================================================================================
     As filed with the Securities and Exchange Commission on April 14, 2004.


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

                                   FORM 10-KSB

{X}      ANNUAL REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT
         OF 1934.
         FOR THE FISCAL YEAR ENDED: DECEMBER 31, 2003.

{ }      TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES
         EXCHANGE ACT OF 1934. FOR THE TRANSITION PERIOD FROM ____ TO _____.

                         Commission file number: 0-32995

                               MEDSOLUTIONS, INC.
                 (Name of small business issuer in its charter)

                Texas                                             75-2531556
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)


                 12750 Merit Drive, Park Central VII, Suite 770
                               Dallas, Texas 75251
           (Address of principal executive office including zip code)

                                 (972) 931-2374
                         (Registrant's telephone number)

Securities registered under Section 12(b) of the Exchange Act:    None.
Securities registered under Section 12(g) of the Exchange Act:

                     Common Stock, Par Value $.001 Per Share
                                (Title of Class)

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

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

State Issuer's revenues for most recent fiscal year: $6,318,861

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates  computed by reference to the price at which the common equity
was sold,  or the average bid and asked  price of such  common  equity,  as of a
specified date within the past 60 days. $0.

The number of shares  outstanding of registrant's  common stock, $.001 par value
per share, as of March 15, 2004, was 18,295,248 shares.

Transitional Small Business Disclosure Format (check one): Yes { } No {X}

================================================================================

<PAGE>

                               MEDSOLUTIONS, INC.
                        2003 ANNUAL REPORT ON FORM 10-KSB
                                      INDEX


                                                                            Page
                                                                            ----
Part I.
    Item 1.  Description of Business                                           1
    Item 2.  Description of Property                                          13
    Item 3.  Legal Proceedings                                                13
    Item 4.  Submission of Matters to a Vote of Security Holders              14
Part II.
    Item 5.  Market for Common Equity and Related Stockholder Matters         15
    Item 6.  Management's Discussion and Analysis or Plan of Operation        16
    Item 7.  Consolidated Financial Statements                                21
    Item 8.  Changes In and Disagreements with Accountants on Accounting and
             Financial Disclosures                                            22
    Item 8A. Controls and Procedures                                          22
Part III.
    Item 9.  Directors and Executive Officers of the Registrant               23
    Item 10. Executive Compensation                                           26
    Item 11. Security  Ownership of Certain  Beneficial  Owners and
             Management and Related  Stockholder Matters                      28
    Item 12. Certain Relationships and Related Transactions                   30
    Item 13. Exhibits and Reports on Form 8-K                                 31
    Item 14. Principal Accountant Fees and Services                           33
Signatures                                                                    34
Audited Consolidated Financial Statements                                    F-i
Exhibit Index


<PAGE>

                SAFE HARBOR REGARDING FORWARD LOOKING STATEMENTS

         This Form 10-KSB contains forward-looking statements.  These statements
relate to future events or our future financial performance. You should exercise
extreme caution with respect to all forward-looking statements contained in this
Form 10-KSB. Specifically, the following statements are forward-looking:

o        statements   regarding   our  overall   strategy   including,   without
         limitation,  our intended  markets,  service offerings and acquisitions
         and our expected liquidity and capital resources;

o        statements  regarding the plans and  objectives of our  management  for
         future  operations,  expectations  for sales and marketing and the size
         and nature of the costs we expect to incur and the people and  services
         we may employ;

o        statements regarding anticipated trends in our business;

o        statements regarding regulations that may affect us;

o        statements  regarding our  competition  and our ability to compete with
         third parties;

o        any statements  using the words  "anticipate,"  "believe,"  "estimate,"
         "expect," "intend," "may," "will," "should," "would," "expect," "plan,"
         "predict," "potential," "continue" and similar words; and

o        any statements other than historical fact.

         Forward-looking  statements reflect the current view of management with
respect to future events and are subject to numerous  risks,  uncertainties  and
assumptions.  We can give no assurance that such  expectations  will prove to be
correct.  Should any one or more of such risks or  uncertainties  materialize or
should any underlying assumptions prove incorrect,  actual results are likely to
vary  materially  from  those  described  in this Form  10-KSB.  There can be no
assurance  that the  projected  results  will  occur,  that these  judgments  or
assumptions will prove correct or that unforeseen  developments  will not occur.
We are under no duty to update any of the  forward-looking  statements after the
date of this Form 10-KSB.


<PAGE>

                                     PART I

Item 1.  Description of Business

Company Overview

MedSolutions,  Inc. ("we," "us," or the "Company"), a Texas corporation that was
organized on November 11, 1993, is a diversified  holding  company that provides
complete  and  effective  waste  management  outsource  solutions  marketed  and
serviced through three wholly owned subsidiaries. Through EnviroClean Management
Services,  Inc.  ("EMSI"),  from which we currently  derive virtually all of our
revenue,  we  are  primarily  engaged  in  regulated  medical  waste  management
services,  which  include  collecting,  transporting,  treating and disposing of
regulated  medical  waste  from  a  variety  of  healthcare  customers.  Through
ShredSolutions,  Inc.  ("SSI"),  we  market  a fully  integrated,  comprehensive
service  for  the  collection,   transportation  and  destruction  of  Protected
Healthcare Information (PHI) and other confidential  documents,  primarily those
generated by  healthcare  providers  and  regulated  under the Health  Insurance
Portability and  Accountability  Act ("HIPAA").  Through  SharpsSolutions,  Inc.
("SharpsSolutions"),  we will offer a reusable sharps container  service program
to healthcare  facilities  that will  virtually  eliminate the current method of
utilizing  disposable  sharps  containers.  We are a fully integrated  regulated
medical waste  management  company  providing  medical waste and PHI collection,
transportation,  treatment and disposal,  and related  consulting,  training and
education services and products. Our three principal groups of customers include
(i)  outpatient  clinics,  medical  and dental  offices,  biomedical  companies,
municipal   entities,   long-term  and  sub-acute  care   facilities  and  other
smaller-quantity   generators  of  regulated   medical  waste  ("small  account"
customers), (ii) blood banks, surgery centers, dialysis centers and other medium
quantity  generators of regulated medical waste ("medium account" customers) and
(iii) hospitals,  diagnostic facilities and other larger-quantity  generators of
regulated  medical  waste  ("large  account"  customers).  We  believe  that the
services  we offer  are  compelling  to our  customers  because  they  allow our
customers to avoid the  significant  capital and operating costs that they would
have to  incur if they  were to  manage  their  regulated  medical  waste or PHI
destruction  internally.  Moreover,  by outsourcing these waste management,  PHI
destruction,  regulatory  compliance  and other  services  to us, our  customers
reduce or eliminate  their risk of the large fines  associated  with  regulatory
non-compliance.  The  Company  also  intends  to  launch  its  sharps  container
management program in the second quarter of 2004.

Business Background

         We were originally  incorporated as Advanced EnviroTech  Systems,  Inc.
for the purpose of  developing,  designing and  manufacturing  a patented  solid
waste treatment technology,  the EnviroClean(R)  Thermal Oxidation System, which
we may sometimes refer to as the "EnviroClean(R) System", for the destruction of
regulated  medical and other specialized waste streams generated by the medical,
commercial  and industrial  business  communities  in an  environmentally  sound
manner. We subsequently changed our name to Enviroclean  International,  Inc. We
have two issued  patents  (No.  5,680,820  and No.  5,730,072)  and a  trademark
regarding  the  EnviroClean(R)  System.  Although  we were  established  for the
purpose of developing,  manufacturing and marketing the  EnviroClean(R)  System,
our  success  in  that  regard  has  been  marginal,  and we have  not  produced
significant  revenue or any profit from such  activities.  Lack of funds for the
development,  modification and marketing of the EnviroClean(R)  System,  coupled
with the general lack of acceptance  and demand,  and the cost of production and
operation  of the product,  contributed  to our  disappointing  results in prior
periods.  There are no plans to reactivate the  development  of the  EnviroClean
System. In 1999, we altered our focus from the development of the EnviroClean(R)
System to the  development  of our regulated  medical waste  management  service
business,  changed our corporate name and modified our business model to emulate
that of the  industry  leader,  Stericycle,  Inc.  ("Stericycle"),  but  with an
emphasis on customer service. In addition, we subsequently began to focus on the
creation and  development  of  subsidiaries  to provide our large base of health
care provider customers with other health care related waste management services
and regulatory compliance programs. From the point we elected to implement these
changes in our business  strategy,  our business has seen a dramatic  turnaround
and a much more receptive market.

Industry Overview

         The  regulated  medical  waste  industry  arose with the Medical  Waste
Tracking  Act of 1988,  or MWTA,  which  Congress  enacted in  response to media
attention  after medical waste washed ashore on ocean beaches,  particularly  in
New York and New Jersey. Since the 1980s, government regulation has increasingly
required the proper  handling and disposal of the medical waste generated by the
health care  industry.  Regulated  medical  waste is generally  described as any
medical  waste  that  can  cause an  infectious  disease,  including  single-use
disposable items, such as needles,  syringes, gloves and other medical supplies;
cultures and stocks of infectious agents; and blood and blood products.


                                       1
<PAGE>

         According to Stericycle's  reports,  the size of the regulated  medical
waste market in the United States is approximately $3.0 billion and is in excess
of $10.0 billion when  ancillary  services such as PHI  destruction,  re-useable
sharps container  programs,  training,  education,  product sales and regulatory
compliance programs are taken into consideration. Industry growth is driven by a
number of factors. These factors include:

         Pressure To Reduce  Hospital  Costs.  The health care industry is under
pressure to reduce costs and improve  efficiency.  To accomplish this reduction,
outside contractors are being hired to perform some services,  including medical
waste management,  PHI destruction and re-useable sharps container programs.  We
believe that our medical waste  management  services help health care  providers
reduce costs by reducing their medical waste  tracking,  handling and compliance
costs,  reducing  their  potential  liability  related to  employee  exposure to
bloodborne pathogens and other infectious  material,  and reducing the amount of
money invested in on-site treatment of medical waste and/or PHI destruction.

         Shift to Off-Site  Treatment.  We believe  that  managed care and other
health care  cost-containment  pressures are causing  patient care to shift from
institutional  higher-cost  acute-care  settings  to  less  expensive,  smaller,
off-site  treatment  alternatives.  Many common  diseases and conditions are now
being  treated  in smaller  non-institutional  settings.  We believe  that these
non-institutional  alternate-site health care expenditures will continue to grow
as cost-cutting  pressures  increase.  Typically these type of settings generate
only small amounts of medical waste; thus, the potential risks of non-compliance
with applicable state and federal medical waste regulations is  disproportionate
to the cost of services we can provide.

         Aging of U.S. Population.  According to industry statistics,  the "baby
boom" generation (births between 1946 and 1964) constitutes approximately 30% of
the United States population. The relative size of this generation will continue
to result in an increase in the average  age of the  population,  while  falling
mortality rates ensure that the average person will live longer.  As people age,
they typically  require more medical  attention and a wider variety of tests and
procedures.  In addition,  as  technology  improves,  more tests and  procedures
become available.  All of these factors lead to increased  generation of medical
waste.

         Environmental  and  Safety  Regulation.  Our  industry  is  subject  to
extensive  regulation beyond the MWTA. For example, the Clean Air Act Amendments
of 1990 (the "Clean Air Act")  regulations  adopted in 1997 limit the  discharge
into the atmosphere of pollutants released by medical waste incineration.  These
regulations have increased the costs of operating medical waste incinerators and
have resulted in the closures of several on-site treatment  facilities,  thereby
increasing the demand for off-site  treatment  services.  In addition,  OSHA has
issued  regulations  concerning  employee  exposure to bloodborne  pathogens and
other potentially infectious materials that require, among other things, special
procedures for the handling and disposal of medical waste and annual training of
all  personnel  who may be  exposed  to  blood  and  other  body  fluids.  These
regulations   underlie  the  expansion  of  our  service  offerings  to  include
Occupational Safety and Health  Administration  ("OSHA") compliance services for
health care providers.

Services and Operations

         Our  services  and   operations   are  comprised  of  the   collection,
transportation,  treatment,  and disposal of regulated  medical waste,  and PHI,
together  with  regulatory   compliance  training  and  education  programs  and
consulting  services.  The Company also  intends to launch its sharps  container
management  program in the second quarter of 2004. To service our customers,  we
have two collection/treatment  facilities and two transfer sites in the State of
Texas, one  collection/treatment/transfer  facility in the State of Oklahoma and
one transfer facility in Louisiana. We offer programs to assist our customers in
the proper  handling,  separating,  packaging and disposing of medical waste. We
also advise our health care  customers in the proper  methods of  recording  and
documenting  their  medical waste  management to comply with federal,  state and
local regulations.  In addition, we offer consulting services to our health care
customers  for OSHA and HIPAA  compliance  and to assist  them in  reducing  the
amount of medical waste they generate.  We have approximately 2000 medical waste
disposal  agreements  with  customers for the  collection of their medical waste
and/or PHI.  During  2003,  the  University  of Texas  Medical  Branch  ("UTMB")
accounted for approximately 19.4% of our revenue,  Harris County Hospital System
approximately  10.3% (Harris  County is no longer a customer in 2004),  Christus
Spohn   Hospital   System   approximately   5.9%,   Baylor  Health  Care  System
approximately  4.7%,  East Texas Medical  System  approximately  4.7%, and Texas
Health Resources System  approximately 4.1%. The loss of any of these sources of
revenue  could  reduce our  revenues,  increase our losses from  operations  and
materially impact our ability to be profitable.

         Collection and Transportation. We consider efficiency of collection and
transportation to be a critical element of our operations  because it represents
approximately  one-half of our operating costs. We have a sophisticated  routing
software to optimize our routes.  We try to maximize the number of stops on each
route.  We use a global  positioning  system  ("GPS")  tracking  system  for our
collection vehicles to improve  efficiency.  We attempt to correlate the size of


                                       2
<PAGE>

our  collection  vehicles to the amount of medical  waste to be  collected  at a
particular  stop or on a particular  route.  We collect  reusable  containers or
corrugated boxes of medical waste from our customers at intervals depending upon
customer  requirements,  terms of service and volume of medical waste  produced.
The containers or boxes are inspected at each  customer's  site prior to pickup.
The waste is then transported  directly to one of our treatment facilities or to
one of our transfer  stations  where it is combined with other medical waste and
transported to a treatment facility.  In some select  circumstances we transport
medical waste to other permitted medical waste treatment facilities.

         As part of our  collection  operations,  we supply  specially  designed
containers for use by most of our customers. We have reusable plastic containers
that  are  leak  and  puncture-resistant.  The  plastic  containers  enable  our
customers to reduce costs by reducing the number of times that medical  waste is
handled,  eliminating the cost (and weight) of corrugated  boxes and potentially
reducing liability  resulting from human contact with medical waste. The plastic
containers  are  designed to  maximize  the loads that will fit within the cargo
compartments  of our standard  trucks and  trailers.  If a customer  generates a
large  volume of waste,  we will place a large  temporary  storage  container or
trailer on the customer's premises.  In order to maximize regulatory  compliance
and minimize potential liability,  we will not accept medical waste unless it is
properly  packaged by customers in  containers  that we have either  supplied or
approved.

         Treatment  and  Disposal.   Upon  arrival  at  a  treatment   facility,
containers or boxes of medical  waste are typically  scanned to verify that they
do not  contain any  unacceptable  substances  like  radioactive  material.  Any
container or box that is discovered to contain unacceptable waste is returned to
the customer. After inspection,  the waste is treated using one of our treatment
technologies.  Upon completion of the particular process, the resulting waste or
incinerator  ash is transported  for disposal in a landfill  operated by parties
unaffiliated with us. After the plastic  containers have been emptied,  they are
washed, sanitized and returned to customers for re-use.

         Treatment   Technologies.   We  currently  use  both   autoclaving  and
incineration technologies for treating regulated medical waste.

         Autoclaving.  Autoclaving  treats  medical  waste  with  steam  at high
temperature  and pressure to kill pathogens.  Autoclaving  alone does not change
the appearance of waste, and  recognizable  medical waste may not be accepted by
some landfill  operators,  but  autoclaving  may be combined with a shredding or
grinding process to render the medical waste unrecognizable.

         Incineration. Incineration burns medical waste at elevated temperatures
and reduces it to ash.  Incineration  reduces the volume of waste, and it is the
recommended  treatment and disposal  option for some types of medical waste such
as  anatomical  waste or residues from  chemotherapy  procedures.  However,  air
emissions from incinerators can contain certain byproducts, which are subject to
federal,  state and, in some  cases,  local  regulation.  In  addition,  the ash
byproduct of incineration may be regulated in some instances.

Our current capacity to treat regulated  medical waste is approximately  divided
between these treatment methods in the following percentages:

                   Autoclaving                    70%
                   incineration                   30%

We vary our treatment of medical waste among  available  treatment  technologies
based on the type of waste  and  capacity  and  pricing  considerations  in each
service area, in order to minimize operating costs and capital investments.

         Disposal Operations.  We operate three permitted treatment  facilities.
Our  treatment/transfer  facility located in Garland, Texas (a suburb of Dallas)
can service North Texas,  Oklahoma,  Arkansas and Louisiana  with an emphasis on
the   Dallas/Ft.    Worth   service   area   (the   "Garland   Facility").   Our
treatment/transfer  facility in Tulsa, Okalhoma services the Oklahoma market and
can service the  Kansas,  Missouri  and  Arkansas  markets.  We have a treatment
facility  located in  Galveston,  Texas which can service  customers  located in
South Texas and  Southern  Louisiana  with an  emphasis on the Greater  Houston,
Corpus Christi and San Antonio service areas. The Galveston facility is owned by
UTMB (the "UTMB Facility"), a component of the University of Texas System, which
is an agency of the State of Texas. We use the UTMB Facility for the disposal of
waste streams that we collect and  transport  for our customers  located in this
region, and also for waste streams generated by UTMB and its affiliates. As part
of our  acquisition  of BMI Services,  Inc.  ("BMI") in 1996,  BMI's contract to
operate the medical waste  incineration  facility at UTMB and to provide medical
waste  incineration  services to UTMB was assigned to us. Our current  agreement
with UTMB expires in December 2005. We are currently in  negotiations  with UTMB
to extend and amend the terms of the agreement.

         Under the current  agreement  with UTMB,  certain fees that we must pay
UTMB will increase on a gradual  annual basis,  including a fixed facility usage
and  maintenance fee that was $18,500 per month for most of 2003 but was reduced



                                       3
<PAGE>

to $12,500 per month  beginning  in November  2003 and will remain at that level
until the year 2005, a graduated  capital  renewal fee (to reimburse  UTMB for a
capital investment of approximately  $1.5 million) of approximately  $27,200 per
month until  December  2005,  and a constant usage fee of $.005 per lb. based on
the volume of medical waste  processed at the UTMB Facility for non-UTMB  waste.
Beginning in November 2003,we paid a flat fee per month for utilities.

         In the past, the UTMB Facility has experienced  operational disruptions
that have caused us to occasionally  discontinue  incinerator  operations at the
facility  while  appropriate  repairs were made.  In the spring of 2002,  it was
determined that the UTMB incinerator would require  extensive  modifications and
improvements  in  order to  comply  with the New  Source  Performance  Standards
promulgated by the  Environmental  Protection Agency ("EPA") that were to become
effective  in  September  2002.  As a result from April 15, 2002 until March 25,
2003, we were unable to incinerate waste at the UTMB Facility.  This required us
to arrange for waste disposal with alternative  vendors in order to continue our
operations. Our transportation and treatment costs for using alternative vendors
for waste disposal are usually higher than the costs of using the UTMB Facility.
During this time,  we continued to make  payments to UTMB;  however,  due to the
closure of the incinerator,  UTMB was required to credit back to us a portion of
such payments and pay us an additional amount as a penalty for the closure. As a
result  of  the  downtime  issues  related  to  the  UTMB  facility,  we  sought
authorization to install and operate  alternative  waste treatment  equipment at
the  Garland  Facility.  In  February  2002,  we  submitted  a permit  amendment
application to the Texas Commission on Environmental  Quality (TCEQ) to allow us
to install autoclave technology at our Garland Facility.  On October 7, 2002 our
permit  amendment  was  approved.  Prior  to  receipt  of  our  approved  permit
amendment,  we  received  temporary  authorization  from the TCEQ to process our
regulated  medical waste at the Garland  Facility using the autoclave  method of
treatment for a period of six months in order to allow for uninterrupted medical
waste treatment while the UTMB Facility was not in operation.

         In 2003,  we  negotiated a long-term  agreement to manage and operate a
permitted  medical waste treatment  facility in Tulsa,  Oklahoma.  Our agreement
became  effective  October 1, 2003 and we have begun marketing and servicing the
Oklahoma  market  from the Tulsa  facility  (the "Tulsa  Facility").  In 2004 we
expect to commence processing operations at the facility and begin marketing the
Kansas, Missouri, Mississippi, and Northern Arkansas markets from this facility.

         Consulting  Services.  Before medical waste is picked up by our trucks,
our integrated  waste  management  approach  attempts to "build in" efficiencies
that will yield  advantages  for our  customers.  For  example,  our  consulting
services can assist our  customers in reducing the volume of medical  waste that
they generate or assist them with regulatory  compliance training.  In addition,
we provide customers with the documentation  necessary for compliance with laws,
which, if they complete the documentation properly, will reduce interruptions to
their businesses to verify compliance.

         Documentation.  We provide complete  documentation to our customers for
all medical waste and PHI that we collect,  including the name of the generator,
date of pick-up and date of delivery to a treatment  facility.  We believe  that
our  documentation  system  meets  all  applicable  federal,   state  and  local
regulations  regarding the packaging  and labeling of medical  waste,  including
regulations issued by the U.S.  Department of Transportation,  or U.S. DOT, OSHA
and state and local  authorities.  This  documentation  is sometimes used by our
customers to prove that they are in compliance with these regulations.

Business Strategy

         Our goals are to  strengthen  our  position  as a regional  provider of
integrated  services in the regulated medical waste industry and to continuously
improve our financial  performance.  Components of our strategy to achieve these
goals include:

         Improve  Margins.  We will  continue  to  actively  work to improve our
margins by increasing  our base of small  account  customers and focusing on our
ancillary service strategies,  including reusable sharps container programs, PHI
destruction and regulatory compliance programs. These services fulfill the needs
of our large,  medium and small  account  customers and we believe that with the
rapid organic and acquisitional growth of our customer base, the opportunity for
sales of ancillary services and regulatory  compliance products to our customers
will continue to grow and the  incremental  cost of offering these services will
continue to decrease, thereby improving margins.

         Expand  Range of Services  and  Products.  We believe  that we have the
opportunity  to expand our  business by  increasing  the range of  products  and
services that we offer to our existing customers.  For example, we now offer PHI
destruction and a broad range of OSHA compliance and consulting  services to our
customers.  Because our drivers call on numerous medical facilities on a routine
basis,  we also offer  single-use  disposable  medical  supplies  to our medical
customers,  and we may  increase  these  offerings  in the future.  In 2002,  we
incorporated  a new  subsidiary,  SharpsSolutions,  that will  market a reusable
sharps  container  program to our  customers.  SharpsSolutions  had no  business
activities during 2003.


                                       4
<PAGE>

         Seek  Strategic  and/or  Complementary  Acquisitions.  We actively seek
strategic  opportunities  to  acquire  businesses  that  expand  our  network of
treatment  centers and  increase our customer  base.  We believe that  strategic
acquisitions  can enable us to gain  operating  efficiencies  through  increased
capacity  utilization  and  increased  route  density  as well as to expand  the
geographic service areas in which we operate.

         Capitalize on Outsourcing Due to Clean Air  Regulations.  The Clean Air
Act  regulations  have  increased  both the capital costs required to bring many
existing  incinerators  into  compliance  and the  operating  costs of continued
compliance.  We  plan  to  continue  to try and  capitalize  on the  anticipated
movement by hospitals to outsource medical waste treatment rather than incur the
cost of installing the air pollution  control  systems  necessary to comply with
these EPA regulations.

         In addition,  the Company  plans to offer the following two programs to
its customers.

         EnviroSafe  Complete  Compliance  Program.  The EnviroSafe program is a
competitive program to Stericycle's  extremely lucrative SteriSafe program - the
difference  being that, in addition to regulated  medical waste  management  and
OSHA  compliance,  the Company will offer  services  related to compliance  with
HIPAA. The Company's EnviroSafe program will be priced at more competitive rates
that those offered by Stericycle's  SteriSafe  program and offer better customer
service initiatives.

         The goal of the  EnviroSafe  program is to reach  small  generators  of
waste and charge them for a turnkey  medical  waste  management  and  OSHA/HIPAA
compliance  package that  generates a more  consistent and  substantial  revenue
stream from the small  generator  than is  typically  expected  from the minimal
amounts of revenue  generated from medical waste service  pickups.  By providing
the customer with regulated medical waste and PHI pickup and disposal  services,
informational software, manuals and training, the Company will ensure compliance
for its customers  and protect them from the high fines and  workplace  injuries
associated with noncompliance.

         Two packages are offered,  "Premium" and "Complete," whereby a customer
can choose its level of service.  The Premium  package  includes  medical  waste
pickup and disposal and some informational  materials in the form of manuals and
software. The Complete package offers total OSHA/HIPAA compliance materials plus
training, mock OSHA inspections and HIPAA related document destruction services.

         The overall  goals of the  program  are:  (1) to capture a  significant
portion of small generator  revenue in every market where the Company  operates;
(2) to gain these customers at the greatest possible profit margin; (3) to raise
the revenue  levels of small  generators  to the  Company;  (4) to assist in the
speedier and timely capture of cash flow from slow paying  accounts;  and (5) to
have 25% of the Company's small  generator  revenue come through this program by
the end of 2004 and 50% by the end of 2005.  We expect to launch this program in
July 2004.

         SharpsSolutions,  Inc.--Reusable Sharps Container Program. The Reusable
Sharps Container Program is perhaps one of the most significant  investments and
opportunities  that the Company is currently  undertaking.  Sharps management is
defined as the  management  and treatment of  sharp-edged  medical waste such as
syringes, needles, razors, scissors and scalpels that may have come into contact
with blood born  pathogens,  such as HIV or  hepatitis.  The most common  sharps
management  is where  the  hospital  employees  dispose  of  sharps  in  various
containers  that are then  collected by other  hospital  employees  and disposed
(container and sharps content together) within the hospitals' waste that is then
treated  in-house or outsourced to a medical waste service  provider such as the
Company.  The  Reusable  Sharps  Container  Program  is  intended  to be a fully
outsourced  service  offering where hospital  employees do not handle the sharps
once they are disposed at the point of use.  This is paramount  for hospitals in
that hospital personnel are less subject to needle stick injuries.

         Statistically,  there are  600,000 to  800,000  needle  stick  injuries
annually,  with a third of them during the  disposal  process.  With each needle
stick costing between $5,000 and $10,000,  these incidents alone are costing the
industry over one billion dollars  annually.  In addition to the  cost/liability
savings  associated with reduced needle stick  incidents,  the cost of recycling
the containers  rather than purchasing  them is significant,  often saving 15 to
20% for the  generator.  The combined  savings  between  direct costs plus costs
associated with reduced needle sticks can reach up to 30% per year.



                                       5
<PAGE>

         Currently,  the reusable sharps  container  recycling market is rapidly
developing.  It is very  popular on the east coast of the  United  States  where
approximately  80% of the  market  utilizes  reusable  sharps  programs,  but is
virtually  unknown in the Company's  existing service  markets.  With the proper
sales and marketing strategy and market penetration to existing  customers,  the
Company  has a very good chance of  capturing  significant  market  share in its
existing service markets.  The Company's  Reusable Sharps Container Program is a
key element of providing  this  broadened  range of services in response to this
new  market  opportunity.  The idea  behind  the  program  is to  create an even
stronger,  longer-term  relationship with large generators of waste by acquiring
contracts and offering a service that  actually put the Company's  personnel and
processes inside of the customers' facilities.  The Company estimates,  based on
research conducted by industry analysts and its own conservative estimates, that
there is a total market  opportunity in Texas and Oklahoma of approximately  $15
million  annually.  The  Company  intends to launch  this  program in the second
quarter of 2004.

         Our business strategy and expansion plans will place significant strain
on our management, working capital, financial and management control systems and
staff.  Our failure to properly respond to these needs by failing to maintain or
upgrade financial and management control systems,  failing to recruit additional
staff or failing to  respond  effectively  to  difficulties  encountered  during
expansion could adversely affect our business,  financial  condition and results
of operations.  Although,  based on our  experience in the industry,  we believe
that our management  and financial  systems and controls are adequate to address
current needs and we are attempting to recruit and train additional staff, there
can be no  assurance  that our  systems,  controls  or staff will be adequate to
sustain future growth.

Acquisitions and Corporate Background

         BMI Services,  Inc. BMI, a regulated  medical waste and  transportation
management  company,  was  acquired  by EMSI in  April  1996.  BMI was  based in
Houston,  Texas and was one of the largest  independent  transporters of medical
waste in Texas.  We acquired  our primary  waste  transportation  business,  our
transfer  station  in Tyler,  Texas  and the UTMB  arrangement  through  the BMI
acquisition.

         EnviroClean   Management   Services,   Inc   ("EMSI").   We  and  other
stockholders  formed EMSI in February 1996, as a  consolidation  vehicle for the
merger or acquisition of BMI and other  proposed  entities.  In January 1998, we
exchanged shares of our common stock, $.001 par value per share ("Common Stock")
to acquire 667,375 shares of EMSI from other stockholders. This transaction gave
us a controlling  interest of approximately  51.3% of EMSI. In December 1998, we
offered to exchange one of our shares for each share of EMSI still  outstanding.
As a result,  we acquired  shares  representing  an aggregate of 96.1% of EMSI's
stock.  Since  then we have  continued  the  exchange  offer  and have  acquired
additional shares and now own 99.3% of EMSI.

         AmeriTech Environmental, Inc. ("ATE"). We acquired on November 7, 2003,
certain of the assets of ATE,  including the assignment by ATE to the Company of
all of its regulated  medical waste  disposal  customer  contracts  (which cover
approximately 800 customers).  The other assets acquired consisted  primarily of
equipment  associated with ATE's regulated medical waste disposal business and a
parcel of real property  located in Houston,  Texas.  The purchase price for the
acquired assets was $650,000 cash, a promissory  note in the original  principal
amount of $750,000  bearing interest at a rate per annum of 7%, interest payable
monthly,  and all  principal and accrued  interest due on November 7, 2004,  and
705,072  shares of our  Common  Stock.  The  number  of  shares of Common  Stock
delivered at the closing may be increased or decreased depending upon the amount
of revenues  realized by the Company from the customer  contracts  acquired from
ATE for the ensuing six months  following  the closing of the  transaction.  The
cash  portion of the  purchase  price was funded  from the  proceeds of sales of
Common Stock in private  placements and $400,000 which was loaned to the Company
by two of its  directors/stockholders  in exchange  for  promissory  notes.  The
purchase price was determined  largely based upon the amount of revenues ATE has
generated from its regulated  medical waste disposal  business  during the first
three quarters of 2003.

         The  Company  has  not  complied  with  the   Securities  and  Exchange
Commission  (the  "SEC")  Form 8-K  reporting  requirements  relating to the ATE
acquisition.  The Company is required to file two years of historical  financial
statements to comply with the SEC's Form 8-K reporting requirements. The Company
has not yet  completed  its audit of ATE relating to the 2003  acquisition,  and
accordingly has not yet complied with these reporting requirements.


                                       6
<PAGE>

Expansion Plans and Acquisition Targets

         In addition to the Company's  agreement to manage and operate the Tulsa
Facility,  the Company has also  initiated  operations  at a permitted  transfer
facility in Logansport,  Louisiana  pursuant to a lease  arrangement.  This will
allow the Company to more effectively service the East Texas,  Southern Arkansas
and Louisiana markets.

         Evaluation and  Integration.  We believe that our  management  team can
evaluate  potential  acquisition  candidates and determine  whether a particular
medical  waste  management  business  can be  successfully  integrated  into our
business. In determining whether to proceed with a business acquisition, we will
evaluate a number of factors including:

         o  the  financial  impact of the proposed  acquisition,  including  the
            effect on our cash flow and earnings per share;

         o  the  historical  and  projected  financial  results  of  the  target
            company;

         o  the  purchase  price  negotiated  with the seller  and our  expected
            internal rate of return;

         o  the composition and size of the target  company's  customer base and
            the opportunity value of integrating our service,  ancillary service
            and regulatory compliance programs into the target company's market;

         o  the  efficiencies  that we can  achieve  by  integrating  the target
            company with our existing operations;

         o  the potential for enhancing or expanding our geographic service area
            and allowing us to make other acquisitions in the same service area;

         o  the experience,  reputation and personality of the target  company's
            management;

         o  the  target   company's   reputation   for   customer   service  and
            relationships with the communities that it serves; and

         o  whether the acquisition  gives us any strategic  advantages over our
            competition.

Once a business is  acquired,  we will  implement  programs  designed to improve
customer service, sales,  marketing,  routing,  equipment utilization,  employee
productivity, operating efficiencies and cash flow.

Marketing and Sales

         Marketing Strategy.  We use both telemarketing and direct sales efforts
to obtain new customers.  In addition, we have a large database of potential new
large and small  account  customers,  which we  believe  gives us a  competitive
advantage in identifying and reaching these higher-margin  accounts. Our drivers
participate  in our  marketing and sales  efforts by actively  soliciting  small
account customers while they service their routes.

         Small Account Customers.  We have targeted small account customers as a
growth  area.  We believe  that these  customers  offer  high  profit  potential
compared to other  potential  customers.  Typical  small  account  customers are
individual or small groups of doctors,  dentists and other health care providers
who are widely dispersed and generate only small amounts of medical waste. These
customers  are very  concerned  about  having the  medical  waste  picked up and
disposed of in compliance  with  applicable  state and federal  regulations.  We
believe that these  customers view the potential  risks of  non-compliance  with
applicable state and federal medical waste  regulations as  disproportionate  to
the cost of the services  that we provide.  We believe that this factor has been
the basis for the significantly  higher gross margins that we have achieved with
our small account customers relative to our large account customers.

         Medium Account  Customers.  The medium account  segment of our business
currently  provides EMSI with the opportunity for substantial  growth and better
profit margins than large account customers. These customers are typically blood
banks,  dialysis  centers,  surgery  centers  and other  high  volume  specialty
facilities.

         Large  Account  Customers.  We believe that we have been  successful in
serving large account customers and plan to continue to serve those customers as
long as they establish route anchors and/or satisfactory levels of profitability
can be  maintained.  In  addition,  we believe that the  implementation  of more
stringent  Clean Air Act and other federal  regulations  directly and indirectly
affecting medical waste will enable us to improve our marketing efforts to large
account  customers  because the additional  costs that they will incur to comply


                                       7
<PAGE>

with these  regulations  will make the costs of our  services  more  attractive,
particularly relative to their use of their own incinerators.  Our marketing and
sales  efforts to large account  customers  are  conducted by full-time  account
executives  whose  responsibilities   include  identifying  and  attracting  new
customers and serving our existing account base of large account  customers.  In
addition to securing new contracts,  our marketing and sales  personnel  provide
consulting services to our health care customers, assisting them in reducing the
amount of medical waste that they generate,  training their  employees on safety
issues and implementing  programs to audit, classify and segregate medical waste
in a proper manner.

         Contract  and Service  Agreements.  We have  long-term  contracts  with
substantially all of our customers.  We negotiate  individual service agreements
with each large account and small account customer.  Although we have a standard
form of  agreement,  particularly  for small account  customers,  terms may vary
depending upon the  customer's  service  requirements  and the volume of medical
waste generated and, in some jurisdictions,  requirements  imposed by statute or
regulation.  Service  agreements  typically include  provisions  relating to the
types  of   containers,   frequency  of  collection,   pricing,   treatment  and
documentation  for  tracking   purposes.   Each  agreement  also  specifies  the
customer's  obligation  to  pack  its  medical  waste  in  approved  containers.
Substantially all of our agreements with customers contain automatic renewal and
price increase provisions.

         Service  agreements  are  generally  for a period of one to five years,
although  customers  may  terminate on written  notice and, in most cases,  upon
payment  of a  penalty.  We may set our  prices  on the  basis of the  number of
containers that we collect,  the weight of the medical waste that we collect and
treat, the number of collection stops that we make on the customer's  route, the
number of collection  stops that we make for a particular  multi-site  customer,
and other factors.

         Competition.  There are  several  regulated  medical  waste  management
companies  operating in the state of Texas and the surrounding  region,  and the
market is highly competitive. Our primary competitors are large, publicly traded
corporations with regional and national businesses. These companies also provide
a variety of  services  other than  collection,  transportation,  treatment  and
disposal.  As  such,  these  competitors  have a broad  scope  of  business  and
substantially greater financial and other resources than we possess.

         According to public securities filings,  Stericycle Inc. ("Stericycle")
is the largest medical waste management company in the United States. Stericycle
initially  developed  and utilized a  proprietary  electro-thermal  deactivation
("ETD") process in a national strategy. However,  Stericycle, like us, primarily
utilizes autoclave  technologies to process a majority of their waste stream and
to  a  lesser  degree   incineration   technologies.   3CI  Complete  Compliance
Corporation  ("American 3CI"), a subsidiary of Stericycle,  is one of the larger
regional medical waste management companies in the Southeast.

         Based  on our  experience  in the  industry,  we  believe  that  we can
successfully  compete with  Stericycle,  American 3CI and other  competitors  by
concentrating  our  operations  in the  Southern  U.S. We believe that we gain a
competitive  advantage by offering better customer service than our competitors,
attractive  ancillary  services  and  regulatory  compliance  programs  and,  if
necessary,  the  ability  to reduce  the  price of waste  disposal  services  to
customers  to an amount  below that of our  competitors.  We believe this can be
accomplished as a result of having our facilities in closer geographic proximity
to the generators of medical waste, our cost reduction  efforts,  our ability to
offer  ancillary  services  and programs  and the  expansion  of our  operations
through acquisitions.

         In addition,  we face potential  competition  from  businesses that are
attempting  to  commercialize   alternate  treatment  technologies  or  products
designed  to reduce or  eliminate  the  generation  of  medical  waste,  such as
reusable or degradable medical products.

         We  compete  for  service   agreements   primarily   on  the  basis  of
cost-effectiveness,  quality of service and geographic location. We also attempt
to compete by demonstrating to customers that we can do a better job in reducing
their potential  liability.  Our ability to obtain new service agreements may be
limited  by the fact that a  potential  customer's  current  vendor  may have an
excellent service history or a long-term service contract or may offer prices to
the potential customer that are lower than ours.

Competitive Strengths

We believe that we benefit from the following competitive strengths:

         Broad  Range of  Services.  We offer  our  customers  a broad  range of
services to help them develop internal  systems and processes,  which allow them
to manage their medical waste, sharps containers and PHI destruction efficiently
and safely from the point of generation through treatment and disposal.  We have
also  developed  regulatory  compliance  programs  to help train our  customers'
employees  on the proper  methods of handling  medical  waste in order to reduce
potential employee exposure.  Other regulatory compliance programs include those
designed to help clients  ensure and maintain  compliance  with OSHA,  HIPAA and


                                       8
<PAGE>

other  relevant  regulations.   In  2002,  we  incorporated  a  new  subsidiary,
SharpsSolutions,  Inc., that will market a reusable sharps container  program to
our customers.

         Strong   Sales   Network  and   Proprietary   Database.   We  use  both
telemarketing and direct sales efforts to obtain new customers.  In addition, we
have a large database of potential new small and large account customers,  which
we believe gives us a competitive  advantage in  identifying  and reaching these
higher-margin and route anchor accounts.

         Experienced Senior Management Team. Our senior executives  collectively
have over 35 years of management  experience in the waste  management and health
care industries.

Governmental Regulation

         We are subject to extensive and frequently changing federal,  state and
local laws and  regulations.  This  statutory and regulatory  framework  imposes
compliance  burdens  and  risks on us,  including  requirements  to  obtain  and
maintain government permits.  These permits grant us the authority,  among other
things:

         o  to construct and operate treatment and transfer facilities;

         o  to   transport   medical   waste   within   and   between   relevant
            jurisdictions; and

         o  to handle particular regulated substances.

Our permits  must be  periodically  renewed and are subject to  modification  or
revocation by the regulatory authority.  We are also subject to regulations that
govern   the   definition,   generation,   segregation,   handling,   packaging,
transportation,  treatment,  storage and disposal of medical waste.  We are also
subject to  extensive  regulations  designed  to minimize  employee  exposure to
medical waste.

         Federal Regulation.  There are at least four federal agencies that have
authority over medical waste. These agencies are the EPA, OSHA, the U.S. DOT and
the U.S. Postal Service.  These agencies  regulate medical waste under a variety
of statutes and regulations.

         Medical Waste Tracking Act of 1988. In the late 1980s, the EPA outlined
a  two-year  demonstration  program  pursuant  to MWTA,  which  was added to the
Resource Conservation and Recovery Act of 1976. The MWTA was adopted in response
to health and environmental concerns over infectious medical waste after medical
waste washed ashore on beaches,  particularly in New York and New Jersey, during
the summer of 1988.  Public  safety  concerns  grew  following  media reports of
careless management of medical waste. The MWTA was intended to be the first step
in addressing  these problems.  The primary  objective of the MWTA was to ensure
that  medical  wastes which were  generated  in a covered  state and which posed
environmental  problems,  including an unsightly  appearance,  were delivered to
disposal or  treatment  facilities  with  minimum  exposure to waste  management
workers and the public. The MWTA's tracking requirements included accounting for
all waste transported and imposed civil and criminal sanctions for violations.

         In regulations implementing the MWTA, the EPA defined medical waste and
established guidelines for its segregation,  handling, containment, labeling and
transport.  The  MWTA  demonstration  program  expired  in  1991,  but the  MWTA
established a model followed by many states in developing their specific medical
waste regulatory frameworks.

         Clean Air Act Regulations.  In August 1997, the EPA adopted regulations
under  the  Clean  Air Act that  limit  the  discharge  into the  atmosphere  of
pollutants  released by medical waste incineration.  These regulations  required
every state to submit to the EPA for  approval a plan to meet  minimum  emission
standards for these pollutants. Due to these regulations,  the UTMB Facility was
closed from April 15, 2002 until March 25, 2003 in order to  implement  upgrades
and improvements to the UTMB incinerator to comply with the new regulations.  We
believe that we will be successful  in  maintaining  all  necessary  federal and
state permits to continue the operation of our incinerators.

         Occupational Safety and Health Act of 1970. The Occupational Safety and
Health  Act of 1970  authorizes  OSHA to issue  occupational  safety  and health
standards.  OSHA  regulations are designed to minimize the exposure of employees
to hazardous work  environments.  Various  standards apply to certain aspects of
our operations. These regulations govern, among other things:

         o  exposure to bloodborne  pathogens and other  potentially  infectious
            materials;

         o  lock out/tag out procedures;


                                       9
<PAGE>

         o  medical surveillance requirements;

         o  use of respirators and personal protective equipment;

         o  emergency planning;

         o  hazard communication;

         o  noise;

         o  ergonomics; and

         o  forklift safety.

Our  employees  are  required  by our policy to receive new  employee  training,
annual  refresher  training and training in their specific tasks. As part of our
medical  surveillance  program,   employees  receive  pre-employment  physicals,
including  drug  testing,   annually  required  medical  surveillance  and  exit
physicals.  We also subscribe to a drug-free  workplace policy. In addition,  we
are subject to unannounced OSHA Safety inspections at any time.

         Resource  Conservation  and  Recovery  Act of 1976.  In 1976,  Congress
passed  the  Resource  Conservation  and  Recovery  Act of 1976,  or RCRA,  as a
response to growing public concern about problems  associated  with the handling
and disposal of solid and hazardous  waste.  RCRA required the EPA to promulgate
regulations  identifying  hazardous wastes.  RCRA also created standards for the
generation,  transportation,  treatment,  storage  and  disposal  of  solid  and
hazardous  wastes.  These  standards  included a  documentation  program for the
transportation  of hazardous  wastes and a permit system for solid and hazardous
waste disposal facilities. Medical wastes are currently considered non-hazardous
solid wastes under RCRA. However,  some substances  collected by us from some of
our customers,  including photographic fixer developer solutions, lead foils and
dental amalgam, are considered hazardous wastes.

         We use landfills  operated by parties  unrelated to us for the disposal
of  incinerator  ash and autoclaved  waste.  Waste is not regulated as hazardous
under RCRA unless it contains hazardous  substances exceeding certain quantities
or concentration  levels,  meets specified  descriptions,  or exhibits  specific
hazardous  characteristics.  Following autoclave treatment, waste is disposed of
as  non-hazardous  waste.  After  incineration  treatment,  we test ash from the
incineration  process to  determine  whether it must be disposed of as hazardous
waste.

         We employ quality control  measures to check incoming medical waste for
specific types of hazardous substances. Our customer agreements also require our
customers to exclude  different  kinds of hazardous  substances  or  radioactive
materials from the medical waste they provide us.

         DOT Regulations. The U.S. DOT has put regulations into effect under the
Hazardous Materials Transportation Authorization Act of 1994 which require us to
package and label medical waste in compliance  with  designated  standards,  and
which  incorporate  bloodborne  pathogens  standards issued by OSHA. Under these
standards,   we  must,  among  other  things,  identify  our  packaging  with  a
"biohazard" marking on the outer packaging, and our medical waste container must
be  sufficiently  rigid and strong to prevent  tearing or  bursting  and must be
puncture-resistant, leak-resistant, properly sealed and impervious to moisture.

         DOT  regulations   also  require  that  a  transporter  be  capable  of
responding  on a  24-hour-a-day  basis in the event of an  accident,  spill,  or
release to the  environment  of a hazardous  material.  We have  entered into an
agreement with an organization that provides 24-hour emergency spill response to
provide this service.

         Our drivers are trained on topics such as safety,  hazardous materials,
medical  waste,  hazardous  chemicals and infectious  substances.  Employees are
trained to deal with emergency spills and releases of hazardous  materials,  and
we have a written  contingency plan for these events. Our vehicles are outfitted
with spill control equipment and the drivers are trained in its use.

         Comprehensive Environmental Response, Compensation and Liability Act of
1980. The Comprehensive  Environmental Response,  Compensation and Liability Act
of 1980, or CERCLA, established a regulatory and remedial program to provide for
the  investigation  and cleanup of facilities  that have released or threaten to
release hazardous substances into the environment. CERCLA and state laws similar
to it may impose strict,  joint and several  liability on the current and former


                                       10
<PAGE>

owners and operators of facilities  from which releases of hazardous  substances
have occurred and on the generators and transporters of the hazardous substances
that come to be located at these facilities.  Responsible  parties may be liable
for  substantial  site  investigation  and cleanup  costs and  natural  resource
damages,  regardless  of  whether  they  exercised  due care and  complied  with
applicable laws and regulations.  If we were found to be a responsible party for
a  particular  site,  we could be  required  to pay the entire  cost of the site
investigation  and cleanup,  even though other parties also may be liable.  This
result  would  be the  case if we were  unable  to  identify  other  responsible
parties,  or if those parties were financially unable to contribute money to the
cleanup.

         State and Local Regulation. We currently conduct all of our business in
Texas,  Oklahoma,  Louisiana and Arkansas.  At some point in the future,  we may
conduct  business  in other  states.  Other  states have  different  regulations
regarding medical waste, medical waste transport and medical waste incineration.
If at any time, we expand our business into other states, we believe, because of
the  stringent  standards  applicable  in Texas,  that the costs of bringing our
business into compliance with the regulations of other states will be minimal.

Medical Waste. The Texas  Department of Health retains  authority to define what
waste will be  regulated  and how it may be  treated.  These  rules,  which were
updated in December  1994,  can be found in Title 25 Texas  Administrative  Code
("TAC")  Sections  1.131-1.137.  Under Texas law, the term  "special  waste from
health-care facilities" ("SWFHCRF") is used to define medical waste regulated by
state agencies. Only five categories of waste are regulated:

o        animal waste from animals intentionally exposed to pathogens;

o        bulk human blood and blood products;

o        pathological waste;

o        microbiological waste; and

o        sharps.

The  criteria  for  selection  of  these  categories  were  based  primarily  on
environmental  concerns rather than occupational  concerns. A chain of events is
necessary to produce disease from contact with medical waste. The items selected
for regulation were deemed to have the highest potential for disease  production
provided all of the required  events took place.  Sharps,  due to their inherent
ability to provide a portal of entry,  must be managed  properly  regardless  of
their contamination status.

Transportation of Medical Waste.  Subchapter Y, 30 TAC ss. 330.1001-1010 defines
rules for medical waste  management,  disposal,  transportation,  collection and
storage. These rules were updated in December 1994. The responsibility for these
regulations  rests  with the  Office  of Waste  Management  of the  TCEQ.  Under
Subchapter Y, the TCEQ regulates and registers transporters of medical waste by,
among other things,  requiring  specific  documentation of transportation of all
medical waste. Currently, the Company is a registered medical waste transporter.
The registration is subject to annual renewal,  and though we believe,  based on
our  experience  in the  industry,  that we are in  compliance  with  all of the
statutory guidelines, there is no guarantee that the TCEQ will continually grant
renewal registration to us.

Treatment  of Medical  Waste.  Approved  methods of  treatment of SWFHCRF can be
found in Title 25 TAC Section 1.133.  There are currently six approved treatment
methods:

o        steam disinfection;

o        chlorine disinfection/maceration;

o        chemical disinfection;

o        moist disinfection;

o        thermal inactivation; and

o        incineration.

We employ the steam disinfection (i.e.  autoclave) and incineration  methods for
the treating of medical waste. We have been successful in obtaining  permits for
our current medical waste transfer,  treatment and processing facilities and for


                                       11
<PAGE>

our transportation  operations.  Currently, we lease and operate one incinerator
from UTMB at the UTMB  Facility  that is properly  licensed by the Office of Air
Quality of the Texas Natural  Resource  Conservation  Commission  ("TNRCC").  On
October 7, 2002,  we  received a permit  amendment  from the TCEQ to allow us to
operate an autoclave at the Garland Facility. Prior to that, we had received and
operated  under a temporary  authorization  to process  medical  waste using the
autoclave method.

         We are  responsible  for  complying  with the  maintenance  obligations
pursuant to numerous  governmental  permits  and  licenses  owned by us or under
which we conduct  our  business.  We are also  responsible  for  complying  with
permits maintained by others. These permits include:

      o  transport  permits  for  solid  waste,   medical  waste  and  hazardous
         substances;

      o  permits to construct and operate treatment facilities;

      o  permits to construct and operate transfer stations;

      o  permits  governing  discharge  of sanitary  water and  registration  of
         equipment under air regulations;

      o  approvals  for the use of ETD and other  technologies  to treat medical
         waste; and

      o  various business operator's licenses.

         We believe that we are currently in compliance in all material respects
with our permits and applicable laws and regulations.  If we expand our services
to other states,  we will have to comply with such state's  specific  permitting
process to obtain the necessary permits to operate in such state, including, but
not  limited  to  obtaining  zoning  approval  and  local  and  state  operating
authority. Most communities rely on state authorities to provide operating rules
and safeguards for their community.  Usually the state provides public notice of
the project and, if enough  public  interest is shown,  a public  hearing may be
held. If we are successful in meeting all regulatory requirements, the state may
issue a permit to construct the new treatment facility or transfer station. Once
the  facility is  constructed,  the state may again issue  public  notice of its
intent to issue an operating  permit and may provide an  opportunity  for public
opposition  or other  action that may impede our ability to construct or operate
the  planned  facility.  Permitting  for  transportation  operations  frequently
involves  registration  of vehicles,  inspection  of equipment,  and  background
investigations on our officers and directors.

Patents and Proprietary Rights

         We rely on  unpatented  and  unregistered  trade  secrets,  proprietary
know-how  and  continuing  technological  innovation.  We  try to  protect  this
information, in part, by confidentiality agreements with our employees,  vendors
and  consultants.  There can be no assurance that these  agreements  will not be
breached,  that we would have adequate remedies for any breach or that our trade
secrets or know-how will not otherwise become known or independently  discovered
by other parties.

         Our commercial  success may also depend on our not  infringing  patents
issued to other  parties.  There can be no assurance  that patents  belonging to
other parties will not require us to alter our processes,  pay licensing fees or
cease  using any  current  or future  processes.  In  addition,  there can be no
assurance  that we would be able to license  the  technology  rights that we may
require at a reasonable  cost or at all. If we could not obtain a license to any
infringing  technology  that we currently use, it could have a material  adverse
effect on our business.

Potential Liability and Insurance

         The medical waste industry  involves  potentially  significant risks of
statutory,   contractual,  tort  and  common  law  liability  claims.  Potential
liability claims could involve, for example:

      o  cleanup costs;

      o  personal injury;

      o  damage to the environment;

      o  employee matters;

      o  property damage; or


                                       12
<PAGE>

      o  alleged negligence or professional  errors or omissions in the planning
         or performance of work.

We could also be subject to fines or penalties in connection  with violations of
regulatory requirements.

         We  carry  $5  million  of  liability  insurance   (including  umbrella
coverage),  and $1 million of aggregate  pollution and legal liability insurance
($2 million per incident),  which we consider  sufficient to meet regulatory and
customer requirements and to protect our employees,  assets and operations.  Our
pollution liability insurance excludes liabilities under CERCLA. There can be no
assurance  that we will not face  claims  under  CERCLA or  similar  state  laws
resulting in  substantial  liability  for which we are uninsured and which could
have a material adverse effect on our business.

Employees

         As of March 15, 2004, the Company had  approximately 84 full-time and 1
part-time employee.  Six of the employees are employed in executive  capacities;
the remaining  employees are in transportation  operations,  sales positions and
administrative  and clerical  capacities.  None of the  Company's  employees are
subject to collective bargaining agreements.

Item 2.  Description of Property

         We lease approximately 6,800 square feet of administrative office space
at 12750 Merit Drive-Park Central VII, Suite 770, Dallas, Texas 75251. The lease
expires on October 31, 2005.  The rent is $9,626.25  per month from  November 1,
2001,  through  October 31, 2002,  $10,192.50  per month from  November 1, 2002,
through  October 31, 2003,  $10,758.75 per month from November 1, 2003,  through
October 31, 2004, and  $11,375.00 a month from November 1, 2004 through  October
31, 2005.

         We lease approximately 7,500 square feet of administrative office space
at 14010  Interdrive  East,  Houston,  Texas.  The lease expires on December 31,
2004. The rent is $4,200 per month through  December 31, 2004.  This facility is
adjacent  to our  permitted  transfer  site in  Houston,  Texas and serves as an
office and warehousing facility.

         We own the Garland Facility, which consists of real property,  building
and  improvements,  furniture and equipment.  The  EnviroClean(R)  System in the
Garland  Facility  has been idle  since  approximately  June 1998.  The  Garland
Facility includes 17,450 square feet of space (2,450 square feet of office space
and 15,000  square feet of  warehouse  space),  and is located on  approximately
three  acres of land.  The  building  is  approximately  30 years  old,  and was
extensively  remodeled  in 1996 at a cost of more than  $500,000  to upgrade the
facility to accommodate the EnviroClean(R)  System and to showcase its operation
for sales and marketing  purposes.  The EnviroClean(R)  System has been idle for
approximately five years.  During most of that time we used the Garland Facility
solely as a transfer station. In 1999, we provided an allowance to write down to
-zero- the  undepreciated  cost of the  EnviroClean(R)  System  and the  Garland
building  improvements.  We have  received  a  permit  amendment  from  the TCEQ
allowing us to process regulated medical waste at the Garland Facility using the
autoclave  method (steam  disinfection)  of treatment  and have been  processing
waste at the  Garland  Facility  since  August 29,  2002  using  such  method of
treatment. Our bank debt is secured by a first lien on the Garland Facility, and
two loans from  stockholders of the Company are secured by a second lien deed of
trust on the Garland Facility.

         As mentioned  above,  we operate the UTMB Facility in Galveston,  Texas
pursuant  to a  contract  with  UTMB,  but UTMB  owns the  property,  plant  and
equipment  comprising the UTMB  Facility.  We also operate the Tulsa Facility in
Tulsa, Oklahoma, but Envirosolve,  L.L.C. owns the property, plant and equipment
comprising the Tulsa Facility.

         In  the  opinion  of  our  management,  the  Company's  properties  are
adequately covered by insurance.

Item 3.  Legal Proceedings

         We operate in a highly regulated industry and are exposed to regulatory
inquiries  or  investigations  from  time to time.  Government  authorities  can
initiate  investigations  for a variety of  reasons.  We have been  involved  in
certain legal and administrative proceedings that have been settled or otherwise
resolved on terms  acceptable to us, without having a material adverse effect on
our business.

         We are  also a  party  to  various  legal  proceedings  arising  in the
ordinary course of business. However, there are no legal proceedings pending or,
to our knowledge, threatened against us that will adversely affect our financial
condition or our ability to carry on the business except the following:


                                       13
<PAGE>

         On November 25,  1998,  the Company was a named  defendant,  along with
several of its officers,  in a lawsuit filed in Buncombe County,  Superior Court
North  Carolina.  A default  judgment was  rendered  against all  defendants  in
November 1999 as a result of not filing answers in a timely  manner.  The ruling
was appealed to the North Carolina Supreme Court and the Company posted a surety
bond in the amount of the judgment of $354,708. The Company's President posted a
$100,000 letter of credit secured by a certificate of deposit in connection with
the surety bond.  The  estimated  liability  due under the judgment  amounted to
$403,369, including interest accrued since November 1999. The Company provided a
$360,000  loss related to this  judgment in the 1999  consolidated  statement of
operations.  On June 8, 2001, the Supreme Court in North  Carolina  affirmed the
judgment.  In July 2001, the  plaintiffs  received the amount of the surety bond
and the Company paid accrued interest in the amount of $48,255 in December 2001.
On August 1, 2001,  the  bonding  company  seized the  $100,000  certificate  of
deposit  posted in connection  with the bond by the  Company's  President and in
December 2001, seized 63,450 shares of the Company's common stock which had been
tendered by the plaintiffs as part of the lawsuit.  In addition,  on November 9,
2001, the bonding company filed a lawsuit against the Company  claiming  damages
of $254,708,  (the amount it paid to the  plaintiffs on the surety bond less the
certificate  of deposit),  plus  interest and  attorneys'  fees.  The  Company's
consolidated  balance sheet,  as of December 31, 2001,  reflected an accrual for
losses in connection  with this  litigation of $260,000.  In February  2003, the
bonding  company's Motion for Summary Judgment was granted and a judgment in the
amount of approximately $295,000 was entered against the Company. On November 3,
2003, a  settlement  agreement  between the bonding  company and the Company was
reached calling for an immediate  payment of $100,000 and the remaining  balance
of $212,093 to be paid in four equal  installments  of $53,023  beginning May 7,
2004 and  continuing  thereafter  every six months until fully paid. The company
paid  $50,000  and  $50,000  was  paid  from  the  trust  mentioned  below.  The
accompanying  consolidated  balance sheet as of December 31, 2003,  includes the
remaining  liability to the bonding  company of $212,093,  of which  $106,046 is
classified as a portion of the current  maturities - litigation  settlements and
$106,046 classified as non-current litigation settlements.

         Michael  Moorhead,  one of the defendants in the North Carolina action,
filed suit in Texas against the Company's  former  counsel in the North Carolina
action claiming,  among other things, that the counsel is liable for the loss in
such case for  failure  to timely  respond  to  discovery.  The case was  styled
Michael  Moorhead v. Hunton & Williams,  et al, 160th Judicial  District  Court,
Dallas County,  Texas, Cause No. 01-07565.  Hunton & Williams,  on September 14,
2001, filed a third-party action against Mr. Fleeger,  alleging that Mr. Fleeger
was the contact person for all of the defendants in the North Carolina case, and
was therefore  responsible  to the  plaintiff.  Hunton & Williams,  et al sought
contribution from Mr. Fleeger in the event they are liable to Mr. Moorhead.  Mr.
Fleeger  denied the  allegations  against him and filed a  counterclaim  against
Hunton &  Williams,  seeking  damages  for  negligence.  The case was settled on
October 17, 2002 and the settlement  amount of $50,000 from Hunton & Williams is
being held in trust and will be applied  against  Moorhead's  liability  for the
outstanding bond obligation discussed in the preceding paragraph, if any.

         The Company was named  defendant in a lawsuit  filed in Travis  County,
Texas by the State of Texas.  The lawsuit  claimed  that the Company  breached a
contract  awarded  under the Texas  Smart  Jobs  Program  by failing to meet the
requirements  of the contract and sought  compensatory  damages in the amount of
$439,631,  plus costs and attorneys'  fees. An accrual of $290,000 was reflected
in the December 31, 2001 and 2002 consolidated  balance sheets. The Company also
accrued  prejudgment  interest  expense of  $30,000,  $30,000 and $44,000 in the
years ended December 31, 2002, 2001 and 2000, respectively.  On March 3, 2003 we
reached a  settlement  with the State of Texas the terms of which  will  require
that we pay the State  $240,620  with no  interest in 36 equal  installments  of
$6,684  commencing on or about April 30, 2003. The settlement also requires that
we  retroactively  pay $6,110 to those  employees or past employees whom we were
obligated to pay, but failed to pay in full, pursuant to the Smart Jobs Program.
Accordingly,  we have reduced the litigation accrual by the amount ($180,465) of
the settlement to be paid in years subsequent to December 31, 2002. Further, the
excess litigation  accrual and the accrued interest expense related to the Smart
Jobs  litigation  was  credited  to income  in  February  2003 in the  amount of
$147,270.

         At December 31, 2003,  the total  recorded  liabilities  for litigation
amounted to $399,242.

         The Company is also subject to various matters of litigation during its
normal course of operations.  Management  believes that the eventual  outcome of
these matters will not have a material adverse effect on the Company's financial
position, results of operations, or cash flows.

Item 4.  Submission of Matters to a Vote of Security Holders

         No matters were  submitted  during the fourth quarter of 2003 to a vote
of the Company's stockholders, through the solicitation of proxies or otherwise.


                                       14
<PAGE>

                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

         There is currently no public market for our Common Stock.

         At March 15, 2004, we had 18,295,248 shares of Common Stock outstanding
and had approximately 700 stockholders of record.

         We have no fixed dividend policy.  The Board of Directors is authorized
to consider dividend distributions from time to time, upon its assessment of our
operating  results,  capital  requirements and general  financial  condition and
requirements.  We  have  not  paid a  dividend  since  our  inception.  For  the
foreseeable  future, it is anticipated that we will use all available cash flows
to finance our growth and that dividends will not be paid to stockholders.

Recent Sales of Unregistered Securities

         During 2001, we (i) issued  585,413 shares of Common Stock at $1.25 per
share for a total of  $731,767  (after  expenses of the  offering),  (ii) issued
3,808  shares of Common  Stock in  conversion  of 1,334  shares of our Series II
Preferred  Stock,  (iii) issued 9,404  shares of Common Stock in  conversion  of
2,177  shares of our Series I  Preferred  Stock (iv)  issued  240,500  shares of
common stock as employee  stock bonuses and (v) issued  860,532 shares of Common
Stock in exchange for the cancellation of debt in the amount of $902,548.

         During 2002, we (i) issued  988,591  shares of Common Stock for a total
of $1,155,763 at prices  ranging from $1.05 to $1.26 per share,  and (ii) issued
368,790 shares of Common Stock in exchange for the  cancellation  of debt in the
amount of $276,548.

         During 2003, we (i) issued  898,267  shares of Common Stock for a total
of $864,500 at prices ranging from $0.75 to $2.25 per share, (ii) issued 122,000
shares of Common Stock as compensation  and in exchange for the  cancellation of
debt in the amount of $122,000,  and (iii) issued 705,082 shares of Common Stock
as part payment to acquire assets from AmeriTech Environmental, Inc.

         All  transactions  described  above  were  deemed  to  be  exempt  from
registration under the Securities Act of 1933, as amended (the "Securities Act")
in reliance on Section 4(2) of the  Securities Act and/or Rule 506 of Regulation
D promulgated  under the  Securities  Act. The  recipients of securities in each
such  transaction  represented  their  intentions to acquire the  securities for
investment  only  and not  with a view to or for  sale in  connection  with  any
distribution   thereof  and  appropriate  legends  were  affixed  to  the  share
certificates  issued in such  transactions.  All recipients had adequate access,
through their relationships with the Company, to information about us.

         In 2001, we filed a Registration Statement on Form 10-SB on a voluntary
basis with the SEC, which  registration  statement became effective on September
14, 2001. Although we were not required to register under the applicable federal
securities  laws,  we believe  that  commencing  voluntary  reporting  under the
Securities  Exchange Act of 1934, as amended (the "Exchange Act"),  will enhance
our ability to access the capital markets.  We also are hopeful that one or more
market  makers  will  provide the basis for our Common  Stock to attain  trading
status and allow for a public  market in our Common  Stock.  We believe that the
establishment  of a public market for our shares will allow us to be in a better
position to obtain future financing and also provide increased  liquidity to our
stockholders. While we have had preliminary discussions with four broker-dealers
concerning  a  range  of  financial  advisory  services,   we  do  not  have  an
understanding  with, or a commitment  from,  anyone to act as a market maker for
our  securities,  and there can be no assurance that we will find a market maker
for our securities, or otherwise establish a public market for our Common Stock.

         We intend  to seek  additional  financing  through  additional  private
placement(s) or a public offering within the next twenty-four  months.  If we do
so, all of the then current existing  stockholders and their stock holdings will
be proportionately diluted.


                                       15
<PAGE>

Item 6.  Management's Discussion and Analysis or Plan of Operation.

         The  following  discussion  of the  financial  condition and results of
operations  of the  Company  should be read in  conjunction  with the  Company's
Consolidated Financial Statements and related footnotes.

Background

         We were  incorporated  in November 1993. We provide  regulated  medical
waste and PHI collection, transportation and treatment services to our customers
and related  training and education  programs and consulting  services.  We also
sell ancillary supplies.

         Our revenues  increased to $6,318,861  in 2003 from  $5,410,710 in 2002
and from  $4,046,061  in 2001.  We derive our  revenues  from  services to three
principal  groups of  customers:  (i)  outpatient  clinics,  medical  and dental
offices, biomedical companies,  municipal entities, long-term and sub-acute care
facilities  and other  smaller-quantity  generators  of regulated  medical waste
("small account" customers), (ii) blood banks, surgery centers, dialysis centers
and other  medium  quantity  generators  of  regulated  medical  waste  ("medium
account"  customers)  and  (iii)  hospitals,  diagnostic  facilities  and  other
larger-quantity   generators  of  regulated   medical  waste  ("large   account"
customers).  Substantially all of our services are provided pursuant to customer
contracts  specifying  either  scheduled  or  on-call  regulated  medical  waste
management  services,  or both. Contracts with small account customers generally
provide for annual  price  increases  and have an  automatic  renewal  provision
unless the customer  notifies us prior to completion of the contract.  Contracts
with medium  account  customers and large account  customers,  which may run for
more than one year,  typically include price escalator  provisions,  which allow
for  price  increases  generally  tied to an  inflation  index or set at a fixed
percentage. At December 31, 2003, we served approximately 2,000 customers.

Statements of Operations Data

Years Ended December 31, 2003 and 2002

                                                     Years Ended December 31,
                                                   ------------    ------------
                                                       2003            2002
                                                   ------------    ------------
Revenues                                           $  6,318,861    $  5,410,710
Cost of revenues                                      4,405,464       3,589,904
                                                   ------------    ------------

Gross profit                                          1,913,397       1,820,806

Selling, general and administrative expenses          2,568,691       1,846,787
Compensatory element of stock bonuses                      --              --
Depreciation and amortization                           320,778         149,530
                                                   ------------    ------------

Loss from operations                                   (976,072)       (175,511)

Other (income) expense:
Interest expense                                        180,279         133,856
Debt conversion expense                                    --            78,300
Other income                                            (51,324)       (101,941)
Litigation settlement                                  (147,270)           --
                                                   ------------    ------------
                                                        (18,315)        110,215
                                                   ------------    ------------

Net loss                                           $   (957,757)   $   (285,726)
                                                   ============    ============

Basic and diluted loss per common share:
         Net loss                                  $      (0.06)   $      (0.02)
                                                   ============    ============

Weighted  average  common  shares used in
basic and diluted loss per share                     16,633,717      15,758,003
                                                   ------------    ------------

EBITDA(1)                                          $   (456,700)   $     75,960
                                                   ============    ============

(1)  Calculated  for any  period  as the sum of net  income  or  loss,  plus net
interest  expense,  income tax expense,  depreciation  expense,  debt conversion
expense and loss from extinguishments of debt. We consider EBITDA to be a widely
accepted  financial  indicator  of a  company's  ability to service  debt,  fund


                                       16
<PAGE>

capital  expenditures  and expand its business.  EBITDA is not calculated in the
same way by all  companies  and  therefore  may not be  comparable  to similarly
titled  measures  reported  by  other  companies.  EBITDA  is not a  measure  in
accordance with accounting  principles  generally accepted in the United States.
EBITDA should not be considered as an alternative to net income, as an indicator
of  operating  performance  or as an  alternative  to cash flow as a measure  of
liquidity.  The  funds  depicted  by  this  measure  may  not be  available  for
management's  discretionary  use due to legal or functional  requirements,  debt
service, other commitments and uncertainties.

         EBITDA is calculated as follows:

Net income (loss)                                  $(957,757)         $(285,726)
Interest expense                                     180,279            133,856
Depreciation expense                                 320,778            149,530
Debt conversion expense                                 --               78,300
                                                   ---------          ---------
EBITDA                                             $(456,700)         $  75,960
                                                   =========          =========

Critical Accounting Policies and Procedures

         Our discussion  and analysis of our financial  condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United States.  The preparation of these financial  statements  requires that we
make  estimates  and  judgments  that  affect  the  reported  amounts of assets,
liabilities,  revenues and  expenses,  and the related  disclosure of contingent
assets and liabilities (see Note 3 to the consolidated financial statements). We
believe  that  of  our  significant  accounting  policies  (see  Note  3 to  the
consolidated financial statements), the following may involve a higher degree of
judgment on our part and complexity of reporting.

         Accounts  Receivable.  Accounts receivable consist primarily of amounts
due to us from our normal  business  activities.  We maintain an  allowance  for
doubtful  accounts  to  reflect  the  expected   uncollectibility   of  accounts
receivable based on past collection  history and specific risks identified among
uncollected accounts.

         Revenue  Recognition and Processing Costs. We recognize revenue and the
associated  processing  costs at the time medical waste is received and prepared
for processing.

         Intangible Assets.  Intangible assets consist primarily of goodwill and
customer list acquired in the AmeriTech  Environmental,  Inc.  acquisition.  The
Company  evaluates its intangible assets for impairment every year in accordance
with SFAS No. 142.

Results of Operations - Year 2003 Compared to 2002.

         Revenues.  Our  revenues  increased  $908,151 or 16.8%,  to  $6,318,861
during the year ended December 31, 2003, from  $5,410,710  during the year ended
December  31,  2002.  The  increase in revenue  from 2002 was due  primarily  to
increased  volume of medical  waste  processed  from current and new  customers,
particularly from those customers acquired from AmeriTech Environmental, Inc. in
an  acquisition  effective  October  3,  2003  which  contributed  approximately
$713,000  to revenue in the fourth  quarter.

         Cost of revenues.  Our cost of revenues increased $815,560 or 22.7%, to
$4,405,464  during 2003, from $3,589,904 in 2002. The increase was primarily due
to higher operating costs of  transportation  and internal  processing offset by
significantly  reduced cost of third-party  disposal cost and by lower container
costs resulting from increased use of reusable containers. Of the increased cost
of revenues,  we estimate that  approximately  $560,000 is attributable to costs
related to the AmeriTech Environmental,  Inc. acquisition discussed above. Costs
of  revenue  for 2003 and 2002 were  reduced by debt  extinguishment  credits of
$49,206 and $44,054, respectively.

         Selling,  general and administrative expenses. Our selling, general and
administrative expenses increased $721,904, or 39.1%, to $2,568,691 during 2003,
from  $1,846,787 in 2002.  The increase was  attributable  principally to higher
payroll  and  payroll-related   expenses,   including   commissions,   increased
consulting fees for marketing and information technology services, and increased
travel costs related to implementation of the Company's  acquisition program and
investigation of possible acquisition candidates. Some of the Company's salaries
in 2003 were  reduced as part of a cost savings  program that reduced  costs and
expenses by approximately  $48,200, while in 2002 some of the Company's salaries
were accrued but not paid. The increase in selling,  general and  administrative
expenses was  attributable  to a slightly higher increase in the expenses of the
parent company compared to the prior year and a significantly higher increase in
EMSI  expenses  compared to 2002,  both of which were  partially  offset by debt
extinguishment credits of $36,754 and $25,623 in 2003 and 2002, respectively.

         Depreciation and amortization.  Depreciation and amortization increased
by $171,248,  or 114.5%,  to $320,778 for the year ended December 31, 2003, from


                                       17
<PAGE>

$149,530 for the year ended December 31, 2002. The increase was due primarily to
increased  depreciation  of EMSI  fixed  assets  related  to the  new  autoclave
installed in our Garland Facility in August 2002.

         Interest expense.  Our interest expense increased $46,423,  or 34.7% to
$180,279  during the year ended December 31, 2003 from $133,856  during the year
ended December 31, 2002.  Interest  expense  increased in EMSI and in the parent
company during the period as a result of debt increases related to the AmeriTech
Environmental,  Inc. acquisition and to stockholder loans to the Company to fund
working capital needs. In 2003 the board of directors  allowed  officers who had
deferred  personal  salaries in previous  years and/or who had made loans to the
Company to accrue interest at the rate of 10 per cent on those amounts  totaling
$33,751 commencing July 1, 2003. In 2002 we charged interest expense for $30,000
in connection with pending litigation with the State of Texas.  Interest expense
will increase in the parent company  because of the new loans from  stockholders
discussed in the liquidity  section below and from unpaid  accrued  salaries and
stockholder advances.

         Other  income.  During the year ended  December 31, 2003 and 2002,  the
Company and EMSI were the  beneficiaries  of certain debt  extinguishments  from
certain  creditors  with  whom the  companies  either  reached  legally  binding
agreements  whereby  certain debt was forgiven or the statute of limitations had
passed whereby the debt holders lost their right to present legal claims against
us. Accordingly, we recorded such extinguishments as other income.

         Debt conversion  expense.  In 2002, we allowed our President to convert
his advances  receivable into our Common Stock at a conversion rate of $0.75 per
share. In connection with such conversion, we charged $28,300 to debt conversion
expense in the first quarter of 2002 and $50,000 to debt  conversion  expense in
the fourth quarter of 2002.

         Net loss. Net loss was $957,757 during 2003,  compared to a net loss of
$285,726  during  2002.  The  increased  loss was  primarily  due to the factors
described above.

         EBITDA.  EBITDA was  $(456,700)  during 2003 compared to $75,960 during
2002. The reduced EBITDA was also primarily due to the factors described above.

Liquidity and Capital Resources

         Source of Funds for Operations and Capital Expenditures.
         --------------------------------------------------------

         Our principal source of liquidity is collections on accounts receivable
from waste management  service  revenue,  from sales of our Common Stock through
private offerings to certain individuals,  primarily existing stockholders,  and
from loans and advances received from certain stockholders. Revenues during 2003
were  approximately  $75,679  per  month  higher,  stemming  primarily  from the
AmeriTech  Environmental,  Inc.  acquisition  discussed above,  than the monthly
average  revenue for 2002.  The  principal  uses of  liquidity  are payments for
labor,  material and expenses,  and debt and lease  obligations to carry out our
regulated medical waste management  services.  The UTMB Facility did not operate
for  much of 2002  and  through  the  month of  March  2003,  causing  increased
transportation  costs and alternative  regulated  medical waste processing costs
and resulting in the continuation of significant  operating losses and cash flow
deficiencies.  Following the  resumption of processing in April 2003 our cost of
revenues  increased  significantly  as  a  result  of  higher  operating  costs,
principally utilities,  while our revenues from UTMB declined because of reduced
UTMB disposal fees.

         We are of the opinion  that our  existing  cash  position and cash flow
from operations will not enable us to satisfy our current cash requirements.  We
will be required to obtain additional  financing to implement our business plan.
Historically,  we have met our cash  requirements from a combination of revenues
from  operations  (which  by  themselves  have  been  insufficient  to meet such
requirements), stockholder loans and advances, and proceeds from the sale of our
debt and equity securities.

         Going concern.
         --------------

         The  following  factors  raise  substantial  doubt about the  Company's
ability to continue as a going  concern.  As indicated by the  Company's  annual
consolidated financial statements,  the Company incurred consolidated net losses
of $957,757; $285,726 and $2,007,861 for the years ended December 31, 2003; 2002
and 2001,  respectively.  Additionally,  the Company has significant deficits in


                                       18
<PAGE>

both working capital and stockholders' equity at December 31, 2003 and 2002. The
Company has remained  current with its payroll  taxes for the year 2002 and most
of 2003, and has paid the substantial  EMSI payroll tax obligation  amounting to
approximately  $362,000  for the years  ended  December  31,  2001 and 2000.  On
October 16, 2002 a  Certificate  of Release of Federal Tax Lien was  executed by
the Internal Revenue Service. The Company expects to continue to explore various
cost  cutting  initiatives,  expand its business in new market areas and explore
other sources for raising capital with debt or equity instruments.

         History of negative cash flow.
         ------------------------------

         Historically,  stockholders  of  the  Company  have  funded  cash  flow
deficits. However, the stockholders are under no specific funding obligation. As
a means of obtaining  working  capital and funds for expansion,  the Company has
received,  from private placements of the Company's Common Stock,  approximately
$864,500,  $1,155,763,  and $731,767  during the years ended  December 31, 2003,
2002 and 2001, respectively. One of our stockholders loaned the Company $615,000
in 2002; the same stockholder loaned an additional  $217,500 in 2003 and another
stockholder loaned the Company $238,125.  Also, our President has advanced funds
for working  capital to us from time to time  amounting  to $220,000 at December
31, 2003.  There is no assurance that such private  placement  funding and loans
and advances will continue to satisfy our cash needs.

         A few of our customers have accounted for a majority of our sales.
         ------------------------------------------------------------------

         During the year ended  December 31,  2003,  sales of our services to 43
customers represented approximately 81.5% of our total revenues, including sales
to UTMB, which amounted to approximately 19.4% of our total revenues.  A loss of
any of these  customers  could  reduce our  revenues,  increase  our losses from
operations and limit our ability to achieve profitability.

         Outstanding liabilities.
         ------------------------

         We have outstanding liabilities and debt of approximately $5,842,064 at
December 31, 2003 compared to $3,724,544 at December 31, 2002.  Our current rate
of revenue may be  insufficient  to enable us to repay our debt upon maturity or
to meet our monthly obligations. In the event that we cannot generate sufficient
revenue and we are unable to finance the repayment of our debt, we could be sued
or face  judgments  against  us which  could  result in a loss of  assets  and a
discontinuation of operations.

         Litigation by a bonding company.
         --------------------------------

         As  discussed  above,  we,  along  with  certain  of our  officers  and
directors,  were named as defendants in a lawsuit in North Carolina in 1998. The
judgment has been  satisfied,  but a bonding company has filed a lawsuit against
us  claiming  damages  of  $254,708.17,  plus  interest  and  attorneys  fees as
indemnification  for the payments made to  plaintiffs in connection  with a bond
posted on our behalf. We have responded alleging, among other things, accord and
satisfaction  and believe that by seizing the shares of Common Stock tendered by
the plaintiffs in the litigation,  the bonding company has been fully reimbursed
for the  amount  paid on the bond and does not have a valid  claim  against  us.
However,  there can be no  assurance  that we will  prevail,  and if we lose the
lawsuit, it will significantly reduce cash available for continuing operations.

         On November 3, 2003, a settlement agreement between the bonding company
and the Company was reached calling for an immediate payment of $100,000 and the
remaining  balance of $212,093 to be paid in four equal  installments of $53,023
beginning  May 7, 2004 and  continuing  thereafter  every six months until fully
paid.  The company  paid  $50,000 and $50,000 was paid from the trust  mentioned
above.  The  accompanying  consolidated  balance  sheet as of December 31, 2003,
includes the remaining  liability to the bonding  company of $212,093,  of which
$106,046 is  classified  as a portion of the  current  maturities  -  litigation
settlements and $106,046 classified as non-current litigation  settlements.  The
2002  balance  sheet  reflects  an accrual  for losses in  connection  with this
litigation of $260,000.

Discussion of Liquidity - Year 2003 Compared to 2002

         At December 31, 2003,  our working  capital  deficit was  $(3,118,340),
compared to a working  capital deficit of $(1,754,171) at December 31, 2002. The
increase in working capital deficit was primarily due to an increase in accounts
receivable and prepaid insurance offset by increases in accrued  liabilities and
all categories of notes payable.

         Net cash used in  operating  activities  was  $(197,539)  during  2003,
compared  to  $(658,124)   for  2003.   This  decrease   primarily   reflects  a
substantially  increased loss in 2003 offset by higher non-cash depreciation and
amortization,  bad debt and stock issued for services  expenses,  an increase in
accounts  receivable and increases in accounts  payable and accrued  liabilities
and advances from stockholder.


                                       19
<PAGE>

         Net cash used in investing  activities  for the year ended December 31,
2003,  was  ($902,385)  compared to ($748,046)  for the year ended  December 31,
2002. The change is primarily  attributable to a decrease in property  additions
(principally  the  installation  of an  autoclave  and related  equipment at our
Garland Facility and the cost of amending our permit for the Garland Facility in
2002)  offset  by the cash  portion  of the  acquisition  of  certain  assets of
AmeriTech Environmental, Inc. effective October 3, 2003.

         Net cash provided by financing  activities  was  $1,099,924  during the
year ended December 31, 2003, compared to $1,406,170 for the year ended December
31, 2002. Proceeds from the sale of Common Stock declined by $291,262.  Payments
on long-term  obligations  decreased to $255,202 in 2003 from  $364,593 in 2002.
Contributing to the decrease in 2003 were fewer proceeds from stockholder  loans
than in 2002.

         There was no net change in cash balance for the year ended December 31,
2003, the same as the year ended December 31, 2002.

Other Liquidity Matters

         At December  31,  2003,  our  long-term  obligations  were  $1,772,363,
including  bank  debt  of  $244,597,  notes  payable  to  stockholders  totaling
$864,596,  installment  notes on equipment of $263,928 and a liabilities for the
settlement of the Smart Jobs and Surety Bond litigation matters in the aggregate
amount of $399,242.

         Our bank debt at December 31,  2002,  of $244,597 is secured by a first
lien on the Garland Facility, and bears interest at a variable rate based on the
national prime rate as published in the Wall Street Journal,  plus 0.5% (4.5% at
December  31,  2003).  The note is payable in minimum  monthly  installments  of
principal and interest totaling $3,100,  matures in July 2011, and is guaranteed
by Mr. Matthew Fleeger, our President and Chief Executive Officer.

         One  of our  stockholders  loaned  the  Company  a  total  of  $615,000
($479,670 was  outstanding  at December 31, 2003) in August and September  2002.
The note bears  interest at the rate of 10 percent per annum and is repayable in
60  equal  monthly  installments  of  $13,067,  including  interest,   beginning
September  28,  2002,  and is secured by a second lien deed of trust on the real
property at our Garland, Texas facility.

         On  November  7,  2003,  the  abovementioned  stockholder  and  another
stockholder  of the Company  each loaned  $200,000 to the Company to assist with
the  funding of the  AmeriTech  Environmental,  Inc.  acquisition.  These  notes
payable to the  stockholders  bear  interest at the rate of 10 percent per annum
and are payable as follows:  As to the first stockholder,  the note is repayable
in full by February 7, 2004. As to the second stockholder,  the note,  including
other funds advanced to the Company,  is payable monthly commencing  December 7,
2003 for a period of 36 months.  The total monthly payment amount is $7,684. The
loans are secured by a second lien deed of trust on the Garland, Texas plant. At
December 31, 2003, the total  obligation to the first  stockholder  was $117,500
and to the second stockholder was $232,426.

         We are also obligated under various  installment  notes payable for the
purchase of equipment. The notes, which bear interest at rates ranging from 8.1%
to 16.1%,  are due at various  dates  through  August  2008,  and are payable in
monthly  installments of approximately  $8,043. The equipment acquired therewith
collateralizes the notes.

         On March 3, 2003 we  reached a  settlement  with the State of Texas the
terms  of  which  will  require  that  we pay the  State  $240,620  in 36  equal
installments  of $6,684  commencing on or about April 30, 2003.  The  settlement
also  requires  that we  retroactively  pay  $6,110 to those  employees  or past
employees whom we were obligated to pay, but failed to pay in full,  pursuant to
the Smart Jobs  Program.  Accordingly,  the excess  litigation  accrual  and the
accrued  interest  expense  related to the Smart Jobs litigation was credited to
income in February 2003 in the amount of $147,270.

         On November 3, 2003, a settlement agreement between the bonding company
and the Company was reached calling for an immediate payment of $100,000 and the
remaining  balance of $212,093 to be paid in four equal  installments of $53,023
beginning  May 7, 2004 and  continuing  thereafter  every six months until fully
paid.  The company  paid  $50,000 and $50,000 was paid from the trust  mentioned
above.  The  accompanying  consolidated  balance  sheet as of December 31, 2003,
includes the remaining  liability to the bonding  company of $212,093,  of which
$106,046 is  classified  as a portion of the  current  maturities  -  litigation
settlements and $106,046 classified as non-current litigation settlements.

         We have two  series  of  convertible  debentures  outstanding  totaling
$40,135 at December 31, 2003 and 2002.  The Company has permitted the holders of

                                       20
<PAGE>

the debentures to convert such amounts into our Common Stock,  but these amounts
reflect  debentures that have not yet been converted by the holders thereof.  We
have not made any cash payments for interest or principal on these debentures in
2003 or 2002 and are default thereof.

         On  November  7,  2003,   we  issued  a  note   payable  to   AmeriTech
Environmental,  Inc. for $750,000  bearing 7% interest  payable monthly with the
final interest  payment and principal  payable on November 7, 2004. The note was
issued in connection  with our  acquisition  of AmeriTech and formed part of the
consideration of the transaction.

         From time to time our  president  and  another  officer of the  Company
advance  funds to cover  working  capital  needs.  At  December  31,  2003,  the
outstanding  balance  of such loans and other  amounts  due other  officers  and
directors of the Company amounted to $510,895.

Material Commitments For Capital Expenditures

         We currently have no significant  commitments for capital expenditures.
However,  we are currently  planning to expand our business  through a series of
acquisitions  and we hope to install an autoclave in our leased Tulsa  permitted
facility.  We  have no  commitments  for  financing  such  acquisitions  but are
exploring  a number of  financing  alternatives,  the  success  of which will be
crucial to the accomplishment of our acquisition objectives.

Events Subsequent to December 31, 2003

         On March 7, 2004, one of our  stockholders  loaned the Company $500,000
in exchange for a convertible promissory note bearing interest at the rate of 10
percent.  The note is payable  monthly on the seventh of each month for a period
of 36 months with each payment amounting to $16,133.59.  The note is convertible
into  common  stock of the Company at the rate of $0.75 per share in whole or in
part at any time and is  subject  to  anti-dilution  provisions,  subject to the
Company's  right to pay in full  the  then  outstanding  principal  and  accrued
interest  within 30 days of notice of  intent  by the  note-holder  to  convert,
effectively canceling the payee's conversion right.

         On March 12, 2004, the Company issued 80,000 shares of its common stock
at a price of $1.25 per share to a stockholder  for aggregate  consideration  of
$100,000.

Recently Issued Accounting Standards

         The  following   pronouncements  have  been  issued  by  the  Financial
Accounting Standards Board ("FASB").

         In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable
Interest  Entities  - an  Interpretation  of ARB No.  51."  This  interpretation
provides guidance related to identifying  variable interest entities (previously
known  generally as special purpose  entities or SPEs) and  determining  whether
such entities should be consolidated.  Certain disclosures are required when FIN
No. 46  becomes  effective  if it is  reasonably  possible  that a company  will
consolidate or disclose  information  about a variable  interest  entity when it
initially applied FIN No. 46. This interpretation must be applied immediately to
variable  interest  entities  created or obtained  after  January 31, 2003.  The
consolidation  requirements  apply to older entities in the first fiscal year or
interim period  beginning after June 15, 2003.  However,  in December 2003, FASB
deferred the latest date by which all public entities, which meet the definition
of small business  issuer under SEC Regulation S-B ("Public  SB's"),  must apply
FIN 46 to the first interim or annual  reporting period ended after December 15,
2004.

         Management  does not believe  that the  adoption of this  pronouncement
will have a material effect on the Company's consolidated financial statements.

Off-Balance Sheet Arrangements

         During the year ended  December 31,  2003,  the Company had off balance
sheet arrangements  related to its lease  obligations.  The Company is obligated
under such lease arrangements for $1,765,728 through 2009.

Item 7.  Consolidated Financial Statements.

         The  Company's   Consolidated   Financial   Statements   and  Notes  to
Consolidated  Financial Statements are attached to this Form 10-KSB beginning at
page F-i and are incorporated herein by reference.


                                       21
<PAGE>

Item  8.  Changes  in and  Disagreements  With  Accountants  on  Accounting  and
Financial Disclosure.

          None.

Item 8A. Controls and Procedures.

         Under  the  supervision  and with the  participation  of the  Company's
management,  including its principal  executive officer and principal  financial
officer,  the Company conducted an evaluation of the effectiveness of the design
and operation of its  disclosure  controls and  procedures,  as defined in Rules
13a-15(e) and 15d-15(e)  under the Securities  Exchange Act of 1934, as amended,
as of the end of the period  covered by this  report  (the  "Evaluation  Date").
Based  on  this  evaluation,  the  Company's  principal  executive  officer  and
principal  financial  officer  concluded  as of the  Evaluation  Date  that  the
Company's  disclosure  controls  and  procedures  were  effective  such that the
information  relating to the Company,  including its consolidated  subsidiaries,
required  to be  disclosed  in  its  SEC  reports  (i) is  recorded,  processed,
summarized  and  reported  within the time  periods  specified  in SEC rules and
forms,  and (ii) is accumulated and  communicated  to the Company's  management,
including its principal  executive officer and principal  financial officer,  as
appropriate to allow timely decisions regarding required disclosure.

         During the fourth quarter of 2003, the Company did not make any changes
in its internal controls over financial reporting that have materially affected,
or are reasonably likely to materially  affect,  the Company's  internal control
over financial reporting.






















                                       22
<PAGE>

                                    PART III

Item 9.   Directors and Executive Officers of the Registrant.

         Members of our Board of Directors  serve until the next annual  meeting
of our  stockholders  or until  their  successors  have  been duly  elected  and
qualified.  Our officers are elected at the Board of Directors meeting following
each annual  stockholders'  meeting,  and serve at the  pleasure of our Board of
Directors.  Our last annual  meeting was held on December 18, 2002, for the 2002
fiscal year.

         Winship  B.  Moody,  Sr.  currently  serves  as the  audit  committee's
financial expert. Mr. Moody is an independent member of the Board of Directors.

         The following persons comprise the directors and executive  officers of
the Company as of December 31, 2003:

                             Director/Officer
Name and Age                 Since            Position(s) Held
---------------------------- ---------------- ----------------

Matthew H. Fleeger (40)      1993             President, Chief Executive Officer
                                              and Director
John Hill (38)               2003             Executive Vice President; Chief
                                              Operating Officer
Sam Hicks, C.P.A. (63)       1998             Senior Vice President; Chief
                                              Financial Officer
Mark M. Altenau, M.D. (62)   1994             Director
Winship B. Moody, Sr. (69)   2002             Chairman of the Board of Directors
                                              of the Company
Vivian Eriksen (60)          2002             Director
Beverly L. Fleeger (68)      1993             Vice President and Corporate
                                              Secretary
Robert Centeno (42)          2001             Vice President, Sales
Steve Evans (44)             2003             Controller

Matthew H. Fleeger - President, and Chief Executive Officer and Director
------------------------------------------------------------------------

         Our Founder, President, Chief Executive Officer and a director, Matthew
H.  Fleeger,  has been with the Company for 11 years,  during our growth from an
early  stage  venture  capital  concept  to  the  present.  Mr.  Fleeger  has  a
comprehensive  background  in finance,  marketing  and sales with several  years
experience  in the oil and gas  industry.  As Senior Vice  President  of a large
Dallas-Fort  Worth  independent  petroleum  company,  he was instrumental in the
development  of revenues in excess of $50  million.  He was also a director  and
played an  important  role in the  development  of Palm Beach Tan,  Inc.  from a
6-store chain of tanning salons to the largest chain of indoor tanning salons in
the nation. He has extensive  experience in corporate  structuring,  mergers and
acquisitions,  joint ventures and a variety of equity and debt private placement
vehicles  used  to fund  the  working  and  expansion  capital  needs  of  small
developmental  and  growth  companies.   Mr.  Fleeger  graduated  from  Southern
Methodist  University  with a BA in  Business  with an  emphasis  in Finance and
Marketing.  He has been selected as a member of the  International  Who's Who of
Business Professionals.

John E. Hill III - Executive Vice President and Chief Operating Officer
-----------------------------------------------------------------------

         John E. Hill III joined the  Company  in early 2003 as  Executive  Vice
President and Chief Operating  Officer.  Mr. Hill comes to us with over 18 years
of experience in the medical waste and waste management industries.  He was most
recently  employed  by the  industry  leader,  Stericycle,  where he  served  as
Director of  Operations  for the  Mid-Atlantic  Region and was  responsible  for
running the recently acquired BioSystems  Division for that region.  BioSystems,
the division of Scherer  Healthcare that Stericycle  acquired for their reusable
sharps container  service program,  is the largest service provider of that type
in the nation.  Prior to  Stericycle,  Mr. Hill  worked for  Bridgeview,  Inc. a
medical  waste  management  company based in  Philadelphia  that was acquired by
Stericycle in 2002.  From 1996 to 1998, Mr. Hill was Vice President of MedWaste,
Inc.,  which,  at the time, was the second largest  medical waste company in the
nation. Before joining MedWaste, Inc. he was employed by Waste Management,  Inc.
for 11 years.

Sam Hicks, C.P.A. - Senior Vice President and Chief Financial Officer
---------------------------------------------------------------------

         Sam  Hicks,  CPA,  is the Senior  Vice  President  and Chief  Financial
Officer and manages the  accounting/finance  departments of the Company and it's
subsidiaries.  Mr. Hicks joined the Company in 1998 as Senior Vice President and
Chief Financial Officer and previously served as Director of Financial Reporting


                                       23
<PAGE>

of HealthCor,  Inc., a publicly held healthcare services company. Prior to that,
Mr.  Hicks was with Ernst & Young LLP for 31 years,  with 16 of those years as a
Partner.  Mr. Hicks  received his BS in Business  Administration  from Creighton
University  in 1962 and holds CPA  certificates  from the states of Nebraska and
Texas. He is a member of the American  Institute of Certified Public Accountants
and the Texas Society of Certified Public Accountants.

Mark M. Altenau, M.D. - Director
--------------------------------

         Dr.  Altenau,  a member of the Board of  Directors  since  1994,  is an
otolaryngologist  in Dallas,  Texas,  where he has been in private  practice for
over 20 years. He has been a significant  stockholder of the Company since March
of 1994. Dr. Altenau  received his  undergraduate  degree from the University of
Cincinnati and his graduate degree from University of Cincinnati Medical School.

Winship B. Moody, Sr. - Chairman of the Board
---------------------------------------------

         Mr.  Moody has a  background  in finance and  accounting.  His previous
career included 28 years of experience in the pulp and paper industry. From 1962
to 1990, he worked at Rice Barton  Corporation  where he rose to the position of
President,  Chief Executive Officer and Chief Financial  Officer.  Mr. Moody has
also  served  as  President  and a Board  Member  of the  American  Pulp & Paper
Manufacturers Association. Mr. Moody retired in 1990 and currently serves on the
Board of Profile Senior Golf  Association.  He received his Bachelors  degree in
chemical engineering from the University of Maine.

Vivian Eriksen - Director
-------------------------

         Mr. Eriksen has a background in investments and franchising.  From 1989
to 1997,  Mr.  Eriksen was the  Chairman  of the Board of The Rio Grande  County
Bank. In addition, during Mr. Eriksen's business career, he has owned and sold a
national  fast food  franchise,  a Canon  copier  franchise  and a  Ford/Mercury
dealership.  Currently retired,  Mr. Eriksen is President of the Kiwanis Club of
Monte Vista,  Colorado and a past President of St. Joseph's Hospital and Nursing
Home.

Beverly L. Fleeger - Vice President, Corporate Secretary
--------------------------------------------------------

         Ms.  Fleeger has worked for the Company  since its  inception  in 1993.
Prior to  joining  the  Company,  Ms.  Fleeger  had  over 30  years of  business
organization and  administrative  experience.  For 17 years, Ms. Fleeger managed
the offices of a  family-owned  oil and gas  production  company.  In 1978,  Ms.
Fleeger formed Bevco,  Int'l.,  an  international  search firm  specializing  in
mid-to-top management personnel for major mining and oil exploration  companies.
Ms.  Fleeger  graduated from a New Mexico  Business  College and received her BA
from the  University  of Texas at  Dallas.  Ms.  Fleeger  is the  mother  of our
President, Matthew Fleeger.

Robert Centeno - Vice President, Sales
--------------------------------------

         Mr. Centeno  joined the Company in November 2001. Mr. Centeno  attended
Mount San Antonio  College in Los Angeles,  California  and went  directly  into
inside sales for a large corporation in Los Angeles. He has over twenty years of
experience in  operations,  sales,  sales  management,  consulting  and business
development. In 1987 Mr. Centeno moved to Dallas where he owned and operated the
Dallas  Hair Club for Men.  He sold that  business  in 1999 and bought the first
franchise  offering of the Great  Outdoors  Sub Shops.  Mr.  Centeno  negotiated
franchise  sales in  several  new Texas  markets  outside  of  Dallas  for Great
Outdoors Franchise, Inc. prior to selling his share to his partner.

Steve Evans - Controller
------------------------

         Steve Evans,  CPA,  joined the Company as  Controller  in June 2003. He
served  as  Controller  for  Aurum  Technology,  Inc.,  a $200  million  revenue
information  technology  company  that  outsourced  and  sold  software  to  the
financial  services  industry.  Prior to that,  Mr.  Evans  was  with  KPMG,  an
international  accounting  firm and was CFO of  Preferred  Bank of Houston.  Mr.
Evans graduated from Abilene Christian University with a B.B.A. in Accounting.

Section 16(a) Beneficial Ownership Reporting Compliance

         Section 16(a) of the Exchange Act requires the Company's  directors and
executive  officers,  and persons who own more than 10% of a registered class of
our equity securities,  to file with the SEC reports of ownership and changes in
ownership of Common Stock and other equity securities of the Company.  Executive
officers,  directors  and  greater  than 10%  stockholders  are  required by SEC
regulation  to furnish the Company  with copies of all Section  16(a) forms they
file.


                                       24
<PAGE>

         Based on the review of copies of such forms furnished to us and written
representations  that no other forms were required,  during the 2003 fiscal year
and prior fiscal years the following executive  officers,  directors and greater
than 10% beneficial owners failed to file on a timely basis, as disclosed in the
such forms, reports required by Section 16(a) of the Exchange Act:

         o        Dr.  Altenau  did not report  three  transactions  on a timely
                  basis on a Form 4. These  transactions  were  reported  on Dr.
                  Altenau's Form 5 for the 2003 fiscal year.
         o        Mr.  Eriksen did not report one  transaction on a timely basis
                  on a Form 4. This  transaction  was reported on Mr.  Eriksen's
                  Form 5 for the 2003 fiscal year. In addition,  Mr. Eriksen had
                  one report filed late.
         o        Mr. Evans had one report filed late.
         o        Mr.  Fleeger  did not report  three  transactions  on a timely
                  basis on a Form 4. These  transactions  were  reported  on Mr.
                  Fleeger's Form 5 for the 2003 fiscal year.
         o        Ms. Fleeger did not report two  transactions on a timely basis
                  on a Form 4. These transactions were reported on Ms. Fleeger's
                  Form 5 for the 2003 fiscal year.
         o        Mr. Hill did not report one transaction on a timely basis on a
                  Form 4. This transaction was reported on Mr. Hill's Form 5 for
                  the 2003 fiscal  year.  In  addition,  Mr. Hill had one report
                  filed late.
         o        Mr. Moody did not report three  transactions on a timely basis
                  on a Form 4. These  transactions  were reported on Mr. Moody's
                  Form 5 for the 2003 fiscal year.  In  addition,  Mr. Moody had
                  one report filed late.

Code of Ethics

         The Company  has not yet  adopted a code of ethics that  applies to its
principal executive officer,  principal financial officer,  principal accounting
officer or controller,  or persons  performing  similar  functions.  The Company
currently  has no  plans  to adopt a  revised  code of  ethics  that  meets  the
definition of a "code of ethics" under applicable SEC regulations.























                                       25
<PAGE>

Item 10. Executive Compensation.

         The following table sets forth the aggregate cash  compensation paid by
the Company in the three most recent  fiscal years ended  December 31, 2003,  to
each of its most highly compensated officers of the Company.

<TABLE>
<CAPTION>

                           Summary Compensation Table
                               Annual Compensation
                           --------------------------

                                                                       Other Annual      All other
Name and Principal Position         Year     Salary(1)    Bonus(2)     Compensation(3)   Compensation
---------------------------         ----     ---------    --------     ---------------   ------------
<S>                                 <C>      <C>          <C>          <C>               <C>
Matthew H. Fleeger...........       2003      $233,218       --             --              $3,612(4)
   President, Chief                 2002      $190,800       --          $78,300(3)         $3,874(4)
   Executive Officer, and Director  2001      $180,000       --          $87,573(3)         $5,534(4)


John Hill....................       2003      $112,523       --             --                --
   Executive Vice President and
   Chief Operating Officer

Sam Hicks....................       2003       $99,603       --             --                --
   Senior Vice President, Chief     2002      $101,760       --             --                --
   Financial Officer and Principal  2001      $94,661        --             --                --
   Accounting Officer

Robert Centeno...............       2003      $137,738       --             --                --
   Vice President, Sales            2002      $117,450       --             --                --

Beverly L. Fleeger                  2003       $65,223       --             --              $2,259(5)
   Vice President and               2002       $60,498       --             --              $6,582(5)
   Corporate Secretary              2001       $61,539       --             --              $6,582(5)
-----------------------------------------------------------------------------------------------------
</TABLE>

         (1)  Salary  includes  accrued  but  unpaid  salaries  in each  year as
follows:
               Matthew H. Fleeger - 2003 - $50,000; 2002 - $85,008; 2001 -
               $180,000
               Sam Hicks - 2003 - None; 2002 - $10,480; 2001 - $25,613
               Beverly L. Fleeger - 2003 - None; 2002 - None; 2001 - $6,532


         (2) Bonuses of up to 250,000 shares of Common Stock, subject to certain
employment  restrictions,  were awarded by the Board of  Directors  for the year
2001 and  charged to expense at the rate of $1 per share.  Specific  awards were
approved by the Board of Directors and shares were  distributed to the designees
on  January  1,  2004.  Certain  of the  shares  were  returned  to the  Company
immediately following distribution in exchange for stock options.

         (3) During 2003,  the  following  named  officers  were  authorized  to
convert their  accrued  salaries and loans into Common Stock of the Company at a
conversion rate of $0.75 per share:

<TABLE>
<CAPTION>

                                                                                  Compensation
Name of Officer           Accrued        Loans at        Total       Number of      Element
---------------        Salary at End      End of       Converted       Shares       Charged
                           Of Year         Year       During Year    Converted     to Expense
                           -------         ----       -----------    ---------     ----------
<S>                       <C>            <C>          <C>            <C>           <C>
Matthew H. Fleeger        $241,650       $220,502         --              --            --
Sam Hicks                 $ 67,259           --           --              --            --
Beverly L. Fleeger        $ 24,522           --           --              --            --

The  compensation  element ($0.25 per share) was charged to debt  extinguishment
expense in 2003.


                                       26
<PAGE>

         During 2002, the following  named  officers were  authorized to convert
their  accrued  salaries  and  loans  into  Common  Stock  of the  Company  at a
conversion rate of $0.75 per share:


                                                                                  Compensation
Name of Officer           Accrued        Loans at        Total       Number of      Element
---------------        Salary at End      End of       Converted       Shares       Charged
                           Of Year         Year       During Year    Converted     to Expense
                           -------         ----       -----------    ---------     ----------
Matthew H. Fleeger        $405,508       $ 84,900      $234,900       313,200       $ 78,300
Sam Hicks                 $ 67,259           --            --            --            --
Beverly L. Fleeger        $ 24,522           --            --            --            --

The  compensation  element ($0.25 per share) was charged to debt  extinguishment
expense in 2002.

         During 2001, the following  named  officers were  authorized to convert
their  accrued  salaries  and  loans  into  Common  Stock  of the  Company  at a
conversion rate of $0.75 per share:


                                                                                  Compensation
Name of Officer           Accrued        Loans at        Total       Number of      Element
---------------        Salary at End      End of       Converted       Shares       Charged
                           Of Year         Year       During Year    Converted     to Expense
                           -------         ----       -----------    ---------     ----------
Matthew H. Fleeger        $321,250       $262,721      $262,721       350,295       $ 87,573
Sam Hicks                 $ 56,779           --            --            --             --
Beverly L. Fleeger        $ 24,522           --            --            --             --
</TABLE>

The  compensation  element ($0.25 per share) was charged to debt  extinguishment
expense in 2001.

         (4) Represents  payments on a club  membership for Matthew Fleeger used
for  Company  purposes  in 2001  and  gasoline  for  automobile  and  disability
insurance premiums in 2003 and 2002.

         (5)  Represents  payments on automobile  driven by Ms. Fleeger used for
Company  purposes.  The automobile was purchased by Ms. Fleeger in December 2003
for the fair market value.

         In September 2003 the Board of Directors adopted a compensation program
for outside  directors.  The principal  components of the plan call for specific
Company common stock awards for service on the board (20,000 shares per person),
for service on  committees  of the board,  including  the audit  committee,  the
compensation  committee and the stock option committee  (5,000,  3,000 and 3,000
shares,  respectively),  and 10,000 shares for service as chairman of the board.
Further,  the Board of Directors  adopted a program to receive  compensation for
board meeting  attendance of $1,000 or $500 per meeting attended in person or by
telephone,  respectively.  The Company  recognized  as expense in 2003  $139,500
related to such expenses  through  December 31, 2003. In addition,  the Board of
Directors  authorized  the payment of interest to board members and officers who
have advanced  funds to the Company from time to time or who have unpaid accrued
salaries  unpaid by the Company.  Accordingly,  the Company  charged  $33,751 to
interest  expense  in 2003 for such  interest  accruals.  None of the  foregoing
amounts have been paid at December 31, 2003.



















                                       27
<PAGE>
<TABLE>
<CAPTION>

Item 11.  Security  Ownership of Certain  Beneficial  Owners and  Management and
Related Stockholder Matters.

         The following table sets forth each certain information  concerning the
number of shares of Common Stock owned beneficially as of March 15, 2004 by: (i)
persons  known to us to own more than five  percent  of any class of our  voting
securities;  (ii) each of our directors and the executive officers named in Item
10. above; and (iii) all our directors and executive officers as a group. Unless
otherwise indicated,  the stockholders listed possess sole voting and investment
power with respect to the shares shown.

                                                                Number of Shares
         Name and Address of Beneficial Owner                 Beneficially Owned(1)          Percent of Class(2)
                                                              ---------------------          -------------------
<S>                                                           <C>                            <C>
Matthew H. Fleeger, President, CEO and Director                   1,280,079(3)                       6.8%
    12750 Merit Drive -Park Central VII, Suite 770
    Dallas, Texas 75251
Mark Altenau, M.D., Director                                      2,603,459(4)                      14.2%
    12750 Merit Drive -Park Central VII, Suite 770
    Dallas, Texas 75251
Vivian Eriksen, Director                                          1,020,000                          5.6%
    12750 Merit Drive -Park Central VII, Suite 770
    Dallas, Texas  75251
Beverly Fleeger, Vice President and Corporate                       655,133(5)                       3.6%
Secretary
    12750 Merit Drive -Park Central VII, Suite 770
    Dallas, Texas 75251
Sam Hicks, Executive Vice President and CFO                         201,470(6)                       1.1%
    12750 Merit Drive -Park Central VII, Suite 770
    Dallas, Texas 75251
Winship  B. Moody,  Sr., Chairman of the Board of                   471,488(7)                       2.5%
Directors
    12750 Merit Drive -Park Central VII, Suite 770
    Dallas, Texas 75251
Robert Centeno, Vice President, Sales                                20,000(8)                       0.1%
    12750 Merit Drive -Park Central VII, Suite 770
    Dallas, Texas  75251
John E. Hill, III, Executive Vice President, COO                     10,000(9)                       0.1%
    12750 Merit Drive -Park Central VII, Suite 770
    Dallas, Texas  75251
Steve Evans, Controller
    12750 Merit Drive -Park Central VII, Suite 770
    Dallas, Texas  75251                                                --                            --
All Directors and Executive
Officers as a Group (9 persons)                                   6,261,629(10)                     32.2%(11)
Cahill Investments, LLC                                           1,000,000                          5.5%
    3330 Southgate Ct SW
    Cedar Rapids, Iowa 52404
</TABLE>

(1)  Pursuant  to Rule 13d-3  under the  Exchange  Act a person  has  beneficial
ownership of any  securities  as to which such person,  directly or  indirectly,
through any contract, arrangement,  undertaking,  relationship or otherwise, has
or shares voting power and/or  investment  power as to which such person has the
right to acquire such voting and/or investment power within 60 days.  Percentage
of beneficial  ownership as to any person as of a particular  date is calculated
by dividing the number of shares beneficially owned by such person by the sum of
the  number of shares  outstanding  as of such date and the  number of  unissued
shares as to which such person has the right to acquire voting and/or investment
control within 60 days. The number of shares shown includes  outstanding  shares
owned as of March 15,  2004,  by the  person  indicated  and  shares  underlying
warrants,  options and/or convertible debt and accrued interest thereon owned by
such  person on March 15,  2004,  that were  exercisable  within 60 days of that
date.

(2)  Applicable  percentage  ownership is based on  18,295,248  voting shares of
Common Stock outstanding on March 15, 2004.


                                       28
<PAGE>

(3) Includes  220,442  shares owned by Preston Harris  Interests,  Inc., a Texas
corporation,  of which Mr.  Fleeger is the president  and majority  stockholder;
322,693  shares of Common  Stock  underlying  convertible  accrued  salaries  at
December 31, 2003; and 310,292  shares for advances  outstanding at December 31,
2003. (See Certain Relationships and Related Transactions.)

(4) Includes an option for 20,000 shares of common stock.

(5)  Includes  32,696  shares of Common  Stock  underlying  convertible  accrued
salaries at December 31, 2003,  and 76,664  shares for advances  outstanding  at
December 31, 2003. (See Certain Relationships and Related Transactions.)

(6)  Includes  89,679  shares of Common  Stock  underlying  convertible  accrued
salaries at December 31, 2003 and an option for 35,000  shares of common  stock.
(See Certain Relationships and Related Transactions.)

(7) Includes  232,426  shares of Common Stock  underlying  convertible  debt and
accrued interest  thereon and an option for 10,000 shares of common stock.  (See
Certain Relationships and Related Transactions.)

(8) Includes an option for 20,000 shares of common stock.

(9) Includes an option for 10,000 shares of common stock.

(10) Includes  232,426 shares of Common Stock  underlying  convertible  debt and
accrued  interest  thereon,  convertible  accrued salaries at December 31, 2003,
convertible  advances  from  stockholders,   and  stock  options.  (See  Certain
Relationships and Related Transactions.)

(11)  Applicable  percentage  ownership is based on 18,295,248  voting shares of
Common Stock  outstanding  on March 15, 2004, and on shares  issuable  within 60
days of March 15, 2004.

<TABLE>
<CAPTION>


                      Equity Compensation Plan Information
                            (as of December 31, 2003)

------------------------------------------------------ --------------------- --------------------- ---------------------
                                                                                                        Number of
                                                                                                        securities
                                                                                                   remaining available
                                                            Number of                              for future issuance
                                                         securities to be                              under equity
                                                           issued upon         Weighted-average     compensation plans
                                                           exercise of        exercise price of         (excluding
                                                           outstanding           outstanding            securities
                                                        options, warrants     options, warrants    reflected in column
                                                          and rights (a)        and rights (b)           (a)) (c)
------------------------------------------------------ --------------------- --------------------- ---------------------
<S>                                                    <C>                   <C>                   <C>
Equity compensation plans approved by
      Security holders................................
                                                                --                    --                 755,000
------------------------------------------------------ --------------------- --------------------- ---------------------
Equity compensation plans not approved by
      Security holders................................          --                    --                    --
------------------------------------------------------ --------------------- --------------------- ---------------------
      Total...........................................          --                    --                 755,000
------------------------------------------------------ --------------------- --------------------- ---------------------
</TABLE>

















                                       29
<PAGE>

Item 12. Certain Relationships and Related Transactions.

         We incur certain general and administrative expenses jointly with other
related parties. Such costs are allocated amongst us and our affiliates based on
the specific entity incurring the expense,  square footage utilization on shared
facilities,  estimated  utilization of other relevant products and services,  or
the human resources dedicated to each respective entity.

         We have certain payable balances with our stockholders and officers. At
December 31, 2002 and 2003,  our payables to  stockholders  and officers were as
follows:
                                                December 31,
                                         2002                 2003
                                      ----------           ----------
           Vivian Eriksen             $  584,302           $  607,795
           Winship Moody, Sr                --                240,513
           Matthew Fleeger               295,508              535,666
           Sam Hicks                      67,259               70,622
           Beverly Fleeger                32,622               82,318
           Robert Centeno                   --                 20,000
                                      ----------           ----------
             Total                    $  979,691           $1,556,914
                                      ==========           ==========

Loans from Directors and Stockholders

         One of our  stockholders  and a director,  Vivian Eriksen,  loaned us a
total of $615,000  ($479,670 was outstanding at December 31, 2003) in August and
September  2002 for the purpose of  repaying a note to our largest  stockholder,
repaying a second lien working  capital note to  Southtrust  Bank,  and paying a
substantial  portion of our  delinquent  payroll tax  liability.  The note bears
interest  at the rate of 10  percent  per  annum  and is  repayable  in 60 equal
monthly installments of $13,067, including interest,  beginning on September 28,
2002,  and is secured by a second lien deed of trust on the real property at our
Garland Facility.

         Mr.  Eriksen  also loaned us a total of  $200,000  in November  2003 in
connection  with our acquisition of AmeriTech  Environmental,  Inc. and has made
other working  capital loans and advances  totaling  $17,500 during 2003.  These
sums were  documented  in the form of a note bearing  interest at the rate of 10
percent per annum and is repayable in two  installments  of $100,000 on December
7, 2003 and  $117,500  on  February  7,  2004,  the  latter  payment  to include
interest,  and is secured by a second lien deed of trust on the real property at
our Garland Facility.

         Mr. Winship  Moody,  Sr. also loaned us a total of $200,000 in November
2003 in connection with our acquisition of AmeriTech Environmental, Inc. and has
made other working  capital  loans and advances  totaling  $38,125  during 2003.
These sums were documented in the form of a note bearing interest at the rate of
10  percent  per annum and is  repayable  in 36 equal  monthly  installments  of
$7,684,  including interest,  beginning on December 7, 2003, and is secured by a
second  lien deed of trust on the real  property at our  Garland  Facility.  Mr.
Moody's note is  convertible at the rate of $1.25 per share into common stock of
the Company.

         Messrs.  Eriksen and Moody are also owed additional  sums  representing
the cash portion of directors' compensation and other sums for advancing certain
expenses to the Company.

Stockholder Lock-Up Agreement

         Stockholders  owning  approximately  61.2%  of our  Common  Stock  have
entered into a lock-up agreement (the "Lock-Up  Agreement") with us by which the
stockholders  agreed  to place  certain  restrictions  on  their  right to sell,
pledge, or otherwise  transfer shares of Common Stock owned by them for one year
following the date that the Common Stock is initially quoted on the OTC Bulletin
Board(R) or other national  exchange (the "Effective  Date").  Essentially,  the
stockholders who signed the agreement (the "Restricted Stockholders") agreed not
to sell,  pledge,  or otherwise  transfer  shares of Common Stock owned by them,
subject  to the  following:  (i)  after  the  expiration  of one  year  from the
Effective  Date,  20% of the  shares of  Common  Stock  owned by the  Restricted
Stockholder will no longer be subject to the Lock-Up  Agreement;  (ii) after the
expiration of 90 days  following  the  completion of one year from the Effective
Date, 40% of the shares of Common Stock owned by the Restricted Stockholder will
no longer be subject to the Lock-Up Agreement; (iii) after the expiration of 180
days  following the  completion of one year from the Effective  Date, 60% of the
shares of Common  Stock owned by the  Restricted  Stockholder  will no longer be
subject  to the  Lock-Up  Agreement;  (iv)  after  the  expiration  of 270  days
following the completion of one year from the Effective  Date, 80% of the shares
of Common Stock owned by the Restricted Stockholder will no longer be subject to
the Lock-Up Agreement;  and (v) after expiration of two years from the Effective
Date,  100% of the shares of Common  Stock owned by the  Restricted  Stockholder
will no longer be subject to the  Lock-Up  Agreement.  The  restrictions  do not


                                       30
<PAGE>

apply to (i) a bona fide gift made by the Restricted Stockholder,  provided that
the donee of the  shares  of  Common  Stock or  securities  convertible  into or
exchangeable  or exercisable  for any shares of Common Stock agree in writing to
be bound by the  terms  of the  Lock-Up  Agreement  prior  to the  gift;  (ii) a
distribution to partners or stockholders of the Restricted  Stockholder  (and to
any  direct or  indirect  partner or  stockholder  thereof),  provided  that the
ultimate  distributees  of the shares of Common Stock or securities  convertible
into or  exchangeable  or  exercisable  for any shares of Common  Stock agree in
writing  to be  bound  by  the  terms  of the  Lock-Up  Agreement  prior  to the
distribution;  and (iii) transfers,  without consideration,  of shares of Common
Stock or securities  convertible  into or  exchangeable  or exercisable  for any
shares of Common  Stock to family  members or to one or more trusts  established
for the  benefit of one or more family  members,  provided  that the  transferee
agrees in writing to be bound by the terms of the Lock-Up Agreement prior to the
transfer.

Item 13. Exhibits and Reports on Form 8-K.

         (a)      Exhibits.

     3.1 Articles of Incorporation  of the Company,  filed with the Secretary of
Sate of the State of Texas on  November  12,  1993  (filed as Exhibit 3.1 to the
Company's  Form  10-SB  filed on July  16,  2001,  and  incorporated  herein  by
reference).

     3.2 Articles of Amendment to the Articles of  Incorporation of the Company,
filed  with the  Secretary  of State of the State of Texas on January  10,  1994
(filed as Exhibit 3.2 to the  Company's  Form 10-SB filed on July 16, 2001,  and
incorporated herein by reference).

     3.3 Articles of Amendment to the Articles of  Incorporation of the Company,
filed  with the  Secretary  of State of the State of Texas on January  31,  1996
(filed as Exhibit 3.3 to the  Company's  Form 10-SB filed on July 16, 2001,  and
incorporated herein by reference).

     3.4 Articles of Amendment to the Articles of  Incorporation of the Company,
filed with the  Secretary  of State of the State of Texas on  November  12, 1996
(filed as Exhibit 3.4 to the  Company's  Form 10-SB filed on July 16, 2001,  and
incorporated herein by reference).

     3.5 Articles of Amendment to the Articles of  Incorporation of the Company,
filed with the  Secretary  of State of the State of Texas on  December  23, 1999
(filed as Exhibit 3.5 to the  Company's  Form 10-SB filed on July 16, 2001,  and
incorporated herein by reference).

     3.6 Articles of Amendment to the Articles of  Incorporation of the Company,
filed with the  Secretary of State of the State of Texas on June 27, 2001 (filed
as  Exhibit  3.6 to the  Company's  Form  10-SB  filed  on July  16,  2001,  and
incorporated herein by reference).

     3.7  Bylaws,  as  amended,  of the  Company  (filed as  Exhibit  3.7 to the
Company's  Form  10-SB  filed on July  16,  2001,  and  incorporated  herein  by
reference).

     4.1 Form of Lock-Up  Agreement  (filed as Exhibit 4.1 to the Company's Form
10-SB filed on July 16, 2001, and incorporated herein by reference).

     4.2 Form of Subscription  Agreement  (filed as Exhibit 4.2 to the Company's
Form 10-SB filed on July 16, 2001, and incorporated herein by reference).

     4.3 Stock Purchase Option,  dated January 15, 1997, between the Company and
Gary S. Krall  (filed as Exhibit 4.3 to the  Company's  Amendment  No. 1 to Form
10-SB filed on February 13, 2002, and incorporated herein by reference).(*)

     10.1 Firm Commitment Agreement, dated October 31, 2000, between Lilly Beter
Capital Group, Ltd. and the Company (filed as Exhibit 10.1 to the Company's Form
10-SB filed on July 16, 2001, and incorporated herein by reference).

     10.2 Loan  Conversion and Common Stock  Agreement  between Mark M. Altenau,
M.D.  and the  Company,  dated  July 31,  2000  (filed  as  Exhibit  10.2 to the
Company's  Form  10-SB  filed on July  16,  2001,  and  incorporated  herein  by
reference).


                                       31
<PAGE>

     10.3  Contractor  Services  Agreement  effective  May 28, 1995, as amended,
between the Company and The  University  of Texas  Medical  Branch at  Galveston
(filed as Exhibit 10.3 to the Company's  Form 10-SB filed on July 16, 2001,  and
incorporated herein by reference).

     10.4 Memorandum of Agreement,  dated June 15, 2001, between the Company and
Intercontinental  Manufacturing  Company (filed as Exhibit 10.4 to the Company's
Form 10-SB filed on July 16, 2001, and incorporated herein by reference).

     10.5  Exclusive  Medical  Waste  Service  Agreement,  dated March 21, 2002,
between EnviroClean  Management Services,  Inc. and Christus Spohn Health System
(filed as Exhibit  10.5 to the  Company's  Form 10-QSB filed on August 16, 2002,
and incorporated herein by reference).+

     10.6 Medical Waste  Transportation and Disposal  Agreement,  dated March 1,
2001, between EnviroClean Management Services,  Inc., and Trinity Mother Frances
Regional  Health Center (filed as Exhibit 10.6 to the Company's  Amendment No. 1
to  Form  10-SB  filed  on  February  13,  2002,  and  incorporated   herein  by
reference).+

     10.7  Amended  and  Restated  Promissory  Note dated  July 31,  2001 by the
Company to Mark M. Altenau,  M.D. for $171,666.67  (filed as Exhibit 10.7 to the
Company's  Amendment  No.  1 to Form  10-SB  filed on  February  13,  2002,  and
incorporated herein by reference).

     10.8  Amended and  Restated  Loan  Conversion  and Common  Stock  Agreement
between Mark M.  Altenau,  M.D.  and the Company,  dated July 31, 2001 (filed as
Exhibit 10.8 to the  Company's  Amendment  No. 1 to Form 10-SB filed on February
13, 2002, and incorporated herein by reference).

     10.9 Amendment 4 to the Contractor  Services  Agreement between the Company
and  University of Texas Medical  Branch at Galveston  (Exhibit  10.9) (filed as
Exhibit 10.9 to the  Company's  Amendment  No. 1 to Form 10-SB filed on February
13, 2002, and incorporated herein by reference).

     10.10 LBCG  Financing  Proposal  (filed as Exhibit  10.10 to the  Company's
Amendment  No. 1 to Form 10-SB  filed on February  13,  2002,  and  incorporated
herein by reference).

     10.11 Purchase Agreement for the purchase of an autoclave for the Company's
Garland facility between  EnviroClean  Management  Services,  Inc. and BondTech,
Inc.  (filed as Exhibit 10.11 to the  Company's  Form 10-QSB filed on August 19,
2002, and incorporated herein by reference).

     10.12  Promissory  Note  dated  August  28,  2002 by the  Company to Vivian
Eriksen for  $202,250.79.  (filed as Exhibit 10.12 to the Company's  Form 10-QSB
filed on November 14, 2002, and incorporated herein by reference).

     10.13  Promissory  Note  dated  August  28,  2002 by the  Company to Vivian
Eriksen for  $90,000.00.  (filed as Exhibit 10.13 to the  Company's  Form 10-QSB
filed on November 14, 2002, and incorporated herein by reference).

     10.14  Promissory  Note  dated  August  28,  2002 by the  Company to Vivian
Eriksen for  $322,749.21.  (filed as Exhibit 10.14 to the Company's  Form 10-QSB
filed on November 14, 2002, and incorporated herein by reference).

     31.1  Certification  of  Chief  Executive  Officer  of  MedSolutions,  Inc.
Pursuant to Rule 13a-14(a)/15d-14(a).**

     31.2  Certification  of  Chief  Financial  Officer  of  MedSolutions,  Inc.
Pursuant to Rule 13a-14(a)/15d-14(a).**

     32.1  Certification  of  Chief  Executive  Officer  of  MedSolutions,  Inc.
Pursuant to 18 U.S.C. Section 1350.**

     32.2  Certification  of  Chief  Financial  Officer  of  MedSolutions,  Inc.
Pursuant to 18 U.S.C. Section 1350.**

--------------
     (*) Denotes a management contract or compensatory plan or arrangement.
     (+)  Confidential  treatment was requested with respect to certain portions
of this exhibit. Omitted portions were filed separately with the SEC at the time
the exhibit was filed.
     (**) Filed herewith.

         (b)      Reports on Form 8-K.


                                       32
<PAGE>

         A report on Form 8-K was  filed on  November  24,  2003  reporting  the
acquisition  by the  Company of certain  of the  assets  and the  assumption  of
certain of the liabilities of AmeriTech Environmental, Inc.

Item 14. Principal Accountant Fees and Services.

         Audit Fees. The aggregate fees billed by Marcum & Kliegman,  L.L.P. for
the fiscal  years ended  December  31, 2003 and 2002 for  professional  services
rendered for the audit of the Company's annual financial statements,  the review
of the financial  statements included in the Company's Forms 10-QSB and services
that were  provided in  connection  with  statutory  and  regulatory  filings or
engagements totaled $72,000 and $108,094, respectively.

         Audit-Related  Fees.  The  aggregate  fees billed by Marcum & Kliegman,
L.L.P.  for the fiscal years ended  December 31, 2003 and 2002 for assurance and
related services that are reasonably  related to the performance of the audit or
review  of the  Company's  financial  statements  and are not  disclosed  in the
paragraph captioned "Audit Fees" above were $0 and $0, respectively.

         Tax Fees.  The aggregate fees billed by Marcum & Kliegman,  L.L.P.  for
the fiscal  years ended  December  31, 2003 and 2002 for  professional  services
rendered for tax  compliance,  tax advice and tax planning,  for the years ended
December 31, 2003 and 2002, were $18,000 and $19,220,  respectively. Tax fees of
$18,000 were for the preparation of the Company's federal income tax returns and
fees of $1,220 in 2002 were for tax research  concerning the taxability of stock
compensation.

         All Other Fees. The aggregate fees billed by Marcum & Kliegman,  L.L.P.
for the fiscal years ended December 31, 2003 and 2002 for products and services,
other than the services  described in the  paragraphs  captioned  "Audit  Fees",
"Audit-Related Fees", and "Tax Fees" above were $0 and $0, respectively.

         The Audit  Committee  has  established  its  pre-approval  policies and
procedures,  pursuant  to which  the  Audit  Committee  approved  the  foregoing
services provided by Marcum & Kliegman, L.L.P. in 2003.



















                                       33
<PAGE>

                                   SIGNATURES

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


                                         MEDSOLUTIONS, INC.


Dated:  April 14, 2004          By:  /S/ Matthew H. Fleeger
                                    --------------------------------------------
                                         Matthew H. Fleeger
                                         President and Chief Executive Officer

                                By: /s/ Sam Hicks
                                    --------------------------------------------
                                        Senior Vice President, Chief Financial
                                        Officer and Principal Accounting Officer



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

        Signature                           Title                      Date
        ---------                           -----                      ----

/s/ Matthew H. Fleeger           President, Chief Executive       April 14, 2004
-------------------------        Officer and Director
     Matthew H. Fleeger


/s/ Mark M. Altenau              Director                         April 14, 2004
-------------------------
Mark M. Altenau, M.D.

/s/ Vivian Eriksen               Director                         April 14, 2004
-------------------------
Vivian Eriksen

/s/ Winship B. Moody, Sr.        Chairman of the Board of         April 14, 2004
-------------------------        Directors
Winship B. Moody, Sr.





















                                       34
<PAGE>

                               MEDSOLUTIONS, INC.

                          INDEX TO FINANCIAL STATEMENTS


                                                                          Page
                                                                       ---------
PART II - FINANCIAL INFORMATION:


   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                                  F-1


   CONSOLIDATED BALANCE SHEETS                                               F-2
     At December 31, 2003 and 2002


   CONSOLIDATED STATEMENTS OF OPERATIONS                                     F-3
     For the Years Ended December 31, 2003 and 2002


   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY                 F-4 - F-6
     For the Years Ended December 31, 2003 and 2002


   CONSOLIDATED STATEMENTS OF CASH FLOWS                               F-7 - F-8
     For the Years Ended December 31, 2003 and 2002


   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                         F-9 - F-29


























                                       F-i

<PAGE>

To the Board of Directors
MedSolutions, Inc.



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
                    ----------------------------------------

We have audited the  accompanying  consolidated  balance sheets of MedSolutions,
Inc.  (the  "Company")  as of  December  31,  2003  and  2002,  and the  related
consolidated statements of operations,  stockholders'  deficiency and cash flows
for the years  then  ended.  These  consolidated  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain reasonable  assurance about whether the consolidated
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  consolidated  financial  statements.  An audit also includes  assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall  consolidated  financial  statement  presentation.  We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
MedSolutions,  Inc.  as of December  31,  2003 and 2002,  and the results of its
operations  and  cash  flows  for the  years  then  ended,  in  conformity  with
accounting principles generally accepted in the United States of America.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated  financial statements,  the Company's significant operating losses,
working capital deficiency and stockholders'  deficiency raise substantial doubt
about its ability to continue as a going concern.  Management's  plans regarding
these  matters  are  also  described  in Notes  2.  The  consolidated  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.


                                          MARCUM & KLIEGMAN, L.L.P.

New York, New York
March 10, 2004


















                                       F-1
<PAGE>
<TABLE>
<CAPTION>

                               MEDSOLUTIONS, INC.

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS
                                     ------
                                                                                 December 31,
                                                                         ----------------------------
                                                                             2003            2002
                                                                         ------------    ------------
<S>                                                                      <C>             <C>
Current Assets:
  Cash                                                                   $       --      $       --
  Accounts receivable - trade, net                                          1,333,765         872,906
  Prepaid expenses and other current assets                                   219,223         124,088
  Supplies                                                                     12,778          19,148
                                                                         ------------    ------------
      Total Current Assets                                                  1,565,766       1,016,142

Property and equipment - at cost, net of accumulated
  depreciation                                                              1,478,176       1,259,650
Intangible assets - Customer list, net of accumulated
  amortization                                                                950,000            --
Intangible assets - Goodwill                                                  961,832            --
Intangible assets - permits                                                    59,764          60,447
Other                                                                           3,014           7,245
                                                                         ------------    ------------
      Total Assets                                                       $  5,018,552    $  2,343,484
                                                                         ============    ============

                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY
                    ----------------------------------------
Current Liabilities:
  Cash overdraft                                                         $    109,991    $     87,588
  Note payable to bank                                                         37,276            --
  Convertible debentures                                                       40,135          40,135
  Current maturities of long-term obligations                                  89,475          38,949
  Accounts payable                                                          1,325,953         847,432
  Accrued liabilities                                                       1,447,951       1,493,942
  Note payable - AmeriTech Environmental, Inc.                                750,000            --
  Current maturities - notes payable stockholders                             338,677         104,632
  Current maturities - litigation settlements                                 186,253         109,535
  Advances from stockholders                                                  358,395          48,100
                                                                         ------------    ------------
      Total Current Liabilities                                             4,684,106       2,770,313

Long-term obligations, less current maturities                                419,050         294,096
Notes payable - stockholder, less current maturities                          525,919         479,670
Litigation settlements, less current maturities                               212,989         180,465
                                                                         ------------    ------------
      Total Liabilities                                                     5,842,064       3,724,544
                                                                         ------------    ------------
Commitments, Contingencies and Other Matters
  (Notes 1, 2, 9, 13, 14 and 16)

Stockholders' Deficiency:
  Common stock (par value $.001) - 100,000,000
    shares authorized at December 31, 2003 and 2002; 18,084,703 shares
    issued and 18,072,503 shares outstanding at December 31,
    2003 and 16,359,354 shares issued and 16,347,154 shares
    outstanding at December 31, 2002                                           18,084          16,359
  Preferred stock (par value $.001) - 100,000,000
    shares authorized at December 31, 2003 and 2002,
    respectively, none outstanding                                               --              --
Additional paid-in capital                                                 21,476,848      19,963,268
Accumulated deficit                                                       (22,300,444)    (21,342,687)
Treasury stock, at cost - 12,200 shares at December 31, 2003
  and 2002                                                                    (18,000)        (18,000)
                                                                         ------------    ------------
        Total Stockholders' Deficiency                                       (823,512)     (1,381,060)
                                                                         ------------    ------------
        Total Liabilities and Stockholders' Deficiency                   $  5,018,552    $  2,343,484
                                                                         ============    ============
</TABLE>

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

                                      F-2
<PAGE>

                               MEDSOLUTIONS, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS



                                                        For the Years Ended
                                                            December 31,
                                                   ----------------------------
                                                       2003            2002
                                                   ------------    ------------

Revenues:
  Sales - Net                                      $  6,318,861    $  5,410,710
                                                   ------------    ------------

Cost, Expenses and Other Income:
  Cost of sales                                       4,405,464       3,589,904
  General and administrative expenses                 2,568,691       1,846,787
  Depreciation and amortization                         320,778         149,530
                                                   ------------    ------------
                                                      7,294,933       5,586,221
                                                   ------------    ------------
Loss from operations                                   (976,072)       (175,511)

Other (income) expense:
  Debt conversion expense                                  --            78,300
  Interest expense                                      180,279         133,856
  Other income                                          (51,324)       (101,941)
  Litigation settlement                                (147,270)           --
                                                   ------------    ------------
                                                        (18,315)        110,215
                                                   ------------    ------------

Net Loss                                           $   (957,757)   $   (285,726)
                                                   ============    ============

Basic and diluted net loss per common share        $       (.06)   $       (.02)
                                                   ============    ============
Weighted average common shares used in basic and
  diluted loss per share                             16,633,717      15,758,003
                                                   ============    ============





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


                                      F-3
<PAGE>
<TABLE>
<CAPTION>

                               MEDSOLUTIONS, INC.

               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY

                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

                                                                      MSI Preferred Stock
                                              MSI Common Stock             Series I
                                          -----------------------   -----------------------
                                            Shares       Amount       Shares       Amount
                                          ----------   ----------   ----------   ----------
<S>                                       <C>          <C>          <C>          <C>
Year Ended December 31, 2003:
-----------------------------

Balance - December 31, 2002               16,359,354   $   16,359         --     $     --
MSI common stock sold for cash               898,267          898         --           --
MSI common stock issued in part
  payment to acquire AmeriTech
  Environmental, Inc.                        705,082          705         --           --
MSI common stock exchanged for accounts
  payable and stock based compensation       122,000          122         --           --
Net loss                                        --           --           --           --
                                          ----------   ----------   ----------   ----------
Balance - December 31, 2003               18,084,703   $   18,084         --     $     --
                                          ==========   ==========   ==========   ==========



Year Ended December 31, 2002:
-----------------------------

Balance - December 31, 2001               15,001,973   $   15,002         --     $     --
MSI common stock sold for cash               988,591          988         --           --
MSI common stock exchanged to cancel
  stockholder advances and accrued
  salaries                                   313,200          313         --           --
Debt conversion expense                         --           --           --           --
MSI common stock exchanged for accounts
  payable and stock based compensation        55,590           56         --           --
Net loss                                        --           --           --           --
                                          ----------   ----------   ----------   ----------
Balance - December 31, 2002               16,359,354   $   16,359         --     $     --
                                          ==========   ==========   ==========   ==========
</TABLE>















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

                                      F-4
<PAGE>
<TABLE>
<CAPTION>



                               MEDSOLUTIONS, INC.

               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY

                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

                                            MSI Preferred Stock       EMSI Preferred Stock
                                                 Series II                 Series I
                                          -----------------------   -----------------------
                                            Shares       Amount       Shares       Amount
                                          ----------   ----------   ----------   ----------
<S>                                       <C>          <C>          <C>          <C>
Year Ended December 31, 2003:
-----------------------------

Balance - December 31, 2002                     --     $     --           --     $     --
MSI common stock sold for cash                  --           --           --           --
MSI common stock issued in part
  payment to acquire AmeriTech
  Environmental, Inc.                           --           --           --           --
MSI common stock exchanged for accounts
  payable and stock based compensation          --           --           --           --
Net loss                                        --           --           --           --
                                          ----------   ----------   ----------   ----------
Balance - December 31, 2003                     --     $     --           --     $     --
                                          ==========   ==========   ==========   ==========

Year Ended December 31, 2002:
-----------------------------
Balance - December 31, 2001                     --     $     --           --     $     --
MSI common stock sold for cash                  --           --           --           --
MSI common stock exchanged to cancel
  stockholder advances and accrued
  salaries                                      --           --           --           --
Debt conversion expense                         --           --           --           --
MSI common stock exchanged for accounts
  payable and stock based compensation          --           --           --           --
Net loss
                                          ----------   ----------   ----------   ----------
Balance - December 31, 2002                     --     $     --           --     $     --
                                          ==========   ==========   ==========   ==========
</TABLE>





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














                                      F-5
<PAGE>
<TABLE>
<CAPTION>

                               MEDSOLUTIONS, INC.

               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY

                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002


                                           Additional
                                            Paid-in      Accumulated      Treasury
                                            Capital        Deficit          Stock           Total
                                          ------------   ------------    ------------    ------------
<S>                                       <C>            <C>             <C>             <C>
Year Ended December 31, 2003:
-----------------------------

Balance - December 31, 2002               $ 19,963,268   $(21,342,687)   $    (18,000)   $ (1,381,060)
MSI common stock sold for cash                 863,602           --              --           864,500
MSI common stock issued in part
  payment to acquire AmeriTech
  Environmental, Inc.                          528,100           --              --           528,805
MSI common stock exchanged for accounts
  payable and stock based compensation         121,878           --              --           122,000
Net loss                                          --         (957,757)           --          (957,757)
                                          ------------   ------------    ------------    ------------
Balance - December 31, 2003               $ 21,476,848   $(22,300,444)   $    (18,000)   $   (823,512)
                                          ============   ============    ============    ============

Year Ended December 31, 2002:
-----------------------------

Balance - December 31, 2001               $ 18,454,014   $(21,056,961)   $    (18,000)   $ (2,605,945)
MSI common stock sold for cash               1,154,775           --              --         1,155,763
MSI common stock exchanged to cancel
  stockholder advances and accrued
  salaries                                     234,587           --              --           234,900
Debt conversion expense                         78,300           --              --            78,300
MSI common stock exchanged for accounts
  payable and stock based compensation          41,592           --              --            41,648
Net loss                                          --         (285,726)           --          (285,726)
                                          ------------   ------------    ------------    ------------
Balance - December 31, 2002               $ 19,963,268   $(21,342,687)   $    (18,000)   $ (1,381,060)
                                          ============   ============    ============    ============
</TABLE>





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
















                                       F-6
<PAGE>
<TABLE>
<CAPTION>

                               MEDSOLUTIONS, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002



                                                              For the Years Ended
                                                                  December 31,
                                                          --------------------------
                                                              2003           2002
                                                          -----------    -----------
<S>                                                       <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

  Net loss                                                $  (957,757)   $  (285,726)
  Adjustments to reconcile net loss to net cash used in
    operating activities:
      Depreciation and amortization                           320,778        149,530
      Bad debt expense                                         78,768         19,182
      Debt conversion expense                                    --           78,300
      Stock/options issued for services and interest          122,000          8,148
      Litigation settlement                                  (147,270)          --
    Changes in assets (increase) decrease:
      Accounts receivable                                    (539,627)       (60,143)
      Supplies                                                 12,975         14,999
      Prepaid expenses and other current assets               (94,534)       (26,658)
    Changes in liabilities increase (decrease):
      Accounts payable and accrued liabilities                674,430       (629,498)
      Bank overdraft                                           22,403        (57,912)
      Advances from stockholder                               310,295        131,654
                                                          -----------    -----------
        NET CASH USED IN OPERATING ACTIVITIES                (197,539)      (658,124)
                                                          -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property and equipment                        (150,974)      (710,752)
  Permits                                                         683        (37,294)
  Acquisition of AmeriTech Environmental, Inc.               (752,094)          --
                                                          -----------    -----------
        NET CASH USED IN INVESTING ACTIVITIES                (902,385)      (748,046)
                                                          -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from sale of common stock                          864,501      1,155,763
  Proceeds from notes payable - stockholder                   490,625        615,000
  Payments on other long-term obligations                    (255,202)      (364,593)
                                                          -----------    -----------
        NET CASH PROVIDED BY FINANCING ACTIVITIES           1,099,924      1,406,170
                                                          -----------    -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS             --             --

CASH AND CASH EQUIVALENTS - BEGINNING                            --             --
                                                          -----------    -----------
CASH AND CASH EQUIVALENTS - END                           $      --      $      --
                                                          ===========    ===========
</TABLE>



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






                                      F-7
<PAGE>
<TABLE>
<CAPTION>

                               MEDSOLUTIONS, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002



                                                              For the Years Ended
                                                                  December 31,
                                                           -------------------------
                                                               2003          2002
                                                           -----------   -----------
<S>                                                        <C>           <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

  Interest paid                                            $   134,570   $   110,589
                                                           ===========   ===========
  Income taxes paid                                        $      --     $      --
                                                           ===========   ===========

SUPPLEMENTAL DISCLOSURE:

  Issuance of notes payable for property and
    equipment                                              $   323,719   $      --
                                                           ===========   ===========
  Stock issued in connection with loans and accounts
    payable                                                $    20,000   $   346,700
                                                           ===========   ===========
  Stock and options issued for compensation                $   102,000   $     8,148
                                                           ===========   ===========
  Issuance of MSI common stock for AmeriTech acquisition   $   528,805   $      --
                                                           ===========   ===========
  Issuance of MSI note payable for AmeriTech acquisition   $   750,000   $      --
                                                           ===========   ===========
</TABLE>












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






















                                      F-8
<PAGE>

                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002



NOTE  1  DESCRIPTION OF BUSINESS

MedSolutions,  Inc.  ("MSI"  or the  "Company")  formerly  known as  EnviroClean
International,  Inc. was incorporated in the State of Texas in November 1993 and
commenced  operations in January 1994. The Company was organized for the purpose
of developing, manufacturing, and marketing the EnviroClean(R) Thermal Oxidation
System  ("EnviroClean(R)  System" or "ETOS"),  which was designed to  incinerate
medical and other  specialized  wastes in an  environmentally  sound manner.  In
1994,  through   collaboration  with   Intercontinental   Manufacturing  Company
("IMCO"),  the Company built the  EnviroClean(R)  System prototype.  The initial
sale of  EnviroClean(R)  Systems  occurred  in  1996.  There  were no  sales  of
EnviroClean(R)  Systems  during the years ended  December 31, 2001 and 2000. The
Company has suspended its efforts to manufacture  and market the  EnviroClean(R)
Systems  until  such time it has the  financial  resources  to  reinstate  these
activities.

In 1995,  the  Company  founded  EnviroClean  Management  Services,  LLC,  which
subsequently became EnviroClean Management Services, Inc. ("EMSI") in 1996. EMSI
is a waste management  services company that services  principally medical waste
generators such as hospitals,  clinics, and physicians' offices.  EMSI collects,
transports,  and  disposes of medical  waste at two  facilities,  one located in
Garland,  Texas,  which  services  the North  Texas  area,  and one  located  in
Galveston, Texas, which services Houston and the South Texas area.

In January  1998,  the Company  exchanged  shares of its common stock to acquire
667,375  shares of EMSI's  common  stock from other  stockholders,  giving MSI a
controlling  interest of  approximately  51.3% in EMSI.  In December  1998,  the
Company  offered to exchange one share of MSI common stock for one share of EMSI
common stock with the remaining stockholders of EMSI. This offer resulted in the
acquisition  of  1,771,151  additional  shares  of EMSI  common  stock,  thereby
increasing the Company's  ownership to approximately  96.1%.  During  subsequent
periods, the Company has continued to obtain outstanding shares of EMSI's common
stock such that its ownership of EMSI is presently approximately 99.3%.

During   2002  the  Company   formed   three  new   wholly-owned   subsidiaries:
ShredSolutions,  Inc., SharpSolutions,  Inc. and EnviroClean Transport Services,
Inc. These subsidiaries did not have any significant  operations at December 31,
2003.

During 2003,  the Company  acquired the business and certain assets of AmeriTech
Environmental,  Inc.,  a  Texas  corporation  in  the  regulated  medical  waste
industry.

NOTE 2  GOING CONCERN

As indicated by the accompanying consolidated financial statements,  the Company
incurred  consolidated  net losses of $957,757  and $285,726 for the years ended
December  31,  2003  and  2002,  respectively.  Additionally,  the  Company  has
significant  deficits  in both  working  capital  and  stockholders'  equity  at
December 31, 2003 and 2002.  These  factors  raise  substantial  doubt about the
Company's ability to continue as a going concern.

Historically,  cash flow  deficits  have  been  funded  by  stockholders  of the
Company.  However, the stockholders are under no specific funding obligation. As
a means of providing working capital and funding for a proposed  financing,  the


                                      F-9
<PAGE>


                               MEDSOLUTIONS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002



NOTE  2  GOING CONCERN (Continued)

Company has received,  from private  placements  of the Company's  common stock,
approximately  $957,757 and $1,155,000  during the years ended December 31, 2003
and 2002,  respectively.  Three of the Company's largest stockholders loaned the
Company $490,625 in 2003. Also, the Company's  President and other  stockholders
have advanced funds for working  capital from time to time totaling  $510,895 at
December 31, 2003. There is no assurance that such private placement funding and
loans and advances will continue to satisfy the  Company's  cash needs,  or that
any other  financing  will  occur.  The  Company  expects to continue to explore
various  cost cutting  initiatives,  expand its business in new market areas and
explore other sources for raising capital with debt or equity instruments.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will be able to continue as a going concern.  Accordingly,  the
consolidated financial statements do not include any adjustments relative to the
recoverability  and  classification of assets, or the amounts and classification
of  liabilities  that might be  necessary  in the event the Company is unable to
continue operations.


NOTE  3  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation
---------------------------

The accompanying  consolidated  financial statements include the accounts of the
Company, its 99% owned subsidiary, EMSI, and its newly formed subsidiaries.  All
significant  intercompany  balances and transactions between the Company and its
subsidiaries have been eliminated in consolidation.

Cash and Cash Equivalents
-------------------------

For purposes of the consolidated  statement of cash flows, the Company considers
all  investments  with an original  maturity of three  months or less to be cash
equivalents.

Allowance for Doubtful Accounts
-------------------------------

The  Company's  trade  accounts  receivable  is stated net of an  allowance  for
doubtful  accounts  of  $58,372  and  $21,744  at  December  31,  2003 and 2002,
respectively.  The allowance for doubtful  accounts  reflects  management's best
estimate  of  probable  losses  inherent  in  the  account  receivable  balance.
Management determines the allowance based on known troubled accounts, historical
experience, and other currently available evidence.



                                      F-10
<PAGE>

                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002



NOTE  3  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


Supplies
--------

Supplies  are  stated at the lower of  average  cost or fair  value and  consist
primarily of medical  waste  containers  and supplies  provided to hospitals and
medical clinics and offices.

Property and Equipment
----------------------

Property and equipment are stated at cost less appropriate  valuation allowances
and accumulated  depreciation and amortization.  Depreciation is provided on the
straight-line  method over the  estimated  useful  lives of the related  assets,
generally  three to twenty  years.  Amortization  of leasehold  improvements  is
provided on the  straight-line  method over the lesser of the  estimated  useful
lives of the  improvements  or the  initial  term of the lease.  Gain or loss is
recognized upon sale or other disposition of property and equipment.

Intangible Assets
-----------------
Permits
-------

Beginning  in 2002  with the  adoption  of SFAS No.  142,  "Goodwill  and  Other
Intangible  Assets," such assets are no longer  amortized but instead are tested
for  impairment in value at least  annually.  Permit costs relate to the Garland
facility   medical  waste   disposal   permit  from  the  Texas   Commission  on
Environmental  Quality  ("TCEQ").  Permits are subjected to an annual impairment
test.

Customer List
-------------

In November 2003 the Company acquired certain of the assets,  including customer
list, of AmeriTech  Environmental,  Inc., in an  acquisition  accounted for as a
purchase.  The  Company  with  the  help of a  licensed  appraiser  completed  a
valuation of the acquired  assets and  assigned  $1,000,000  to the value of the
customer list acquired and established a useful life of five years over which to
amortize the assigned cost of the customer list.  Amortization  expense for each
year will approximate $200,000. In addition, the customer list will be subjected
to an annual impairment test.

Goodwill
--------

In November 2003 the Company acquired certain of the assets,  including customer
list, of AmeriTech  Environmental,  Inc., in an  acquisition  accounted for as a
purchase.  The Company  assigned the unallocated  cost in excess of identifiable
assets acquired,  including the $1,000,000 assigned to the value of the customer
list, to goodwill. Goodwill is subjected to an annual impairment test.

As of  December  31,  2003,  the  Company  determined  in  accordance  with  the
provisions of SFAS No. 142 there was no impairment of its intangible assets.



                                      F-11
<PAGE>

                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002



NOTE  3  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


Impairment of Long-Lived Assets
-------------------------------

In accordance  with SFAS No. 144, the Company  continually  monitors  events and
changes in  circumstances  that could  indicate  carrying  amounts of long-lived
assets, including intangible assets, may not be recoverable.  An impairment loss
is recognized when expected cash flows are less than the assets' carrying value.
Accordingly,  when indicators or impairment are present,  the Company  evaluates
the carrying value of such assets in relation to the operating  performance  and
future undiscounted cash flows of the underlying business.  The Company's policy
is to record an impairment  loss when it is determined  that the carrying amount
of the asset may not be recoverable. At December 31, 2003, no impairment exists.

Revenue Recognition and Processing Costs
----------------------------------------

Revenues and the associated  processing costs from waste management services are
recognized at the time medical waste is received and prepared for processing.

Fair Value of Financial Instruments
-----------------------------------

The recorded carrying values of accounts receivable, accounts payable, and other
long-term  obligations  are  considered to  approximate  the fair values of such
financial instruments because of the short maturities.

Provisions for Income Taxes
---------------------------

No provisions have been made for federal or state income taxes since the Company
has incurred net operating losses since its inception.

Stock-Based Compensation
------------------------

During the year ended  December  31,  2003,  the Company  adopted  SFAS No. 148,
"Accounting  for  Stock-based   Compensation-Transition  and  Disclosure."  This
statement amended Statement No. 123, "Accounting for Stock-based  Compensation."
As  permitted  under  Statement  No.  123,  the Company  continues  to apply the
Accounting  Principles Board Opinion (APB) No. 25,  "Accounting for Stock Issued
to Employees." As required under Statement No. 148, the following table presents
pro-  forma  net loss  and  basic  and  diluted  loss  per  share as if the fair
value-based method had been applied to all awards.






                                      F-12
<PAGE>

                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002



NOTE  3  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


 (in thousands)


Periods Ended December 31, 2003 and 2002
----------------------------------------
                                                  2003      2002
                                                  ----      ----

Net Loss                                       $  (957)      (286)

Stock-based employee compensation
cost, net of tax effect, under fair
value accounting                                   (29)      --
                                               ------------------
Pro-forma loss under
Fair Value Method                              $  (986)      (286)
                                               ==================
Income loss per share
Basic and Diluted                              $  (.06)      (.02)

Per share stock-based employee
compensation cost, net of tax
effect, under fair value accounting            $  --         --
                                               ------------------
Pro-forma loss share basic
& diluted                                      $  (.06)      (.02)
                                               ==================

The fair value of each option grant was estimated at the date of grant using the
Black-Scholes  option valuation model. The Black-Scholes  option valuation model
was developed for use in estimating  the fair value of traded options which have
no  vesting  restrictions  and are fully  transferable.  During  the year  ended
December 31, 2003,  the Company  granted  40,000 stock  options to employees and
directors.  The  exercise  price  of  the  stock  options  was  $1.00  and  vest
immediately.  The options may be exercised  over a period of ten years.  Because
the Company's stock options have  characteristics  significantly  different from
those of traded options, and because changes in the subjective input assumptions
can materially  affect the fair value  estimate,  in management's  opinion,  the
existing models do not necessarily provide a reliable single measure of the fair
value  estimate  of its  stock  options.  The  total  number  of  stock  options
outstanding as of December 31, 2003 and 2002,was 40,000 and -0- respectively. In
calculating the fair values of the stock options, the following assumptions were
used:

                                                 YEAR                  YEAR
                                               2003 GRANTS         2002 GRANTS

Dividend yield                                     --                  --
Weighted average expected life:                 5 years                --
Weighted average risk-free interest rate          2.99%                --
Expected volatility                              98.18%                --




                                      F-13
<PAGE>

                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002



NOTE  3  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


Loss Per Share of Common Stock
------------------------------

Basic net loss per share of common stock has been computed based on the weighted
average number of common shares outstanding during the periods presented.

Common stock equivalents,  consisting of options,  convertible accrued wages and
convertible  securities,  discussed  in  Note  11,  were  not  included  in  the
calculation of diluted loss per share because their inclusion would have had the
effect of decreasing the loss per share otherwise computed.

Advertising Expenses
--------------------

Advertising costs are charged to expense when incurred.  Advertising expense for
the years ended  December  31, 2003 and 2002  approximated  $45,300 and $30,000,
respectively.

Other income
------------

Other income consists principally of debt extinguishments from certain creditors
with whom the  companies  either  reached  legally  binding  agreements  whereby
certain debt was forgiven or the statute of  limitations  has passed whereby the
debt holders lost their right to present legal claims against us.

Environmental Expenditures
--------------------------

Environmental  expenditures  are  capitalized  if the costs  mitigate or prevent
future  environmental  contamination  or if the costs improve  existing  assets'
environmental  safety or efficiency.  All other  environmental  expenditures are
expensed.  Liabilities  for  environmental  expenditures  are accrued when it is
probable  that  such  obligations  have been  incurred  and the  amounts  can be
reasonably estimated.

Use of Estimates
----------------

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities at the date of the financial  statements and the reported amounts of
revenues and expenses  during the related  periods.  Actual results could differ
from such estimates.




                                      F-14
<PAGE>

                               MEDSOLUTIONS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002



NOTE  3  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


Impact of Recently Issued Accounting Standards
----------------------------------------------

The  following  pronouncements  have  been  issued by the  Financial  Accounting
Standards Board ("FASB").

In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest
Entities  - an  Interpretation  of ARB No.  51."  This  interpretation  provides
guidance related to identifying  variable  interest  entities  (previously known
generally  as special  purpose  entities or SPEs) and  determining  whether such
entities should be consolidated.  Certain  disclosures are required when FIN No.
46  becomes  effective  if  it  is  reasonably  possible  that  a  company  will
consolidate or disclose  information  about a variable  interest  entity when it
initially applied FIN No. 46. This interpretation must be applied immediately to
variable  interest  entities  created or obtained  after  January 31, 2003.  The
consolidation  requirements  apply to older entities in the first fiscal year or
interim period  beginning  after June 15, 2003.  However,  in December 2003, the
FASB  deferred  the  latest  date by which all public  entities,  which meet the
definition of small business  issuer under SEC Regulation S-B must apply FIN No.
46 to the first  interim or annual  reporting  period  ended after  December 15,
2004.

Management does not believe that the adoption of this  pronouncement will have a
material effect on the Company's consolidated financial statements.


NOTE  4  ACQUISITION OF AMERITECH ENVIRONMENTAL, INC.

On October 3, 2003, the Company signed a letter of intent to acquire  certain of
the assets, including customer contracts,  assume certain of the liabilities and
take over the  regulated  medical waste  operations of AmeriTech  Environmental,
Inc., a Texas corporation ("AmeriTech"),  in exchange for a combination of cash,
a promissory note and shares of the Company's common stock, par value $.001 (the
"Common Stock"). Pursuant to the definitive asset purchase agreement dated as of
November 7, 2003, by and between the Company and AmeriTech,  the transaction was
completed by an  assignment  by AmeriTech to the Company of all of its regulated
medical  waste  disposal  customer  contracts,  which  cover  approximately  800
customers. The other assets acquired consisted primarily of equipment associated
with AmeriTech's  regulated medical waste disposal business and a parcel of real
property located in Houston, Texas.

The purchase  price for the  acquired  assets was $650,000 in cash, a promissory
note in the original principal amount of $750,000 bearing interest at a rate per
annum of 7%, interest payable  monthly,  with all principal and accrued interest
due on the first  anniversary  of the note,  and 705,072 shares of Common Stock.
The number of shares of Common  Stock  delivered at the closing may be increased
or decreased  depending upon the amount of revenues realized by the Company from
the  customer  contracts  acquired  from  AmeriTech  for the  ensuing six months
following the closing of the transaction. The cash portion of the purchase price
was funded from the proceeds of sales of Common Stock in private




                                      F-15
<PAGE>

                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002


NOTE  4  ACQUISITION OF AMERITECH ENVIRONMENTAL, INC. (Continued)


placements  and  $400,000  which  was  loaned  to  the  Company  by  two  of its
directors/stockholders  in exchange for promissory notes. The purchase price was
determined  largely  based upon the amount of revenues  AmeriTech  has generated
from its  regulated  medical  waste  disposal  business  during the first  three
quarters of 2003.

MedSolutions purchased the following assets and assumed the liabilities shown in
the following table in exchange for the amount paid.

                       Description                            Amount

          Purchase price:
          Cash paid                                        $  650,000
          Promissory note                                     750,000
          Common stock, 705,072 shares                        528,805
          Acquisition related costs                           102,093
                                                           ----------

          Total acquisition cost                           $2,030,898
                                                           ==========

          Assets acquired:

          Net assets (supplies, property, plant
            and equipment, less related liabilities)           73,297
          Customer list, to be amortized over five years    1,000,000
          Goodwill                                            957,601
                                                           ----------

          Total assets acquired                            $2,030,898
                                                           ==========


Results of  operations  of  AmeriTech  have been  included  in the  consolidated
financial  statements for the three months  following the acquisition on October
3, 2003. As indicated  above,  the purchase price will be adjusted for increases
or  decreases in revenues  realized by the Company  from the customer  contracts
acquired  from  AmeriTech  and for other  expenses  incurred in  finalizing  the
acquisition.

The  following  table  presents  the  unaudited  pro forma  combined  results of
operations  of the Company and  AmeriTech as if they had been  combined from the
beginning of 2003 (the operating results for 2002 are not available):

                                                         Pro forma
                                                         Combined
                                                        At December
                                                         31, 2003
                                                         --------

               Revenues:
                 Net Sales                               $ 8,780,712

                 Net loss                                $(1,942,820)


               Basic net loss per common share           $     (0.11)

               Weighted average common shares
                 outstanding - basic and diluted         $17,710,166





                                      F-16
<PAGE>

                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002



NOTE  4  ACQUISITION OF AMERITECH ENVIRONMENTAL, INC. (Continued)

The pro forma  combined  results are not  necessarily  indicative of the results
that actually  would have occurred if the  acquisition  had been completed as of
the beginning of the year 2003,  nor are they  necessarily  indicative of future
consolidated results.

The Company has not complied  with the Form 8-K  reporting  requirements  of the
United States Securities and Exchange  Commission (SEC). The Company has not yet
completed its audit of  AmeriTech.  The Company is required to file two years of
historical financial statements to comply with such SEC reporting requirements.


NOTE  5  PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

                                                At December 31,
                                            -----------------------
                                               2003         2002
                                            ----------   ----------

          Land                              $   58,680   $   20,000
          Building                             709,458      661,179
          Furniture and equipment            1,661,932    1,307,303
                                            ----------   ----------
                                             2,430,070    1,988,482
          Less:  Accumulated depreciation      951,894      728,832
                                            ----------   ----------
          Property and Equipment, Net       $1,478,176   $1,259,650
                                            ==========   ==========

Depreciation of property and equipment for the years ended December 31, 2003 and
2002 amounted to $270,778 and $149,530, respectively.


NOTE  6 INCOME TAXES

The Company was not  required  to record a  provision  for income  taxes for the
years ended  December  31, 2003 and 2002,  as a result of net  operating  losses
incurred during those years.

As of December 31, 2003, the Company had available approximately  $17,000,000 of
net operating losses ("NOL") for income tax purposes that may be carried forward
to offset future taxable income, if any. The NOL carryforwards from December 31,
1995 through 1997 expire during the years 2010 through 2012 and the December 31,
1998  through  2002 NOL  carryforwards  expire in the years 2018  through  2022,
respectively.  The Company's ability to utilize its carryforwards may be subject
to an annual  limitation  in  future  periods  pursuant  to  Section  382 of the
Internal Revenue Code, as amended.



                                      F-17
<PAGE>

                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002



NOTE  6 INCOME TAXES (Continued)

At December  31,  2003,  the Company has a deferred  tax asset of  approximately
$7,140,000,  principally representing the benefits of its net operating loss and
certain  other  expenses  not  currently  deductible  for  tax  purposes.  These
temporary  differences  consist  principally  of  compensation  related  to  the
granting of restricted stock and stock options,  certain  intangible assets, and
property and equipment. The Company's deferred tax asset has been fully reserved
by a valuation  allowance  since  realization  of its benefit is uncertain.  The
valuation  allowance  increased by $380,000  during the year ended  December 31,
2003.


NOTE 7 ACCRUED LIABILITIES

Accrued liabilities consist of the following:

                                                 At December 31,
                                             -----------------------
                                                2003         2002
                                             ----------   ----------

          Salaries                           $  458,752   $  374,149
          Payroll and other taxes               203,212       88,217
          Royalty obligation                     61,112       80,000
          Interest                               94,069      152,249
          Processing expenses                   145,414      187,484
          Insurance                             191,647       47,543
          Litigation provision (Note 13)           --        260,000
          Other accrued liabilities             293,745      304,300
                                             ----------   ----------
                                             $1,447,951   $1,493,942
                                             ==========   ==========



NOTE  8 LONG-TERM OBLIGATIONS

Long-term obligations are comprised of the following:

                                                 At December 31,
                                             -----------------------
                                                2003         2002
                                             ----------   ----------

          Bank note - EMSI facility          $  244,597   $  265,209
          Installment notes - equipment         263,928       67,836
                                             ----------   ----------
          Total indebtedness to bank and
            financial institutions              508,525      333,045

          Less:  Current maturities              89,475       38,949
                                             ----------   ----------
               Total Long-Term Obligations   $  419,050   $  294,096
                                             ==========   ==========




                                      F-18
<PAGE>

                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002



NOTE  8  LONG-TERM OBLIGATIONS (Continued)


In July 1996, the Company borrowed  $367,500 from a bank. The note is secured by
a first lien on EMSI's  facility  in  Garland,  Texas,  and bears  interest at a
variable rate based on the national prime rate, plus 2.5%,  aggregating  4.5% at
December  31,  2003.  The note is  payable in minimum  monthly  installments  of
principal and interest  totalling $3,100 and matures in July 2011. The Company's
president and chief executive officer has guaranteed this debt. The total amount
outstanding at December 31, 2003 is $244,957.

The  Company is  obligated  under  various  installment  notes  payable  for the
purchase of equipment with a cost of $323,000. The notes, which bear interest at
rates ranging from 8.1% to 16.1%,  are due at various dates through  August 2008
and are payable in monthly  installments of approximately  $8,043  consisting of
principal and interest. The equipment acquired collateralizes the notes.

Aggregate  maturities of long-term  indebtedness  (including the notes payable -
stockholders  described in Note 9 below) and the Smart Jobs  litigation  and the
Surety Bond  litigation  settlements  described in Note 13 below  subsequent  to
December 31, 2002 are as follows:

          Year Ended December 31,                 Amount
          ----------------------                ----------

                   2004                         $  461,905
                   2005                            491,731
                   2006                            334,392
                   2007                            162,873
                   2008 and thereafter             168,962
                                                ----------
                                                $1,619,863
                                                ==========

NOTE  9  NOTES PAYABLE - STOCKHOLDER

On August  28,  2002,  the  Company  received  loans  totaling  $615,000  from a
stockholder of the Company.  The notes payable to the stockholder  bear interest
at the  rate of 10  percent  per  annum,  are  payable  monthly,  and  commenced
September 28, 2002 for a period of 60 months.  The total monthly  payment amount
is $13,067. The loans are secured by a second lien deed of trust on the Garland,
Texas plant. At December 31, 2003, the total obligation was $479,670.

On November 7, 2003, the abovementioned  stockholder and another  stockholder of
the Company  each  loaned  $200,000 to the Company to assist with the funding of
the  AmeriTech  Environmental,  Inc.  acquisition.  These  notes  payable to the




                                      F-19
<PAGE>


                               MEDSOLUTIONS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002



NOTE  9  NOTES PAYABLE - STOCKHOLDER (Continued)

stockholders  bear  interest at the rate of 10 percent per annum and are payable
as  follows:  As to the  first  stockholder,  the note is  repayable  in full by
February 7, 2004. As to the second stockholder,  the note, including other funds
advanced to the Company,  is payable monthly  commencing  December 7, 2003 for a
period of 36 months.  The total monthly  payment amount is $7,684.  In addition,
the second  stockholder may convert at his option any portion of the outstanding
principal  and  unpaid  accrued  interest  on this note into  fully paid and non
assessable shares of common stock of the Company.  The conversion price is $1.00
per  share  and is  subject  to  adjustment  based  on  antidilution  provisions
specified in the agreement.Both loans are secured by a second lien deed of trust
on the Garland,  Texas plant. At December 31, 2003, the total  obligation to the
first stockholder was $117,500 and to the second stockholder was $232,426.


NOTE 10  CONVERTIBLE DEBENTURES

Series I Debentures
-------------------

In 1994 and 1995,  the Company  issued a total of $1,100,000 of 15%  Convertible
Redeemable  Subordinated  Debentures  ("Series I  Debentures")  for the  primary
purpose of funding  the initial R&D  activities  relating to the  EnviroClean(R)
System. The terms of the Series I Debentures  specified a final maturity date of
March 31,  1999,  with  provisions  for  conversion  of the  debentures,  at the
holder's  option,  into the Company's  common stock at varying  conversion rates
through maturity. The Series I Debentures also allowed the Company to redeem the
debentures  any time prior to maturity at a price of 105% of the debenture  face
value. Interest on the Series I Debentures is scheduled to be paid semi-annually
on April 1 and October 1 of each year.

Due to cash constraints,  the Company was not able to redeem this balance at the
stated  maturity date of March 31, 1999. In addition,  the Company is delinquent
in its payment of interest on the outstanding  debentures.  The Company is still
allowing the holders to convert  Series I Debentures  into MSI common stock at a
conversion rate of $1.50 per share.  Accrued  interest payable on the debentures
as of December 31, 2003 and 2002 totaled $33,812 and $29,312,  respectively. The
principal balance at December 31, 2003 and 2002 was $30,000.

Series II Debentures
--------------------

In 1998 the Company issued 10%  Convertible  Redeemable  Debentures  ("Series II
Debentures")  primarily for working capital purposes. The terms of the Series II
Debentures  specify a maturity date of November l, 1999, and contain a provision
for conversion of the  debentures,  at the holder's  option,  into the Company's
common  stock  at a rate of $3 per  share.  The  Company  may  also  redeem  the
debentures at a price of 110% of the  debenture  face value prior to November l,
1999, and at a price of 100% of face value thereafter. Interest on the Series II
Debentures is scheduled to be paid semi-annually on May 1 and November 1 of each
year.




                                      F-20
<PAGE>

                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002



NOTE 10  CONVERTIBLE DEBENTURES (Continued)


Due to cash constraints,  the Company was not able to redeem this balance at the
stated maturity date of November 1, 1999. In addition, the Company is delinquent
in its payment of interest on the outstanding  debentures.  However, the Company
is still  allowing the holders to convert  Series I  Debentures  into MSI common
stock at a conversion rate of $1.75 per share.  Accrued  interest payable on the
debentures  as of  December  31,  2003  and  2002  totaled  $4,969  and  $3,956,
respectively. The principal balance at December 31, 2003 and 2002 was $10,135.


NOTE 11  STOCKHOLDERS' DEFICIENCY


Common Stock
------------

During 2002 the Company offered to its current  stockholders  the opportunity to
purchase  the  MedSolutions,  Inc.  Common  Stock Unit  Offering  to finance the
installation of certain autoclave treatment equipment at EMSI's Garland facility
and general working capital purposes.  The Unit Offering  consisted of ten units
of common  stock at $60,000 per unit for the  purchase  of 40,000  shares of MSI
common stock and a one-tenth  interest in the  Processed  Waste  Trust.  EMSI is
obligated to pay to the Trust a royalty of one-half cent per pound for all waste
processed  through  autoclave  number  one  for  a  period  of  two  years  from
commencement  of operation of the  autoclave.  The Company  guaranteed a minimum
processing volume of 800,000 pounds per month.

During 2002 the Company sold 988,591 shares of its common stock for  $1,155,763.
The  Company  also  issued  55,590  shares  valued at  $41,648  for stock  based
compensation and in settlement of accounts payable.

During 2003 the Company  sold 898,267  shares of its common stock for  $864,500.
The  Company  also issued  122,000  shares  valued at  $122,000  for stock based
compensation and in settlement of accounts payable.


Stock Grants and Options
------------------------

At the annual meeting of  stockholders  of the Company on December 18, 2002, the
stockholders  approved the adoption of the  MedSolutions,  Inc. 2002 Stock Plan.
The  purpose of the plan is to attract and retain the best  available  personnel
for positions of substantial responsibility,  to provide additional incentive to
employees, directors and consultants and to promote the success of the Company's
business.  Options  granted under the plan may be Incentive Stock Options or Non
statutory Stock Options,  as determined by the Board of Directors at the time of
grant.  850,000 shares of common stock have been reserved for issuance under the
plan.






                                      F-21
<PAGE>


                               MEDSOLUTIONS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002



NOTE 11  STOCKHOLDERS' DEFICIENCY (Continued)

The Company's Board of Directors has previously  approved grants of common stock
and options to purchase  common stock to key executives  and  employees,  all of
which were granted prior to January 1, 1999.  The Company has also granted stock
and options to a  stockholder  of the Company in  connection  with various loans
made by the  stockholder  to the  Company,  all of which were  granted  prior to
January 1, 1999. The option grants are for periods of two to five years. Certain
options may not be exercised  for a period of two years after the grant date. An
option to purchase 25,000 shares of the Company's  common stock held by a former
officer of the Company expired on January 15, 2002. The option was not exercised
before  expiration.  Options for 40,000 shares were granted to two directors and
one officer  during 2003. No options were granted to employees  during the years
ended  December  31, 2002 or 2001 and no  compensation  expense  was  recognized
during those years with respect to stock options.

The Board of Directors  has approved an  employee's  stock bonus of $250,000 for
the year ended December 31, 2001.  These bonuses were reflected as  compensation
expense in the year ended  December  31,  2001.  No stock  bonuses  were granted
during the year ended December 31, 2003 or 2002.

A summary of activity involving options on the Company's common stock follows:

                                           Number of Options      Exercise Price
                                           -----------------      --------------

Balance outstanding at December 31, 2001         25,000                $0.75

Granted                                            --                    --
Exercised                                          --                    --
Cancelled/Expired                               (25,000)               (0.75)
                                               --------                -----
Balance outstanding at December 31, 2002           --                    --

Granted                                          40,000                 1.00
Exercised                                          --                    --
Cancelled/Expired                                  --                    --
                                               --------                -----
Balance outstanding at December 31, 2003         40,000                $1.00
                                               ========                =====

On  May  31,  2001,  the  Board  of  Directors  authorized  three  officers  and
stockholders to convert accrued salaries and loans, at their option, into shares
of common  stock,  at the rate of $0.75 per share.  During  2003,  there were no
salaries  converted  into shares of common  stock.  At December  31,  2003,  the
officers and stockholders have remaining accrued salaries not converted totaling
$333,431 that could be converted into 444,575 common shares.



                                      F-22
<PAGE>

                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002



NOTE 11  STOCKHOLDERS' DEFICIENCY (Continued)


Earnings Per Share
------------------

Securities that could potentially dilute basic earnings per share ("EPS") in the
future that were not included in the computation of diluted EPS because to do so
would  have  been  anti-dilutive  for  the  periods  presented  consist  of  the
following:

<TABLE>
<CAPTION>

                                                                             At December 31,
                                                                         -----------------------
               Potentially Dilutive Securities:                             2003         2002
               --------------------------------                          ----------   ----------
       <S>                                                               <C>          <C>
       Convertible accrued salaries                                         444,575      463,052
       Options to purchase common stock                                      40,000         --
       Convertible debentures and unpaid interest                            51,172       47,593
       Note payable to stockholder and accrued interest                     232,426         --
       Advances from stockholders                                           368,763         --
       Shares to be issued on January 1, 2004 to employees under stock
       bonus                                                                259,500      259,500
                                                                         ----------   ----------
               Total                                                      1,396,436      770,145
                                                                         ==========   ==========
      </TABLE>


NOTE 12  WASTE MANAGEMENT FACILITY AGREEMENT

In April 1996, EMSI acquired  certain assets and assumed certain  liabilities of
BMI Services,  Inc.  ("BMI"),  a medical  waste  transportation  and  management
company.  As part of this  acquisition,  BMI's  contract  to operate the medical
waste incineration facility at UTMB in Galveston,  Texas, and to provide medical
waste incineration services to UTMB, was assigned to EMSI. The original contract
was for an  initial  term of five  years that  ended in  December  2000,  but is
renewable for a second five-year term (see below). The contract required EMSI to
pay UTMB a monthly fixed facility usage fee on one medical waste incinerator;  a
monthly  variable  fee based on the volume of  medical  waste  processed  at the
facility;  and utility charges for the facility.  EMSI was also  responsible for
repairs and maintenance  costs of the facility up to an annual limit of $90,000.
In return,  EMSI received  medical waste  management fees from UTMB based on the
quantity of waste  processed.  Such fees are determined using a progressive rate
schedule, which is adjusted annually.




                                      F-23
<PAGE>


                               MEDSOLUTIONS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002



NOTE 12  WASTE MANAGEMENT FACILITY AGREEMENT  (Continued)

The Company has renegotiated with UTMB an amendment  extending the UTMB contract
until December 8, 2005. The amendment  requires the Company to pay the following
estimated monthly amounts during the contract years:

                           Fixed Facility
                            Maintenance           Capital          Variable
       Contract Years       and Use Fee         Renewal Fee        Usage Fee
       --------------      --------------       -----------      -------------
                                                                 (Based on waste
                                                                   incinerated)

            2001              $ 17,500            $ 10,833        $.005 per lb.
            2002              $ 18,500            $ 20,208        $.005 per lb.
            2003              $ 19,500            $ 27,159        $.005 per lb.
            2004              $ 12,500            $ 27,159        $.005 per lb.
            2005              $ 12,500            $ 27,159        $.005 per lb.

The Company is required to pay $2,700  towards  utility  costs.  The contract is
cancelable  by either  party with a one year  written  notice and payment of the
remaining capital renewal fee.


NOTE 13  COMMITMENTS AND CONTINGENCIES


Risks and Concentrations
------------------------

MSI and EMSI operate exclusively in one industry. EMSI provides waste management
services to medical waste generators in North and South Texas.  Until August 29,
2002,  EMSI's  operations were highly dependent upon utilization of UTMB's waste
incineration  facility.  EMSI uses this  facility to service UTMB in addition to
several  other  customers  in the South  Texas area.  Prior to August 29,  2002,
substantially  all  of the  waste  processed  by the  Company  was  done  at the
Galveston facility, except when the facility was not operational,  in which case
the  Company   outsourced  its  medical  waste  processing   through   alternate
facilities.  On August 29, 2002, EMSI commenced  using its own autoclave  system
that was installed in its Garland,  Texas  facility.  Accordingly,  in the event
that UTMB cancelled the waste  management  facility  agreement  with EMSI,  EMSI
would be able to use its Garland  facility as a suitable  alternate  facility to
avoid any  significant  detrimental  impact on the  operations of EMSI (see Note
12).

Financial  instruments,  which potentially subject the Company to concentrations
of credit risk,  are  primarily  cash and cash  equivalents  and trade  accounts
receivable.

With respect to trade  receivables,  ongoing  credit  evaluations  of customers'
financial condition are performed and generally,  no collateral is required. The
Company  maintains a reserve for potential credit losses and such losses, in the
aggregate, have not exceeded management's expectations.




                                      F-24
<PAGE>

                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002



NOTE 13  COMMITMENTS AND CONTINGENCIES  (Continued)

At December 31, 2003 and 2002,  UTMB  accounted for  approximately  19% and 30%,
respectively,  of the accounts receivable balance.  For the years ended December
31, 2003 and 2002, UTMB accounted for approximately  19% and 22%,  respectively,
of net revenues in each year.

The  Company  carries $5  million of  liability  insurance  (including  umbrella
coverage),  and $1 million of aggregate  pollution and legal liability insurance
($2  million  per  incident),  which the Company  considers  sufficient  to meet
regulatory and customer  requirements  and to protect its employees,  assets and
operations.  The Company's pollution  liability  insurance excludes  liabilities
under  CERCLA.  There can be no assurance  that the Company will not face claims
under CERCLA or similar state laws resulting in substantial  liability for which
the Company is uninsured and which could have a material  adverse  effect on its
business.

Lease Obligations
-----------------

The Company has leases covering its office in Dallas, Texas and other facilities
for terms which expire through  December 2008.  Minimum annual rentals under the
leases are as follows:

                        Years Ended
                        December 31,                Amount
                        ------------              ----------

                           2004                   $  240,738
                           2005                      173,750
                           2006                       60,000
                           2007                       60,000
                           2008                       60,000
                                                  ----------
                                                  $  594,488
                                                  ==========


During the year ended  December 31, 2002, the Company,  through its  subsidiary,
EnviroClean  Transport  Services,  Inc., entered into operating lease agreements
for the use of eight  vehicles.  The monthly lease  payments  range from $993 to
$1,101 and the lease periods range from 39 months for one used truck to 72 to 84
months for the  remaining  vehicles.  In addition  the  Company  pays a per-mile
maintenance fee of $0.06 to $0.065 for the use of the vehicles.

During the year ended  December 31,  2003,  the Company  entered into  operating
lease  agreements  for the use of eight  new  vehicles  to  expand  its fleet to
accommodate  the new business  acquired from AmeriTech  Environmental,  Inc. The
monthly lease  payments  range from $1,106 to $1,527 and the lease periods range
from 60 to 72 months for the  vehicles.  In addition the Company pays a per-mile
maintenance fee of $0.065 to $0.070 for the use of the vehicles.




                                      F-25
<PAGE>

                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002



NOTE 13  COMMITMENTS AND CONTINGENCIES  (Continued)

The following  table shows the future minimum  operating lease payments that are
due under the contracts.


                        Years Ended
                        December 31,                     Amount
                        ------------                   ----------

                           2004                        $  226,483
                           2005                           226,483
                           2006                           213,378
                           2007                           213,378
                           2008                           180,837
                           Thereafter                     110,681
                                                       ----------
                                                       $1,171,240
                                                       ==========


Rent expense for all operating  leases during the years ended  December 31, 2003
and 2002 was $477,149 and $496,404, respectively.


Payroll Tax Delinquency
-----------------------

At  December  31,  2003  unpaid  fourth   quarter   payroll  taxes  amounted  to
approximately $115,000.

Environmental Matters
---------------------

The Company  operates  within the medical waste  management  industry,  which is
subject to various federal, state and local laws and regulations.  Management is
not  aware  of  any  significant   contingent   liabilities  relative  to  these
activities.

Litigation
----------

On November 25, 1998, the Company was a named  defendant,  along with several of
its  officers,  in a lawsuit  filed in  Buncombe  County,  Superior  Court North
Carolina.  A default  judgment was rendered  against all  defendants in November
1999 as a result of not  filing  answers  in a timely  manner.  The  ruling  was
appealed to the North  Carolina  Supreme  Court and the Company  posted a surety
bond in the amount of the judgment of $354,708. The Company's President posted a
$100,000 letter of credit secured by a certificate of deposit in connection with
the surety bond.  The  estimated  liability  due under the judgment  amounted to
$403,369, including interest accrued since November 1999. The Company provided a






                                      F-26
<PAGE>


                               MEDSOLUTIONS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002



NOTE 13  COMMITMENTS AND CONTINGENCIES  (Continued)

$360,000  loss related to this  judgment in the 1999  consolidated  statement of
operations.  On June 8, 2001, the Supreme Court in North  Carolina  affirmed the
judgment.  In July 2001, the  plaintiffs  received the amount of the surety bond
and the Company paid accrued interest in the amount of $48,255 in December 2001.
On August 1, 2001,  the  bonding  company  seized the  $100,000  certificate  of
deposit  posted in connection  with the bond by the  Company's  President and in
December 2001, seized 63,450 shares of the Company's common stock which had been
tendered by the plaintiffs as part of the lawsuit.  In addition,  on November 9,
2001, the bonding company filed a lawsuit against the Company  claiming  damages
of $254,708,  (the amount it paid to the  plaintiffs on the surety bond less the
certificate  of deposit),  plus  interest and  attorneys'  fees.  The  Company's
consolidated  balance sheet,  as of December 31, 2001,  reflected an accrual for
losses in connection  with this  litigation of $260,000.  In February  2003, the
bonding  company's Motion for Summary Judgment was granted and a judgment in the
amount of approximately $295,000 was entered against the Company. On November 3,
2003, a  settlement  agreement  between the bonding  company and the Company was
reached calling for an immediate  payment of $100,000 and the remaining  balance
of $212,093 to be paid in four equal  installments  of $53,023  beginning May 7,
2004 and  continuing  thereafter  every six months until fully paid. The company
paid  $50,000  and  $50,000  was  paid  from  the  trust  mentioned  below.  The
accompanying  consolidated  balance sheet as of December 31, 2003,  includes the
remaining  liability to the bonding  company of $212,093,  of which  $106,046 is
classified as a portion of the current  maturities - litigation  settlements and
$106,046 classified as non-current litigation settlements.

Michael Moorhead, one of the defendants in the North Carolina action, filed suit
in Texas  against the  Company's  former  counsel in the North  Carolina  action
claiming,  among other  things,  that the counsel is liable for the loss in such
case for failure to timely  respond to  discovery.  The case was styled  Michael
Moorhead v. Hunton & Williams,  et al, 160th  Judicial  District  Court,  Dallas
County,  Texas,  Cause No. 01-07565.  Hunton & Williams,  on September 14, 2001,
filed a third-party  action against Mr.  Fleeger,  alleging that Mr. Fleeger was
the contact person for all of the defendants in the North Carolina case, and was
therefore  responsible  to  the  plaintiff.  Hunton  &  Williams,  et al  sought
contribution from Mr. Fleeger in the event they are liable to Mr. Moorhead.  Mr.
Fleeger  denied the  allegations  against him and filed a  counterclaim  against
Hunton &  Williams,  seeking  damages  for  negligence.  The case was settled on
October 17, 2002 and the settlement amount of $50,000 is being held in trust and
will be applied against Moorhead's liability for the outstanding bond obligation
discussed in the preceding paragraph, if any.

The Company was named  defendant in a lawsuit filed in Travis  County,  Texas by
the State of Texas.  The lawsuit  claimed  that the Company  breached a contract
awarded  under the Texas Smart Jobs Program by failing to meet the  requirements
of the contract and sought compensatory damages in the amount of $439,631,  plus
costs and attorneys'  fees. An accrual of $290,000 was reflected in the December
31,  2001 and  2002  consolidated  balance  sheets.  The  Company  also  accrued





                                      F-27
<PAGE>


                               MEDSOLUTIONS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002



NOTE 13  COMMITMENTS AND CONTINGENCIES  (Continued)

prejudgment interest expense of $30,000,  $30,000 and $44,000 in the years ended
December 31, 2002,  2001 and 2000,  respectively.  On March 3, 2003 we reached a
settlement  with the State of Texas the terms of which will  require that we pay
the State  $240,620 in 36 equal  installments  of $6,684  commencing on or about
April 30, 2004. The settlement also requires that we retroactively pay $6,110 to
those  employees or past  employees whom we were obligated to pay, but failed to
pay in full,  pursuant to the Smart Jobs Program.  Accordingly,  we have reduced
the litigation  accrual by the amount ($180,465) of the settlement to be paid in
years subsequent to December 31, 2002.  Further,  the excess litigation  accrual
and the  accrued  interest  expense  related  to the Smart Jobs  litigation  was
credited to income in February 2003 in the amount of $147,270.

At December 31, 2003, the total liabilities  recorded for litigation  amounts to
$399,242.

The Company is also subject to various other  matters of  litigation  during its
normal course of operations.  Management  believes that the eventual  outcome of
these matters will not have a material adverse effect on the Company's financial
position, results of operations, or cash flows.























                                      F-28
<PAGE>

                               MEDSOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002



NOTE 14 RELATED PARTY TRANSACTIONS

Related party expenses included in the accompanying consolidated statements of
operations are as follows:

                                               Years Ended December 31,
                                              --------------------------
                                                 2003            2002
                                              ----------      ----------

       Interest expense                       $   95,650      $   37,573
                                              ==========      ==========


NOTE 15 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table summarizes our unaudited  consolidated  quarterly results of
operations  as reported  for 2003 and 2002 (in  thousands,  except for per share
amounts):

                                         First    Second      Third     Fourth
                                        Quarter   Quarter    Quarter    Quarter
                                          2003      2003       2003       2003
                                        -------   -------    -------    -------
Revenues .........................      $ 1,577   $ 1,412    $ 1,316    $ 2,014
Gross profit .....................          692       513        249        458
Income (loss) from operations ....           63      (122)      (569)      (348)
Net income (loss) ................          206      (150)      (617)      (396)
*Basic and diluted earnings (loss)
     per common share.............         0.01     (0.01)     (0.04)     (0.02)

                                         First    Second      Third     Fourth
                                        Quarter   Quarter    Quarter    Quarter
                                          2002      2002       2002       2002
                                        -------   -------    -------    -------
Revenues .........................      $ 1,209   $ 1,313    $ 1,386    $ 1,503
Gross profit .....................          298       360        469        694
Income (loss) from operations ....         (161)     (128)       (29)       143
Net income (loss) ................         (213)     (132)       (20)        79
*Basic and diluted earnings (loss)
     per common share............. .      (0.01)    (0.01)      (0.00)     0.00
---------
* Earnings per share are  calculated  on a quarterly  basis,  and, as such,  the
amounts may not total the calculated full-year earnings per share.





                                      F-29
<PAGE>

                                  EXHIBIT INDEX

EXHIBIT  NO.      DESCRIPTION
-----------------------------

3.1               Articles  of  Incorporation  of the  Company,  filed  with the
                  Secretary  of Sate of the State of Texas on November  12, 1993
                  (filed as Exhibit  3.1 to the  Company's  Form 10-SB  filed on
                  July 16, 2001, and incorporated herein by reference).

3.2               Articles of Amendment to the Articles of  Incorporation of the
                  Company,  filed  with the  Secretary  of State of the State of
                  Texas  on  January  10,  1994  (filed  as  Exhibit  3.2 to the
                  Company's Form 10-SB filed on July 16, 2001, and  incorporated
                  herein by reference).

3.3               Articles of Amendment to the Articles of  Incorporation of the
                  Company,  filed  with the  Secretary  of State of the State of
                  Texas  on  January  31,  1996  (filed  as  Exhibit  3.3 to the
                  Company's Form 10-SB filed on July 16, 2001, and  incorporated
                  herein by reference).

3.4               Articles of Amendment to the Articles of  Incorporation of the
                  Company,  filed  with the  Secretary  of State of the State of
                  Texas on  November  12,  1996  (filed  as  Exhibit  3.4 to the
                  Company's Form 10-SB filed on July 16, 2001, and  incorporated
                  herein by reference).

3.5               Articles of Amendment to the Articles of  Incorporation of the
                  Company,  filed  with the  Secretary  of State of the State of
                  Texas on  December  23,  1999  (filed  as  Exhibit  3.5 to the
                  Company's Form 10-SB filed on July 16, 2001, and  incorporated
                  herein by reference).

3.6               Articles of Amendment to the Articles of  Incorporation of the
                  Company,  filed  with the  Secretary  of State of the State of
                  Texas on June 27, 2001 (filed as Exhibit 3.6 to the  Company's
                  Form 10-SB filed on July 16, 2001, and incorporated  herein by
                  reference).

3.7               Bylaws,  as amended,  of the Company  (filed as Exhibit 3.7 to
                  the  Company's   Form  10-SB  filed  on  July  16,  2001,  and
                  incorporated herein by reference).

4.1               Form  of  Lock-Up  Agreement  (filed  as  Exhibit  4.1  to the
                  Company's Form 10-SB filed on July 16, 2001, and  incorporated
                  herein by reference).

4.2               Form of  Subscription  Agreement  (filed as Exhibit 4.2 to the
                  Company's Form 10-SB filed on July 16, 2001, and  incorporated
                  herein by reference).

4.3               Stock  Purchase  Option,  dated January 15, 1997,  between the
                  Company  and  Gary  S.  Krall  (filed  as  Exhibit  4.3 to the
                  Company's  Amendment No. 1 to Form 10-SB filed on February 13,
                  2002, and incorporated herein by reference).(*)

10.1              Firm  Commitment  Agreement,  dated October 31, 2000,  between
                  Lilly Beter  Capital  Group,  Ltd.  and the Company  (filed as
                  Exhibit  10.1 to the  Company's  Form 10-SB  filed on July 16,
                  2001, and incorporated herein by reference).

10.2              Loan  Conversion  and Common Stock  Agreement  between Mark M.
                  Altenau,  M.D. and the Company,  dated July 31, 2000 (filed as
                  Exhibit  10.2 to the  Company's  Form 10-SB  filed on July 16,
                  2001, and incorporated herein by reference).

10.3              Contractor  Services  Agreement  effective  May 28,  1995,  as
                  amended,  between  the  Company  and The  University  of Texas
                  Medical  Branch at  Galveston  (filed as  Exhibit  10.3 to the
                  Company's Form 10-SB filed on July 16, 2001, and  incorporated
                  herein by reference).

10.4              Memorandum  of  Agreement,  dated June 15,  2001,  between the
                  Company and Intercontinental  Manufacturing  Company (filed as
                  Exhibit  10.4 to the  Company's  Form 10-SB  filed on July 16,
                  2001, and incorporated herein by reference).

10.5              Exclusive  Medical  Waste Service  Agreement,  dated March 21,
                  2002,  between  EnviroClean  Management  Services,   Inc.  and
                  Christus  Spohn  Health  System  (filed as Exhibit 10.5 to the
                  Company's   Form  10-QSB  filed  on  August  16,   2002,   and
                  incorporated herein by reference).+

<PAGE>

10.6              Medical Waste  Transportation  and Disposal  Agreement,  dated
                  March 1, 2001, between EnviroClean Management Services,  Inc.,
                  and Trinity  Mother Frances  Regional  Health Center (filed as
                  Exhibit 10.6 to the  Company's  Amendment  No. 1 to Form 10-SB
                  filed  on  February  13,  2002,  and  incorporated  herein  by
                  reference).+

10.7              Amended and  Restated  Promissory  Note dated July 31, 2001 by
                  the Company to Mark M. Altenau, M.D. for $171,666.67 (filed as
                  Exhibit 10.7 to the  Company's  Amendment  No. 1 to Form 10-SB
                  filed  on  February  13,  2002,  and  incorporated  herein  by
                  reference).

10.8              Amended  and  Restated  Loan   Conversion   and  Common  Stock
                  Agreement between Mark M. Altenau, M.D. and the Company, dated
                  July  31,  2001  (filed  as  Exhibit  10.8  to  the  Company's
                  Amendment No. 1 to Form 10-SB filed on February 13, 2002,  and
                  incorporated herein by reference).

10.9              Amendment 4 to the Contractor  Services  Agreement between the
                  Company and  University of Texas  Medical  Branch at Galveston
                  (Exhibit  10.9)  (filed  as  Exhibit  10.9  to  the  Company's
                  Amendment No. 1 to Form 10-SB filed on February 13, 2002,  and
                  incorporated herein by reference).

10.10             LBCG  Financing  Proposal  (filed  as  Exhibit  10.10  to  the
                  Company's  Amendment No. 1 to Form 10-SB filed on February 13,
                  2002, and incorporated herein by reference).

10.11             Purchase  Agreement  for the purchase of an autoclave  for the
                  Company's  Garland  facility  between  EnviroClean  Management
                  Services,  Inc. and BondTech,  Inc. (filed as Exhibit 10.11 to
                  the  Company's  Form  10-QSB  filed on August  19,  2002,  and
                  incorporated herein by reference).

10.12             Promissory Note dated August 28, 2002 by the Company to Vivian
                  Eriksen  for  $202,250.79.  (filed  as  Exhibit  10.12  to the
                  Company's   Form  10-QSB  filed  on  November  14,  2002,  and
                  incorporated herein by reference).

10.13             Promissory Note dated August 28, 2002 by the Company to Vivian
                  Eriksen  for  $90,000.00.  (filed  as  Exhibit  10.13  to  the
                  Company's   Form  10-QSB  filed  on  November  14,  2002,  and
                  incorporated herein by reference).

10.14             Promissory Note dated August 28, 2002 by the Company to Vivian
                  Eriksen  for  $322,749.21.  (filed  as  Exhibit  10.14  to the
                  Company's   Form  10-QSB  filed  on  November  14,  2002,  and
                  incorporated herein by reference).

31.1              Certification of Chief Executive Officer of MedSolutions, Inc.
                  Pursuant to Rule 13a-14(a)/15d-14(a).**

31.2              Certification of Chief Financial Officer of MedSolutions, Inc.
                  Pursuant to Rule 13a-14(a)/15d-14(a).**

32.1              Certification of Chief Executive Officer of MedSolutions, Inc.
                  Pursuant to 18 U.S.C. Section 1350.**

32.2              Certification of Chief Financial Officer of MedSolutions, Inc.
                  Pursuant to 18 U.S.C. Section 1350.**
----------
(*)  Denotes a management contract or compensatory plan or arrangement.
(+)  Confidential  treatment was requested  with respect to certain  portions of
     this exhibit.  Omitted  portions were filed  separately with the SEC at the
     time the exhibit was filed.
(**) Filed herewith.