ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND LIQUIDITY AND CAPITAL RESOURCES

Forward-Looking Statements

The information in this quarterly report contains forward-looking statements within the meaning of the Private Securities litigation Reform Act of 1995. This Act provides a "safe harbor" for forward-looking statements to encourage companies to provide prospective information about themselves so long as they identify these statements as forward looking and provide meaningful cautionary statements identifying important factors that could cause actual results to differ from the projected results. All statements other than these statements of historical fact made in this report are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward looking statements. Forward-looking statements reflect management's current expectations and are inherently uncertain. Our actual results may differ significantly from management's expectations.

The following discussion and analysis should be read in conjunction with the financial statements of Wellstar International, Inc., included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.

Overview and Plan of Operation

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

Wellstar, through its Trillennium subsidiary, is dedicated to developing and licensing the use of advanced thermal imaging technology in the consumer health care and veterinary markets throughout the United States. Wellstar has obtained the rights to market a thermal imaging camera using infrared technology approved by the Food and Drug Administration as an adjunctive diagnostic device and software for thermal imaging pursuant to an exclusive supplier contract with the camera's manufacturer. Mikron Instrument, Inc. (Wellstar does not manufacture the thermal imaging cameras). Our camera and software technology is known as the TMI Thermal Imaging System.

We have been developing our market opportunity since the inception of Trillennium Medical Imaging, Inc. and initially positioned our equipment in pain clinics and acute care facilities. However we have refocused our direction exclusively to the Pressure Ulcer market. The management decision to dedicate the resources of TMI to the Pressure Ulcer market is based on the capability of our system to detect patterns of tissue injury and continue to monitor said injury. In addition, the financial benefit to TMI will be recognized once hospitals will be denied reimbursement for hospital acquired pressure ulcers under the Medicare Hospital Patient Safety Initiative. TMI's system will allow hospitals to more accurately recognize patterns of injury upon POA to the hospital.

In furtherance of our refocused business strategy, we have entered into an agreement with Duke Medical Center pursuant to which Duke Medical Center has agreed to use our TMI Thermal Imaging System imaging systems in research studies conducted at Duke Medical Center's facilities.

TMI and the DUMC Wound Management Institute are in the final stages of approval for a study using TMI Thermal Imaging Systems to document patterns of injury consistent with pressure ulcer development. The Departmental IRB has reviewed and approved the protocol, and the DUMC main IRB will be reviewing in the near future. The 100 patient study is slated to commence in the 1st quarter of 2008. The study should be completed within a 3 month time period.

The Department of Rheumatology utilized the TMI system in an study that was completed this fall. An additional study is being contemplated in the area of Radiation Oncology to monitor the dosage of radiation for breast cancer patients.

While we continue to develop our plan to penetrate the equine market, we have not yet entered into any license agreements in this industry. In addition, we are continuing to seek qualified directors, employees and consultants, and to pursue agreements with pain clinic owners and operators.

Results of Operations

Three Months Ended October 31, 2007 compared to Three Months Ended October 31, 2006

---

Revenue and Gross Profit

Our revenue and gross profit for the three months ended October 31, 2007 was zero and for October 31, 2006 the revenue was $1,500 and the gross profit was $1,400. We have refocused our business strategy towards research and development of our thermal imaging technology. Accordingly, we have not yet installed our thermal imaging systems at revenue generating customer locations in the last four operating quarters.

Net Loss

For the three months ended October 31, 2007, we incurred a net loss of $2,105,664, or $.02 per share, which was an decrease of $287,527 from the net loss of $2,393,191, or $.03 per share for the three months ended October 31, 2006. The decrease in net loss is primarily attributable to Selling, General and Administrative Expenses, which decreased by $133,538 from an expense of $529,977 for the quarter ended October 31, 2006 as compared to an expense of $396,439 for the quarter ended October 31, 2007.

Operating Expenses

Total operating expenses for the three months ended October 31, 2007 decreased by $123,722 to $488,945 from $612,667 for the three months ended October 31, 2006. This change is due principally to a decrease in expense for professional and consulting fees to $77,453 from $158,119.

Liquidity and Capital Resources

As of October 31, 2007, we had a working capital deficit of approximately $2,194,143, and cash of $15,314. We have acquired additional financing in the amount of $175,000 pursuant to a Securities Purchase Agreement with AJW Partners, LLC and affiliates entered into in October, 2007. However, we do not have the funds necessary to maintain our operations for the remainder of our fiscal year, and will need to raise additional funding.

We presently do not have any available credit, bank financing or other external sources of liquidity. Due to our brief operating history as a start up company, our operations have not been a source of liquidity. We will need to obtain additional capital in order to maintain and expand our operations. We are currently investigating other financial alternatives, including additional equity and/or debt financing. In order to obtain capital, we may need to sell additional shares of our common stock or borrow funds from private lenders. However, there can be no assurance that that any additional financing will become available to us, and if available, on terms acceptable to us.

Recent Financings

In October, 2007, Wellstar International, Inc. ("Wellstar" or the "Company") entered into a Securities Purchase Agreement with AJW Partners, LLC ("Partners"), AJW Offshore, Ltd. ("Offshore"), AJW Qualified Partners, LLC ("Qualified") and New Millennium Capital Partners, II, LLC ("Millennium") for the sale of (i) 8% secured convertible notes in an aggregate principal amount of $175,000 (the "Notes"); and (ii) warrants to purchase 15,000,000 shares of the Company's common stock (the "Warrants")(Partners, Offshore, Qualified and Millennium are collectively referred to as the "Purchasers"). Net proceeds of $170,000 were disbursed to the Company upon closing.

---

The Notes bear interest at the rate of 8% per annum. Interest is payable quarterly, unless the Company's common stock is greater than $0.0775 per share for each trading day of a month, in which event no interest is payable during such month. Any interest not paid when due shall bear interest of 15% per annum from the date due until the same is paid. The Notes mature three years from the date of issuance, and are convertible into common stock, at the Purchasers' option, at the lesser of (i) $0.12 or (ii) a 40% discount to the average of the three lowest trading prices of the common stock during the 20 trading day period prior to conversion. At the Company's option, in any month where the current stock price is below the Initial Market Price, the Company can pay the outstanding principal and interest due for that month and this will stay any conversions for that month. The term "Initial Market Price" means the volume weighted average price of the common stock for the five trading days immediately preceding the closing which was $0.09. The Notes contain a call option whereby, if the Company's stock price is below $0.15, the Company may prepay the outstanding principal amount of the Notes, subject to the conditions set forth in the call option. The Notes also contain a partial call option whereby, if the Company's stock price is below $0.09, the Company may prepay a portion of the outstanding principal amount of the Note, subject to the conditions set forth in the partial call option.

The full principal amount of the Notes are due upon a default under the terms of the Notes. In addition, the Company granted the Purchasers a security interest in substantially all of the Company's assets and intellectual property. The Company is required to file a registration statement with the Securities and Exchange Commission within 60 days of closing, which will include the common stock underlying the Notes and the Warrants.

The Warrants are exercisable until seven years from the date of issuance at a purchase price of $0.0001 per share. The Purchasers may exercise the Warrants on a cashless basis if the shares of common stock underlying the Warrants are not then registered pursuant to an effective registration statement. In the event the Purchasers exercise the Warrants on a cashless basis, then the Company will not receive any proceeds. Upon an issuance of shares of common stock below the market price, the exercise price of the Warrants will be reduced accordingly. The market price is determined by averaging the last reported sale prices for the Company's shares of common stock for the five trading days immediately preceding such issuance as set forth on the Company's principal trading market. The exercise price shall be determined by multiplying the exercise price in effect immediately prior to the dilutive issuance by a fraction. The numerator of the fraction is equal to the sum of the number of shares outstanding immediately prior to the offering plus the quotient of the amount of consideration received by us in connection with the issuance divided by the market price in effect immediately prior to the issuance. The denominator of such issuance shall be equal to the number of shares outstanding after the dilutive issuance.

The conversion price of the Notes and the exercise price of the Warrants may be adjusted in certain circumstances such as if the Company pays a stock dividend, subdivides or combines outstanding shares of common stock into a greater or lesser number of shares, or takes such other action as would otherwise result in dilution of the selling stockholder's position.

The Purchasers have agreed to restrict their ability to convert their Notes or exercise their Warrants and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires that management make a number of assumptions and estimates that affect the reported amounts of assets, liabilities, revenues and expenses in our consolidated financial statements and accompanying notes. Management bases its estimates on historical information and assumptions believed to be reasonable. Although these estimates are based on management's best knowledge of current events and circumstances that may impact the Company in the future, actual results may differ from these estimates.

Our critical accounting policies are those that affect our financial statements materially and involve a significant level of judgment by management.

The Company has adopted the policy of capitalizing the cost of its imaging equipment and depreciating the cost against earnings over the straight line method using an estimated useful life of five years. Because the useful life of any new technology is difficult to estimate due to factors such as competition, obsolescence, government regulations, etc., this accounting estimate is reasonably likely to change from period to period with a material impact on our financial statements. The significance of the accounting estimate to the Company's financial statements is that the equipment on the balance sheet is stated at cost less accumulated amortization and the corresponding depreciation is an expense on the statement of operations. The estimate as to the useful life of these assets will directly affect the carrying amount on the balance sheet and the expense for depreciation recorded in the statement of operations. Accordingly, shareholders' equity and earnings will be materially affected.

Revenue Recognition

Revenue will be recognized as earned per the licensing agreements which provide for a fixed fee for each thermal imaging camera we install. The revenue is recognized in the month that the camera is in use at the customer's facility.

---

Derivative Instruments

In connection with the sale of debt or equity instruments, we may sell options or warrants to purchase our common stock. In certain circumstances, these options or warrants may be classified as derivative liabilities, rather than as equity. Additionally, the debt or equity instruments may contain embedded derivative instruments, such as conversion options, which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative instrument liability.

The identification of, and accounting for, derivative instruments is complex. Our derivative instrument liabilities are re-valued at the end of each reporting period, with changes in the fair value of the derivative liability recorded as charges or credits to income, in the period in which the changes occur. For options, warrants and bifurcated conversion options that are accounted for as derivative instrument liabilities, we determine the fair value of these instruments using the Black-Scholes option pricing model. That model requires assumptions related to the remaining term of the instruments and risk-free rates of return, our current common stock price and expected dividend yield, and the expected volatility of our common stock price over the life of the option. Because of the limited trading history for our common stock, we have estimated the future volatility of our common stock price based on not only the history of our stock price but also the experience of other entities considered comparable to us. The identification of, and accounting for, derivative instruments and the assumptions used to value them can significantly affect our financial statements.

Registration Rights Agreements

In connection with the sale of debt or equity instruments, we may enter into registration rights agreements. Generally, these registration rights agreements require us to file registration statements with the Securities and Exchange Commission to register common shares that may be issued on conversion of debt or preferred stock, to permit re-sale of common shares previously sold under an exemption from registration or to register common shares that may be issued on exercise of outstanding options or warrants.

The registration rights agreements usually require us to pay penalties for any time delay in filing the required registration statements, or in the registration statements becoming effective, beyond dates specified in the registration rights agreement. These penalties are usually expressed as a fixed percentage, per month, of the original amount we received on issuance of the debt or preferred stock, common shares, options or warrants. We account for these penalties as a contingent liability and not as a derivative instrument. Accordingly, we recognize the penalties when it becomes probable that they will be incurred. Any penalties are expensed over the period to which they relate.

Recent Accounting Pronouncements

Emerging Issues Task Force Pronouncement 00-27, relating to certain convertible instruments, requires the discounting of certain debt instruments when the conversion feature meets certain criteria. FASB 123R, Stock Options To Employees And Consultants. This pronouncement relates to employees and consultants who receive stock based pay.

The Company will account for the fair value of employee and non-employee options and warrants in accordance with SFAS No. 123R, "Share-Based Payment", which is effective for options and warrants during the annual reporting period beginning after December 15, 2005. The compensation cost will be measured after the grant date based on the value of the reward and is recognized over the service period. The fair value of each option grant is estimated on the date of the grant using the Black-Scholes stock option pricing model. The Company has not yet adopted a stock option plan but is evaluating the affect of a stock option plan on its financial position and results of operations in future periods.