.

During the quarter ended September 30, 2009, 125,000 options to purchase common shares pursuant to investor relations agreements vested and were valued at $35,600. In the same period for 2008, no options to purchase common shares pursuant to investor relations agreements vested. Thus, the Company had an increase of $35,600 in stock-based advertising and investor relations costs during the three months ended September 30, 2009 when compared to the three months ended September 30, 2008.

Consulting fees incurred in the quarter ended September 30, 2009 in the amount of $202,784 were $33,419 higher than the $169,365 incurred in the same period for 2008. This increase is a direct result of the exercise of cashless warrants issued for consulting services that were valued at $136,850 during the three months ended September 30, 2009. No similar transactions were incurred in the same period for 2008. This increase was partially offset by having fewer contracts with consultants in the three months ended September 30, 2009, when compared to the same period in 2008. The costs associated with the new consulting contracts entered into since September 30, 2008, were for lower amounts than those that have terminated since September 30, 2008.

The Company decided to compensate outside directors in the form of shares commencing on April 1, 2006. During the three months ended September 30, 2008, one of the outside directors for the Company resigned and forfeited any right to the shares that were to be issued to him. As a result, directors’ fees accrued in the first six months of 2008 for shares not yet issued were reversed in the quarter ended September 30, 2008. Accordingly, directors’ fees incurred in the three months ended September 30, 2008 reflected this reversal and resulted in a credit of $50 being charged to operations compared to $15,186 being charged to operations for the same period in 2009.

To account for the issuance of the Company’s $400,000 non-convertible debentures that include attached warrants in the fourth quarter of the year ended December 31, 2007, a beneficial conversion feature of $100,000 was recorded as a debt discount and was amortized over the life of the debenture. An additional $109,465 was recorded as a debt discount related to debentures issued in 2008. As a result $48,482 in interest accretion related to the debt discount was charged to operations in the three months ended September 30, 2008. In December 2007, an unsecured note (“FEP Note”), bearing interest at a rate of 0.0%, in the amount of approximately $2,696,980 (CAD $2,665,000) was issued. The fair value of this note was computed as $2,183,635 using an imputed interest rate of 18.0% which was assumed to represent the incremental borrowing rate of the Company. This resulted in $513,345 being recorded as a debt discount which will be amortized over the life of the note. During the quarter ended September 30, 2008, amortization of $28,791 related to the debt discount on the note was recorded. Total costs for the accretion of interest related to financial instruments incurred in the quarter ended September 30, 2008 was $77,273. During the quarter ended September 30, 2009, 600,000 new warrants valued at $108,900 were issued to debenture holders in exchange for their agreement to extend the due date of their debt instruments. This amount was charged to operations for the quarter ended September 30, 2009.

Other Income and Expenses

For the quarter ended September 30, 2009, other expenses have decreased by $798,085 from the same period in 2008. This decrease is the net result of the matters described below.

We did not deliver free-trading shares called for under Tranche 2, Stage Three of the agreement to acquire Vasjar. Under the terms of the agreement we are required to pay the former Vasjar shareholders an additional 3,471,526 Wescorp common shares for the three months ended September 30, 2009. This resulted in an accrual of $888,872 being recorded for the quarter ended September 30, 2009, (September 30, 2008 - $248,996) which reflects the increase in shares needed to be delivered and the closing trading price of Wescorp shares as at September 30, 2009.

The foreign currency loss of $57,154 for the quarter ended September 30, 2009 is a direct result of the Canadian dollar being slightly stronger than the U.S. dollar at September 30, 2009 when compared to June 30, 2009. Many payables are denominated in Canadian dollars and as that currency strengthens exchange losses result when payables are settled. The foreign currency gain of $27,142 for the quarter ended September 30, 2008 was a direct result of the Canadian dollar being slightly weaker than the U.S. dollar at September 30, 2008 when compared to June 30, 2008. Many of Wescorp’s payables are denominated in Canadian dollars and as that currency weakens exchange gains result when those payables are settled.

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The gain on the settlement of debt in the amount of $1,522,515 incurred in the three months ended September 30, 2009, is the result of two transactions. On September 16, 2009, a settlement agreement was reached with Ellycrack A/S. As part of this agreement net debt in the amount of $213,855 relating to payables and accrued liabilities was deemed to be paid for nil consideration and resulted in a gain on the settlement of debt. On September 15, 2009, the Company settled the $2,250,000 principal balance of a debenture in exchange for 4,500,000 common shares of the Company. At the date of this transaction the closing market price of these shares was $0.265 per share. The value of the shares at the settlement date was $1,192,500 and as a result a gain on the settlement of debt in the amount of $1,057,500 was realized during the period. In addition, the accrued interest on the $2,250,000 debenture in the amount of $512,260 was forgiven in exchange for 2,250,000 warrants which were valued at $261,100 which resulted in a gain of the settlement of debt in the amount of $251,160. No similar transactions were incurred in the three months ended September 30, 2008.

Net Loss

The net loss for the quarter ended September 30, 2009 of $755,994 compared to a net loss of $1,841,467 for 2008 is due to the net effect of the decreases in operating expenses of 601,139, and $798,085 in other expenses partially offset by the decrease in gross profit of $313,751 as explained above.

Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008

Revenues

Revenues during the nine months ended September 30, 2009 were $1,581,683 compared to $3,094,155 for the nine months ended September 30, 2008, a decrease of $1,512,472, or 48.9% . Revenues attributable to our wholly-owned subsidiary Flowstar were $1,172,293 (2008 - $2,307,538) while revenues of Raider contributed $409,390 (2008 - $786,941). This decrease is primarily attributed to the decline in the price of natural gas which has resulted in the customers of Flowstar to either defer or abandon plans to bring new wells into production. Problems continue to be caused by reductions in well licensing, drilling activities, and capital spending which still plague the Canadian natural gas industry. Based on information published by the Canadian Association of Petroleum Producers, well licensing is down 55.1% and well completions are down 56.1% for gas wells in the first nine months of 2009 when compared to the same period for 2008 in the province of Alberta, Canada.

Also contributing to the decrease in revenue is the decline in the Canadian dollar relative to the US dollar. The average exchange rate of the Canadian dollar for the US dollar decreased by approximately 12.7% for the nine months ended September 30, 2009 when compared with the exchange rate for same period in 2008. As virtually all revenue is from sales to customers in Canada, the decrease in the exchange rate had a significant impact on revenue for the nine months ended September 30, 2009.

We continue to look for additional product offerings that will further expand our existing product line, and to find new market niches for our existing products. Flowstar has been focusing its sales efforts by identifying applications and markets where its electronic flow measurement systems have advantages over competing products in order to increase its market share in the Canadian natural gas flow measurement market.

Cost of Sales

As a percentage of revenues, cost of sales for the nine months ended September 30, 2009 increased to 65.6% versus 57.7% for the nine months ended September 30, 2008. A significant portion of the inventory is purchased from suppliers in the U.S.A., and the cost of these goods has been higher when compared to the prior year due to the change in the exchange rate as described above. In addition, one of our major suppliers has increased the cost of its products significantly. Given the depressed market in the Canadian natural gas industry and the resulting decrease in drilling activity as described above, these costs could not be passed on to our customers. Also, pricing of products was reduced to try to stimulate demand. In addition, a portion of this increase can be attributed to the slightly lower margins achieved in the sale of Raider products versus those margins that are realized on the sale of Flowstar products and having a higher percentage of the sales in this nine-month period being contributed by Raider.

Expenses

Operating expenses for the nine months ended September 30, 2009 were $4,091,471 versus $6,528,819 for the nine months ended September 30, 2008, a decrease of $2,437,348. The largest decreases in our operating expenses were in research and development, wages and benefits, interest accreted on financial instruments, advertising and investor relations, stock-based wages, office, travel, legal and accounting, and interest, finance and bank charges as explained below.

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Costs for research and development dropped in the nine months ended September 30, 2009 to $124,874 compared to the $795,069 incurred in the nine months ended September 30, 2008. Most of this decrease can be attributed to a reduction in the costs incurred to develop the H2Omaxx technology of Total Fluid. Expenditures, net of grant funds received, on developing this technology were only  $122,376 for the nine months ended September 30, 2009 while net costs of $389,353 were incurred in the corresponding period in 2008. In addition there was a reduction in costs associated with modifying the VISCOSITOR to be a 20 to 50 barrel-per-day pilot plant. With current efforts being concentrated on completing development of the H2Omaxx technology, only $2,499 in expenditures were committed to the development of the VISCOSITOR in the nine months ended September 30, 2009 while costs incurred in the nine months ended September 30, 2008 totaled $405,716. Two consulting contracts related to this project were terminated in the year ended December 31, 2008 and therefore costs that had been incurred in the nine months ended September 30, 2008 were not incurred in the nine months ended September 30, 2009.

Wages and benefits decreased to $1,318,299 during the nine months ended September 30, 2009 versus $1,910,342 during the nine months ended September 30, 2008, a decrease of $592,043. As most of the employees are paid in Canadian dollars, the Company realized a significant decrease in payroll costs due to the decrease in the Canadian dollar when compared to the US dollar as described above. Further savings can be attributed to not replacing employees who left the Company and the laying off of employees. Our Chief Operating Officer stopped receiving compensation effective August 31, 2009. In addition, commencing in October 2008 our Chief Financial Officer, who resigned in August 2009, was no longer receiving any compensation.

To account for the issuance of the Company’s $400,000 non-convertible debentures that include attached warrants in the fourth quarter of the year ended December 31, 2007, a beneficial conversion feature of $100,000 was recorded as a debt discount and was amortized over the life of the debenture. An additional $109,465 was recorded as a debt discount related to debentures issued in 2008. As a result $168,842 in interest accretion related to the debt discount was charged to operations in the nine months ended September 30, 2008. In December 2007, an unsecured note (“FEP Note”), bearing interest at a rate of 0.0%, in the amount of approximately $2,696,980 (CAD $2,665,000) was issued. The fair value of this note was computed as $2,183,635 using an imputed interest rate of 18.0% which was assumed to represent the incremental borrowing rate of the Company. This resulted in $513,345 being recorded as a debt discount which will be amortized over the life of the note. During the nine months ended September 30, 2008, amortization of $315,316 related to the debt discount on the note was recorded. Total costs for the accretion of interest related to financial instruments incurred in the nine months ended September 30, 2008 was $484,158. During the nine months ended September 30, 2009, 600,000 new warrants valued at $108,900 were issued to debenture holders in exchange for their agreement to extend the due date of their debt instruments. This amount was charged to operations for the nine months ended September 30, 2009.

Advertising and investor relations expenses decreased by $338,365 to $202,920 for the nine months ended September 30, 2009 versus $541,285 reported for the nine months ended September 30, 2008. This decrease is a direct result of significant costs that were incurred in the first nine months, particularly in the first quarter, of 2008 for brand imaging and extensive promotion of the Wescorp Navigator and Flowstar product offerings were not incurred in 2009. This includes the issuing of shares valued at $128,250 pursuant to consulting contracts for investor relations services in the nine months ended September 30, 2008, with no corresponding expense being incurred in the comparable 2009 period. In addition, the contracts for investor relations consulting services in the nine months ended September 30, 2009, were for lower amounts than the contracts that existed during the nine months ended September 30, 2008.

During the nine months ended September 30, 2009, 500,000 options to purchase common shares pursuant to employment agreements for executive officers vested and were valued at $197,100. In the same period for 2008, 1,382,385 options to purchase common shares pursuant to employment agreements for executive officers vested and were valued at $377,200. Thus, the Company had a decrease of $180,100 in stock-based wages during the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008.

Office expenses for the nine months ended September 30, 2009 were $406,133 compared to $553,436 for the nine months ended September 30, 2008. The decrease of $147,303 is a direct result of the decreased cost of rental space for the office in Houston, Texas, and decreased spending for the operations of Wescorp Navigator. There have also been reductions in cellular telephone charges due to decreases in travel outside of North America, and software license fees. As a greater portion of the office expenses in the current period were incurred in Canadian dollars instead of US dollars, some additional savings were also realized by the reduction in the exchange rate for the Canadian dollar.

Travel expenses during the nine months ended September 30, 2009, decreased by $126,119 versus the nine months ended September 30, 2008, a direct result of reduced marketing of Wescorp Navigator, Wescorp, and Flowstar in international markets and decreased activity in the Ellycrack project. Due to the downturn in the Alberta natural gas market, there has been less activity in Flowstar resulting in a corresponding decrease in travel costs for that division. Travel costs for Flowstar decreased to $55,008 in the nine months ended September 30, 2009 versus the $94,639 incurred in the same period for 2008. As a greater portion of the travel

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expenses in the current period were incurred in Canadian dollars instead of US dollars, some additional savings were also realized by the reduction in the exchange rate for the Canadian dollar. These savings were offset by an increase in travel expenses for Total Fluid in the amount of $13,580 in the nine months ended September 30, 2009, versus the same period for 2008. This increase in costs was directly related to the set up of the H2Omaxx unit in Kansas and to ensure it was operating adequately. Travel costs for Total Fluid increased to $76,701 in the nine months ended September 30, 2009 versus the $63,121 incurred in the same period for 2008.

Legal and accounting costs for the nine months ended September 30, 2009, were $174,637, which was a decrease of $125,382 compared to the corresponding period of 2008. The decrease in 2009 is directly related to decreased audit fees and lower legal fees required for compliance with various regulatory filings, and for due diligence work undertaken with respect to potential business acquisitions and other contracts. These decreases were offset by partially higher costs related to SOX 404 compliance.

We incurred interest, finance and bank charges of $356,440 for the nine months ended September 30, 2009, compared to $425,792 incurred during the nine months ended September 30, 2008. Most of the decrease can be attributed to the reduction in interest-bearing debt from $5,417,305 at September 30, 2008, to $3,994,875 at September 30, 2009. In addition, financing fees of $25,689 were incurred in the nine months ended September 30, 2009, versus the $98,618 incurred in the nine months ended September 30, 2008.

Depreciation and amortization expense for the nine months ended September 30, 2009 was $174,459 versus $218,790 for the nine months ended September 30, 2008, a decrease of $44,331. This decrease was a direct result of having fully depreciated property and equipment as at December 31, 2008 that were still being utilized by the Company in the first nine months of 2009. The value of property and equipment that was not fully depreciated at September 30, 2008 was higher than at September 30, 2009.

Consulting fees incurred in the current nine month period in the amount of $ 414,237 were $23,100 lower than the $437,337 incurred in the same period for 2008. This decrease is a direct result of having fewer contracts with consultants in the nine months ended September 30, 2009 when compared to the same period in 2008. The costs associated with the new consulting contracts that did not exist in the first nine months of 2008 were for lower amounts than those that have terminated since September 30, 2008. Included in the costs for consulting in the nine months ended September 30, 2009 was $99,900 for the value of shares issued pursuant to consulting agreements. Only $14,333 in corresponding costs for consulting fees paid with shares were incurred in the nine months ended September 30, 2008. These decreases were offset by the exercise of cashless warrants issued for consulting services that were valued at $136,850 during the nine months ended September 30, 2009. No similar transactions were incurred in the same period for 2008.

Insurance expense for the nine months ended September 30, 2009 was $89,633 compared to $103,958 for the nine months ended September 30, 2008. The decrease is due to a reduction in our premium for our comprehensive insurance partially offset by a slight increase in our directors’ and officers’ liability insurance.

The above decreases were partially offset by increases in stock-based advertising and investor relations, and director’s fees.

During the nine months ended September 30, 2009, 725,000 options to purchase common shares pursuant to investor relations agreements vested and were valued at $262,200. In the same period for 2008, no options to purchase common shares pursuant to investor relations agreements vested. Thus, the Company had an increase of $262,200 in stock-based advertising and investor relations costs during the nine months ended September 30, 2009 when compared to the nine months ended September 30, 2008.

The Company decided to compensate outside directors in the form of shares commencing on April 1, 2006. During the three months ended September 30, 2008, one of the Company’s outside directors resigned and forfeited any right to the shares that were to be issued to him. As a result, directors’ fees accrued in the first nine months of 2008 for shares not yet issued were reversed in the quarter ended September 30, 2008. Accordingly directors’ fees incurred in the nine months ended September 30, 2008, reflected this reversal and resulted in $38,726 being charged to operations compared to $45,051 being charged to operations for the same period in 2009. Fees for other outside directors for the nine months ended September 30, 2009, are lower than what was incurred in the same period for 2008 as there has been a slight decrease in the market price of the Company’s shares during the nine months ended September 30, 2009, when compared to September 30, 2008.

Other Income and Expenses

For the nine months ended September 30, 2009, other expenses have decreased by $466,554 from the same period in 2008. This decrease is the net result of the matters described below.

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We did not deliver free-trading shares called for under Tranche 2, Stage Three of the agreement to acquire Vasjar. Under the terms of the agreement we are required to pay the former Vasjar shareholders an additional 8,039,322 Wescorp common shares for the nine months ended September 30, 2009. This resulted in an accrual of $1,658,597 being recorded for the nine months ended September 30, 2009, (September 30, 2008 - $762,300) which reflects the increase in shares needed to be delivered and the closing trading price of Wescorp shares as at September 30, 2009.

The foreign currency loss of $91,809 for the nine months ended September 30, 2009 is a direct result of the Canadian dollar being stronger than the U.S. dollar at September 30, 2009 when compared to December 31, 2008. Many payables are denominated in Canadian dollars and as that currency strengthens exchange losses result when payables are settled. The foreign currency loss of $11,657 for the nine months ended September 30, 2008 was a direct result of the Canadian dollar being weaker than the U.S. dollar at September 30, 2008 when compared to December 31, 2007. Wescorp had a short-tem investment, redeemed in September 2008, of approximately $1,478,400 denominated in Canadian dollars which decreased in value as the Canadian dollar weakened against the U.S. dollar. Some of the losses incurred in 2008 were offset, as many payables were denominated in Canadian dollars and as that currency weakened, exchange gains resulted when the payables were settled.

The gain on the settlement of debt in the amount of $1,522,515 incurred in the nine months ended September 30, 2009, is the result of two transactions. On September 16, 2009, a settlement agreement was reached with Ellycrack A/S. As part of this agreement net debt in the amount of $213,855 relating to payables and accrued liabilities was deemed to be paid for nil consideration and resulted in a gain on the settlement of debt. On September 15, 2009, the Company settled the $2,250,000 principal balance of a debenture in exchange for 4,500,000 common shares of the Company. At the date of this transaction the closing market price of these shares was $0.265 per share. The value of the shares at the settlement date was $1,192,500 and as a result a gain on the settlement of debt in the amount of $1,057,500 was realized during the period. In addition, the accrued interest on the $2,250,000 debenture in the amount of $512,260 was forgiven in exchange for 2,250,000 warrants which were valued at $261,100 which resulted in a gain of the settlement of debt in the amount of $251,160. No similar transactions were incurred in the nine months ended September 30, 2008.

Interest income for the nine months ended September 30, 2008 is directly related to the short-term investment made in June 2007. This short-term investment was redeemed in June of 2008; therefore no corresponding interest income was earned in the same period for 2009.

The gain on the disposal of assets is the direct result of disposing of assets that were completely depreciated and no longer being utilized by the Company during the nine months ended September 30, 2009.

The gain on the disposal of investment for the nine months ended September 30, 2008 is the direct result of disposing of 4.5% of the investment in Tarblaster AS.

Net Loss

The net loss for the nine months ended September 30, 2009, of $3,767,802 compared to a net loss of $5,907,809 for 2008 is due to the net effect of the decreases in operating expenses of $2,437,348, and $466,554 in other expenses partially offset by the decrease in gross profit of $763,895, as explained above.

Continued Liquidity and Financing of Business Plan

To date, our operations have been funded by a combination of short-term debt and equity financing. Currently, cash on hand, and collection of trade accounts receivable are our only existing sources of liquidity. In the event that we do not achieve positive cash flow from operations in 2009, we will be relying on debt and equity financings to provide our Company with sufficient capital to continue our development and operational plans. There can be no assurance that we can continue to grow, which would have a significant effect on the financial condition of our Company and our ability to effectively implement our proposed business plans.

Although we do not have any lending arrangements in place with banking or financial institutions, we intend to seek conventional bank financing for Flowstar once we redeem or effect the conversion of the outstanding short-term convertible debenture to equity as noted herein.

We are also currently in the process of pursuing financing for our 2009 operations and investment plan. Our total anticipated funding requirement through the end of 2009 is estimated to be approximately three million dollars. We believe that if we are able to obtain this financing, of which there is no assurance, our cash balances will be sufficient to carry on normal operations for the next twelve

17


months plus meet any cash requirements that may be needed for target investments or acquisitions. Any sale of additional equity securities, if undertaken, will result in dilution to our stockholders. There can be no assurance that additional financing, when required, will be available to us or on acceptable terms.

We anticipate that the most likely major purchases of capital assets in the next 12 months will be the potential acquisition of one or more new businesses and/or technologies, and the costs of developing and marketing the next in the series of environmental remediation technologies acquired in late 2007. However, there may be some small purchases of office equipment and shop equipment as required.

Off-Balance Sheet Arrangements

We have never entered into any off-balance sheet financing arrangements and have not formed any special purpose entities. We have not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets.

ITEM 4T. CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures. An evaluation was carried out under the supervision and with the participation of our management, including our Principal Accounting Officer and Principal Executive Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report on Form 10-Q. Disclosure controls and procedures are procedures designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, such as this Form 10-Q, is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and is communicated to our management, including our Principal Executive Officer and Principal Accounting Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, our Principal Accounting Officer and Principal Executive Officer concluded that, as of September 30, 2009, our disclosure controls and procedures are effective to satisfy the objectives for which they are intended.

(b) Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On August 24, 2009, the Company issued 50,000 shares of common stock for total proceeds of $14,500. These shares were issued for director’s fees at a value of $0.29 per share. The shares were issued to the director as an accredited investor through a private transaction under Section 4(2) and Regulation D of the Securities Act.

ITEM 6. EXHIBITS.

Exhibit  
Number Description

2.1

Share Purchase and Subscription Agreement dated June 9, 2003 among the Company, 1049265 Alberta Ltd., Flowray, Flowstar, New Millennium Acquisitions Ltd. ("New Millennium") and Gregory Burghardt. (Incorporated by reference to the Company’s Current Report on Form 8-K/A filed with the Commission on May 12, 2004, File No. 000-30095.)

2.2

Share Purchase Agreement dated as of January 14, 2004 between the Company and the Trustee of the Epitihia Trust. (Incorporated by reference to the Company’s Current Report on Form 8-K/A filed with the Commission on May 12, 2004, File No. 000-30095.)

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2.3

Share Purchase Agreement dated as of January 14, 2004 between the Company and the Trustee of the Abuelo Trust. (Incorporated by reference to the Company’s Current Report on Form 8-K/A filed with the Commission on May 12, 2004, File No. 000-30095.)

2.4

Share Purchase and Subscription Amending Agreement dated January 14, 2004 among the Company, 1049265 Alberta Ltd., Flowray, Flowstar, New Millennium and Gregory Burghardt. (Incorporated by reference to the Company’s Current Report on Form 8- K/A filed with the Commission on May 12, 2004, File No. 000-30095.)

2.5

Share Purchase Agreement dated as of January 14, 2004 between the Company and Epitihia Trust. (Incorporated by reference to the Company’s Current Report on Form 8-K/A filed with the Commission on May 12, 2004, File No. 000-30095.)

2.6

Share Purchase Agreement dated as of January 14, 2004 between the Company and Abuelo Trust. (Incorporated by reference to the Company’s Current Report on Form 8-K/A filed with the Commission on May 12, 2004, File No. 000-30095.)

2.7

Share Purchase Option Agreement dated February 10, 2004 between the Company and Olav Ellingsen (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on April 9, 2004, File No. 000-30095.)

2.8

Amending Agreement dated as of June 16, 2004 between the Company and the Trustee of the Epitihia Trust. (Incorporated by reference to the Company’s Quarterly Report on Form 10-QSB filed with the Commission on August 26, 2004, File No. 000- 30095.)

2.9

Amending Agreement dated as of June 16, 2004 between the Company and the Trustee of the Abuelo Trust. (Incorporated by reference to the Company’s Quarterly Report on Form 10-QSB filed with the Commission on August 26, 2004, File No. 000- 30095.)

2.10

Form of Subscription Agreement dated March 15, 2005 by and between Wescorp and the Purchaser named therein. (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on March 21, 2005, File No. 000-30095.)

2.11

Form of Subscription Agreement dated April 28, 2005 between and Wescorp and the Purchaser named therein. (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on April 29, 2005, File No. 000- 30095.)

2.12

Form of Subscription Agreement between the Company and the United States Resident Purchaser named therein. (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on December 24, 2006, File No. 000-30095.)

2.13

Form of Subscription Agreement between the Company and the Non-United States Resident Purchaser named therein. (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on December 24, 2006, File No. 000-30095.)

2.14

Purchase Agreement dated March 23, 2007 between the Company and 306538 Alberta Ltd. (Incorporated by reference to the Company’s Current Report on Form 8-k filed with the Commission on March 27, 2007, File No. 000-30095.)

2.15

Agreement and Plan of Merger between the Company and Strategic Decision Sciences, USA, Inc. dated as of September 5, 2007 (Incorporated by reference to Form 8-K filed on September 11, 2007.)

3.1

Restated Articles of Incorporation of the Company filed February 17, 2004. (Incorporated by reference to the Company’s Annual Report on Form 10-KSB/A filed with the Commission on May 13, 2004, File No. 000- 30095.)

3.2

Amended and Restated Bylaws (Incorporated by reference to the Company’s Annual Report on Form 10-K filed with the Commission on April 15, 2009, File No. 000- 30095.)

4.1

Form of Common Stock Purchase Warrant dated March 15, 2005. (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on March 21, 2005, File No. 000- 30095.)

4.2

Certificate for 14% Secured Convertible Debenture dated April 28, 2005 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on April 29, 2005, File No. 000- 30095.)

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4.3

Form of Common Stock Purchase dated April 28, 2005. (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on April 29, 2005, File No. 000-30095.)

4.4

Addendum dated February 6, 2003 to that certain Loan Agreement dated January 28, 2003 between the Company and AHC Holdings Ltd. containing Stock Purchase Warrant (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on April 28, 2003, File No. 000- 30095.)

4.5

Form of Warrant issued to the United States Resident Purchaser named therein. (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on December 24, 2006, File No. 000- 30095.)

4.6

Form of Warrant issued to the Non-United States Resident Purchaser named therein. (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on December 24, 2006, File No. 000- 30095.)

4.7

Form of Debenture Certificate 14% Redeemable Secured Debenture issued to Non-United States Residents (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on February 20, 2008.)

4.8

Form of Warrant issued to Non-United States Residents (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on February 20, 2008.)

4.9

Form of Warrant issued to Non-United States Residents (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on May 7, 2009.)

10.1

Hypothecation Agreement dated as of July 6, 2004 between the Company, the Trustee of the Epitihia Trust and Yearwood & Boyce. (Incorporated by reference to the Company’s Quarterly Report on Form 10-QSB filed with the Commission on August 26, 2004, File No. 000-30095.)

10.2

Hypothecation Agreement dated as of July 6, 2004 between the Company, the Trustee of the Abuelo Trust and Yearwood & Boyce. (Incorporated by reference to the Company’s Quarterly Report on Form 10-QSB filed with the Commission on August 26, 2004, File No. 000-30095.)

10.3

License Agreement dated and effective December 1, 2001 between Flowray and Flowstar Technologies, Inc. (Incorporated by reference to the Company’s Current Report on Form 8-K/A filed with the Commission on May 12, 2004, File No. 000- 30095.)

10.4

Memorandum of Understanding, dated as of September 21, 2004 between the Company and Ellycrack AS (Incorporated by reference to Form 8-K filed on September 23, 2004.)

10.5 **

Employment Agreement dated as of September 1, 2007 by and among the Company and Douglas Biles (Incorporated by reference to Form 8-K filed on September 21, 2007.)

10.6

Letter Agreement, dated as of November 22, 2006, between the Company and Jack Huber (Incorporated by reference to the Company’s Annual Report on Form 10-KSB filed with the Commission on April 11, 2007, File No. 000-30095.)

10.7 **

Employment Agreement dated as of September 1, 2007 between the Company and Scott Shemwell (Incorporated by reference to Form 8-K filed on September 21, 2007.)

10.8 **

Consulting Agreement dated as of September 1, 2007 between the Company and Steve Cowper (Incorporated by reference to Form 8-K filed on September 21, 2007.)

10.9

Asset Purchase Agreement, dated as of December 18, 2007, by and among Wescorp Technologies Ltd., FEP Services Inc., Kyle Plante and Norman Plante (Incorporated by reference to Form 8-K filed on December 21, 2007.)

10.10

September 13, 2007 Letter Agreement between the Company and Jack Huber regarding the retirement of certain debt. (Incorporated by reference to the Company’s Annual Report on Form 10-KSB filed with the Commission on May 15, 2008, File No. 000-30095.)

10.11

December 19, 2007 Letter Agreement between the Company and Jack Huber regarding the retirement of certain debt. (Incorporated by reference to the Company’s Annual Report on Form 10-KSB filed with the Commission on May 15, 2008, File No. 000-30095.)

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10.12 Settlement Agreement between the Company and Ellycrack AS, effective September 16, 2009 (Incorporated by reference to Form 8-K filed on October 10, 2009).
31.1* Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 * Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1* Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Filed herewith.

** Management contracts or compensatory plans or arrangements.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

                                   Wescorp Energy, Inc.
   
Date: November 20, 2009 By: /s/ Douglas Biles
  Douglas Biles
  Chief Executive Officer
  (Principal Executive Officer)
   
Date: November 20, 2009 By: /s / Blaine Miciak
  Blaine Miciak
  Controller
  (Principal Financial and Accounting Officer)

EXHIBIT INDEX

Exhibit  
Number Description
2.1

Share Purchase and Subscription Agreement dated June 9, 2003 among the Company, 1049265 Alberta Ltd., Flowray, Flowstar, New Millennium Acquisitions Ltd. ("New Millennium") and Gregory Burghardt. (Incorporated by reference to the Company’s Current Report on Form 8-K/A filed with the Commission on May 12, 2004, File No. 000-30095.)

2.2

Share Purchase Agreement dated as of January 14, 2004 between the Company and the Trustee of the Epitihia Trust. (Incorporated by reference to the Company’s Current Report on Form 8-K/A filed with the Commission on May 12, 2004, File No. 000-30095.)

2.3

Share Purchase Agreement dated as of January 14, 2004 between the Company and the Trustee of the Abuelo Trust. (Incorporated by reference to the Company’s Current Report on Form 8-K/A filed with the Commission on May 12, 2004, File No. 000-30095.)

2.4

Share Purchase and Subscription Amending Agreement dated January 14, 2004 among the Company, 1049265 Alberta Ltd., Flowray, Flowstar, New Millennium and Gregory Burghardt. (Incorporated by reference to the Company’s Current Report on Form 8- K/A filed with the Commission on May 12, 2004, File No. 000-30095.)

2.5

Share Purchase Agreement dated as of January 14, 2004 between the Company and Epitihia Trust. (Incorporated by reference to the Company’s Current Report on Form 8-K/A filed with the Commission on May 12, 2004, File No. 000-30095.)

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2.6

Share Purchase Agreement dated as of January 14, 2004 between the Company and Abuelo Trust. (Incorporated by reference to the Company’s Current Report on Form 8-K/A filed with the Commission on May 12, 2004, File No. 000-30095.)

2.7

Share Purchase Option Agreement dated February 10, 2004 between the Company and Olav Ellingsen (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on April 9, 2004, File No. 000-30095.)

2.8

Amending Agreement dated as of June 16, 2004 between the Company and the Trustee of the Epitihia Trust. (Incorporated by reference to the Company’s Quarterly Report on Form 10-QSB filed with the Commission on August 26, 2004, File No. 000- 30095.)

2.9

Amending Agreement dated as of June 16, 2004 between the Company and the Trustee of the Abuelo Trust. (Incorporated by reference to the Company’s Quarterly Report on Form 10-QSB filed with the Commission on August 26, 2004, File No. 000- 30095.)

2.10

Form of Subscription Agreement dated March 15, 2005 by and between Wescorp and the Purchaser named therein. (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on March 21, 2005, File No. 000-30095.)

2.11

Form of Subscription Agreement dated April 28, 2005 between and Wescorp and the Purchaser named therein. (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on April 29, 2005, File No. 000- 30095.)

2.12

Form of Subscription Agreement between the Company and the United States Resident Purchaser named therein. (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on December 24, 2006, File No. 000-30095.)

2.13

Form of Subscription Agreement between the Company and the Non-United States Resident Purchaser named therein. (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on December 24, 2006, File No. 000-30095.)

2.14

Purchase Agreement dated March 23, 2007 between the Company and 306538 Alberta Ltd. (Incorporated by reference to the Company’s Current Report on Form 8-k filed with the Commission on March 27, 2007, File No. 000-30095.)

2.15

Agreement and Plan of Merger between the Company and Strategic Decision Sciences, USA, Inc. dated as of September 5, 2007 (Incorporated by reference to Form 8-K filed on September 11, 2007.)

3.1

Restated Articles of Incorporation of the Company filed February 17, 2004. (Incorporated by reference to the Company’s Annual Report on Form 10-KSB/A filed with the Commission on May 13, 2004, File No. 000- 30095.)

3.2

Amended and Restated Bylaws (Incorporated by reference to the Company’s Annual Report on Form 10-K filed with the Commission on April 15, 2009, File No. 000- 30095.)

4.1

Form of Common Stock Purchase Warrant dated March 15, 2005. (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on March 21, 2005, File No. 000- 30095.)

4.2

Certificate for 14% Secured Convertible Debenture dated April 28, 2005 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on April 29, 2005, File No. 000- 30095.)

4.3

Form of Common Stock Purchase dated April 28, 2005. (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on April 29, 2005, File No. 000-30095.)

4.4

Addendum dated February 6, 2003 to that certain Loan Agreement dated January 28, 2003 between the Company and AHC Holdings Ltd. containing Stock Purchase Warrant (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on April 28, 2003, File No. 000- 30095.)

4.5

Form of Warrant issued to the United States Resident Purchaser named therein. (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on December 24, 2006, File No. 000- 30095.)

4.6

Form of Warrant issued to the Non-United States Resident Purchaser named therein. (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on December 24, 2006, File No. 000- 30095.)

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4.7

Form of Debenture Certificate 14% Redeemable Secured Debenture issued to Non-United States Residents (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on February 20, 2008.)

4.8

Form of Warrant issued to Non-United States Residents (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on February 20, 2008.)

4.9

Form of Warrant issued to Non-United States Residents (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on May 7, 2009.)

10.1

Hypothecation Agreement dated as of July 6, 2004 between the Company, the Trustee of the Epitihia Trust and Yearwood & Boyce. (Incorporated by reference to the Company’s Quarterly Report on Form 10-QSB filed with the Commission on August 26, 2004, File No. 000-30095.)

10.2

Hypothecation Agreement dated as of July 6, 2004 between the Company, the Trustee of the Abuelo Trust and Yearwood & Boyce. (Incorporated by reference to the Company’s Quarterly Report on Form 10-QSB filed with the Commission on August 26, 2004, File No. 000-30095.)

10.3

License Agreement dated and effective December 1, 2001 between Flowray and Flowstar Technologies, Inc. (Incorporated by reference to the Company’s Current Report on Form 8-K/A filed with the Commission on May 12, 2004, File No. 000-30095.)

10.4

Memorandum of Understanding, dated as of September 21, 2004 between the Company and Ellycrack AS (Incorporated by reference to Form 8-K filed on September 23, 2004.)

10.5 **

Employment Agreement dated as of September 1, 2007 by and among the Company and Douglas Biles (Incorporated by reference to Form 8-K filed on September 21, 2007.)

10.6

Letter Agreement, dated as of November 22, 2006, between the Company and Jack Huber (Incorporated by reference to the Company’s Annual Report on Form 10-KSB filed with the Commission on April 11, 2007, File No. 000-30095.)

10.7 **

Employment Agreement dated as of September 1, 2007 between the Company and Scott Shemwell (Incorporated by reference to Form 8-K filed on September 21, 2007.)

10.8 **

Consulting Agreement dated as of September 1, 2007 between the Company and Steve Cowper (Incorporated by reference to Form 8-K filed on September 21, 2007.)

10.9

Asset Purchase Agreement, dated as of December 18, 2007, by and among Wescorp Technologies Ltd., FEP Services Inc., Kyle Plante and Norman Plante (Incorporated by reference to Form 8-K filed on December 21, 2007.)

10.10

September 13, 2007 Letter Agreement between the Company and Jack Huber regarding the retirement of certain debt. (Incorporated by reference to the Company’s Annual Report on Form 10-KSB filed with the Commission on May 15, 2008, File No. 000-30095.)

10.11

December 19, 2007 Letter Agreement between the Company and Jack Huber regarding the retirement of certain debt. (Incorporated by reference to the Company’s Annual Report on Form 10-KSB filed with the Commission on May 15, 2008, File No. 000-30095.)

10.12

Settlement Agreement between the Company and Ellycrack AS, effective September 16, 2009 (Incorporated by reference to Form 8-K filed on October 10, 2009).

31.1*

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 *  

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*

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

* Filed herewith.

** Management contracts or compensatory plans or arrangements.

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