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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549
 Form 10-K
 (Mark One)x
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934For the fiscal year ended
December 31, 2003
 Or o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934For the transition period
from                                       to                     .
 Commission file number 000-3149 PRESIDION CORPORATION
  Florida
    
    65-0832987(State or other jurisdiction of
    
    (IRS Employerincorporation or organization)
    
    Identification No.)
 755 W. Big Beaver, Suite 1700
Troy, Michigan 48084
(Address of principal executive offices, including zip code)(248) 269-9600
(Registrants telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock Par Value $0.0000303 Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x    No. o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. o Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes o  No . x The aggregate market value of the Registrants common stock held by
non-affiliates on April 28, 2004 was approximately $3,004,115 (based upon the
closing price of the common stock on the Over the Counter Bulletin Board on
such date). Shares of common stock held by each officer, director and holder of
5% or more of the outstanding common stock have been excluded in that such
persons have been deemed to be affiliates for this purpose. This determination
of affiliate status is only applicable to this purpose. As of April 28, 2004, the number of outstanding shares of the Registrants
Common Stock, $0.0000303 par value per share, was 96,766,439 shares. 1




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TABLE OF CONTENTS  PART IItem 1. BusinessItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission of Matters to a Vote of Security HoldersPART IIItem 5. Market for Registrants Common Equity and Related Stockholder MattersItem 6. Selected Financial DataItem 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataINDEPENDENT AUDITORS REPORTConsolidated Balance SheetsConsolidated Statements of OperationsConsolidated Statements of Stockholders Equity (Deficit)Consolidated Statements of Cash FlowNotes to Consolidated Financial StatementsItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresPART IIIItem 10. Directors and Executive Officers of the RegistrantItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and ManagementItem 13. Certain relationships and Related TransactionsItem 14. Principal Accounting Fees and ServicesPART IVItem 15. Exhibits, Financial Statement Schedules and Reports on Form 8-KSIGNATURESINDEX TO EXHIBITSRestated Articles of IncorporationForm of BylawsEmployment Agreement between Craig A. VanderburgEmployment Agreement between John W. Burcham IIEmployment Agreement between James E. BaiersEmployment Agreement between Brian JarzynskiCode of Business Conduct and EthicsList of SubsidiariesSec. 302 Certification of Chief Executive OfficerSec. 302 Certification of Chief Financial OfficerSec. 906 Certification of Chief Executive OfficerSec. 906 Certification of Chief Financial OfficerAmendment and Waiver AgreementAssignment AgreementPayment Schedule    Table of Contents  
 PART I 
 Item 1. Business. Merger with MediaBus Networks, Inc. On February 11, 2003, MediaBus Networks, Inc. (MediaBus) acquired 100% of the
outstanding common stock of Presidion Solutions, Inc., (PSI) by the issuance
of 84,749,980 shares of common stock of MediaBus to the shareholders of PSI,
representing an 87.5% ownership interest in MediaBus. At the time of this
transaction, Presidion Solutions, Inc. became a wholly owned subsidiary of
MediaBus. Immediately prior to this transaction, MediaBus was a publicly
traded development stage company with no business operations. Accordingly,
this transaction has been accounted for as a reverse acquisition with Presidion
Solutions, Inc. as the accounting acquiror. On February 28, 2003 and on May
15, 2003, respectively, MediaBus changed its name to Presidion Corporation and
changed its year end to December 31 from June 30. Business Operations Presidion Solutions, Inc. Presidion Corporation (Presidion) is the parent company of PSI, a
wholly-owned subsidiary. PSI was established as a holding company in July
2000. PSI was incorporated in 2000 under the name Affinity Business Services,
Inc. (Affinity), in the state of Florida, and is located in Troy, Michigan. On
February 28, 2002, Affinity changed its name to Presidion Solutions, Inc.
Presidion, through PSI, operates as a professional employer organization
(PEO) and provides comprehensive and integrated human resource management
services to small and medium sized businesses on a service agreement basis.
Presidion provides services to approximately 2,400 clients through
approximately 32,000 of the clients employees primarily in the southeastern
United States. Operating as a PEO, Presidion allows its clients to outsource their human
resource responsibilities. Presidion offers a broad range of services,
including human resource administration, employer regulatory compliance
management, employee benefits administration, risk management services and
employer liability protection and payroll administration. Presidion provides
these services by becoming the legal employer of its clients employees
(worksite employees). While Presidion becomes the legal employer for most
purposes, the clients remain a co-employer and have operational control of
their businesses. As the legal employer of its clients employees, Presidion
is able to take advantage of certain economies of scale relating to employment
services and to pass those benefits on to our clients and worksite employees.
As a result, the clients are able to obtain, at an economical cost, services
and expertise similar to those provided by the human resource departments of
large companies. We believe that Presidions services provide substantial benefits to both its
clients and their worksite employees. The objective of these services is to
assist business owners by:  
    
    permitting the managers of the client to concentrate on the
clients core business as a result of the reduced time and effort they
are required to spend dealing with complex human resource, legal and
regulatory compliance issues and employee administration;
    
    managing escalating costs associated with unemployment, workers
compensation, health insurance coverage, worksite safety programs and
employee-related litigation;
    
    providing better access to broader, more affordable benefits,
enhanced benefit portability, improved worksite safety and employment
stability; and
    
    providing comprehensive and integrated human resource management
services to our small and medium size business clients in a highly
efficient manner. Based upon the experience of the management of
Presidion, our belief is that once the management of a business becomes
familiar with the benefits of working with a PEO, they rarely choose to
revert back to providing human resource management services on their
own. PSI was founded as a holding company to effect a consolidation in the highly
fragmented, fast-growing and scale-intensive PEO industry. PSI has made two
significant acquisitions and has assumed certain existing client contracts
resulting in the Company serving approximately 2,400 clients with 32,000
worksite employees. PSI was founded by Craig A. Vanderburg, Presidions
President and Chief Executive Officer, John W. Burcham II, Presidions
Chairman, and James E. Baiers, Presidions Executive Vice President and General
Counsel. 2




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Upon the establishment of PSI, the founders sought to acquire a platform
company that could integrate add-on PEOs and maximize the economies of scale
and synergies that are characteristic of the industry. In May 2001, PSI bought
the Sunshine Companies (Sunshine), a PEO provider in Florida. Sunshine
provided a complete PEO service offering, critical mass, a potential for
profitable growth and a presence in the Florida market. On January 1, 2002, PSI made its first add-on acquisition of a PEO by
purchasing Amfinity Business Solutions, Inc. (Amfinity) Amfinity was the
result of the merger of Amfinity with Paradyme Human Resources, Inc., two
Florida-based PEOs, in July 2001. In addition to strengthening PSIs presence
in Florida, Amfinity provided PSI with an advanced online service management
system. This system is intended to strengthen PSIs marketing capabilities,
reduce costs and improve customer service. In addition, on June 14, 2002, PSI acquired certain client service contracts
(from a company affiliated with Presidion through common ownership) that had
been serviced by the Fidelity United Group of PEOs, which is based primarily
in Southeastern Florida. Financial Information About Segments Presidion operates as a PEO and operates under one reportable segment in
conformity with Statement of Financial Accounting Standards (SFAS) No. 131,
Disclosures about Segments of an Enterprise and Related Information. Products and Services Presidion provides professional employer services through five core activities:  
    
    Human resource administration;
    
    Employer regulatory compliance management;
    
    Employee benefits administration;
    
    Risk management services and employer liability protection; and
    
    Payroll and payroll tax administration. Human Resource Administration.Presidion, as an employer, provides its clients
with a broad range of human resource services including on-going supervisory
education and training regarding risk management and employment laws, policies
and procedures. In addition, Presidions human resource department handles
sensitive and complicated employment issues such as employee discipline,
termination and sexual harassment, as well as wage and salary planning and
analysis. Presidion provides a comprehensive employee handbook, which includes
customized, site-specific materials concerning each worksite, to all worksite
employees. Also, Presidion maintains extensive files and records regarding
worksite employees for compliance with various state and federal laws and
regulations. The objective of this extensive record keeping is to
substantially reduce legal actions arising from a lack of proper documentation. Regulatory Compliance Management.Presidion, under its Client Services
Agreement, assumes responsibility for complying with many employment-related
regulatory requirements. As an employer, Presidion must comply with numerous
federal and state laws, including certain tax, workers compensation,
unemployment, immigration, civil rights, and wage and hour laws, which include:  
    
    The Americans with Disabilities Act of 1990;
    
    The Family and Medical Leave Act;
    
    Laws administered by the Equal Employment Opportunity Commission; and
    
    Employee benefits laws such as ERISA and COBRA. Presidion also assists its clients in their efforts as employers to comply with
and understand certain other laws and responsibilities with respect to which
Presidion does not assume liability and responsibility. For example, while
Presidion provides significant safety training and risk management services to
its clients, Presidion does not assume responsibility for compliance with the
Occupational Safety and Health Act because the client controls its worksite
facilities and equipment. 3




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Employee Benefits Administration.Presidion offers a broad range of employee
benefit programs to its worksite employees. Presidion administers such benefit
programs, thereby reducing the administrative responsibilities of its clients
for maintaining complex and tax-qualified employee benefit plans. By combining
its multiple worksite employees, Presidion is able to take advantage of certain
economies of scale in the administration and provision of employee benefits.
As a result, Presidion is able to offer its worksite employees benefit programs
that are comparable to those offered by large corporations. In fact, some
programs offered by Presidion would not otherwise be available to the worksite
employees of many clients if such clients were the sole employers. Eligible
worksite and corporate staff employees are entitled to participate in
Presidions employee benefit programs without discrimination. Such programs
include life insurance coverage as well as a cafeteria plan that offers a
choice of different health plans and dental, vision and prescription card
coverage. In addition, Presidion permits, in specific cases, employees to
participate in its 401(k) retirement plan and its dependent care assistance
program. Presidion maintains a defined contribution plan covering certain of
its internal employees as well as its worksite employees for a number of client
companies. Presidion may, at its discretion, contribute on behalf of each
participating client, varying amounts based on client company elections. In
addition, Presidion may at its discretion, contribute amounts on behalf of its
internal employees. Presidion made internal matching contributions of
approximately $63,000 during the year ended December 31, 2003. Presidion made
no contributions to these plans during 2002 and 2001. Presidion believes that by offering its worksite employees a broad range of
large corporation style benefit plans and programs, it is able to reduce
worksite employee turnover, which results in cost savings for itself and its
clients. Presidion performs regulatory compliance and plan administration in
accordance with state and federal benefit laws. Risk Management Services and Employer Liability Protection.Presidions risk
management of the worksite includes policies and procedures designed with the
objective of proactively preventing and controlling costs of lawsuits, fines,
penalties, judgments, settlements and legal and professional fees. In
addition, Presidion controls benefit plan costs by attempting to prevent fraud
and abuse by closely monitoring claims. Other risk management programs include
processing workers compensation and unemployment claims and aggressively
contesting any suspicious or improper claims. The objectives of such risk
management efforts include reducing Presidions liability exposure and
increasing the value of its services to its clients. Presidion also maintains insurance for employment practices risks, including
liability for employment discrimination and wrongful termination. Presidion
aims to achieve a higher level of client satisfaction by being insured for such
risks. The objective of this insurance coverage is to reduce Presidions
liability exposure and, consequently, the potential volatility of its operating
results because it is not required to rely exclusively on contractual
indemnification from its clients. Moreover, Presidions contract with its
clients provides for indemnification of Presidion for all issues in which the
client has operated outside of Presidions advice. Presidion believes that
this arrangement is better received by clients that are seeking to reduce their
employment liability exposures and also aids in preventing Presidion from
becoming involved in adversarial situations with its clients by eliminating the
need for seeking such indemnification. Payroll and Payroll Tax Administration.Presidion provides its clients with
comprehensive payroll and payroll tax administration, which substantially
eliminates client responsibility for payroll and payroll taxes beyond
verification of payroll information. Unlike traditional payroll service
providers, which do not act as employers, Presidion, as the employer, assumes
liability and responsibility for the payroll and payroll taxes of its worksite
employees and for the obligations of its client to make federal and state
unemployment and workers compensation filings, child support levies and
garnishments, and new hire reports. Presidion receives all payroll information
and then calculates, processes and records all such information. Afterward,
Presidion either issues payroll checks or directly deposits the net pay of
worksite employees into their bank accounts. Presidion delivers all payroll
checks either to the on-site supervisor of the worksite or directly to the
worksite employees. Other Services.Presidion has been working on expanding its PEO service
offerings to leverage the strength of its customer relationships and to develop
additional revenue streams. For instance, Presidion is using its experience
with insurance companies and benefit providers to negotiate favorable terms on
products such as mortgages, car insurance and credit cards, that it will offer
to the employees of its clients. For these products, Presidion offers
advantageous discounts and a convenient method of payment  automatic payroll
deduction. During 2003, Presidion began offering clients the flexibility of
payroll ATM cards and also began offering personal concierge services to its
client company employees. 4




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Pricing of Services.Presidion bills its clients on each payroll date for:  
    
    the gross salaries and wages, related employment taxes and employee benefits of its worksite employees;
    
    human resource administrative services;
    
    workers compensation and unemployment service fees; and
    
    an administrative fee. Presidions administrative fee for each client is computed based on the
particular mix of services to be provided, the estimated costs of delivery, and
a targeted profit margin. Accordingly, the administrative fee income will
fluctuate based on the volume and amount of gross salaries and wages of
worksite employees, as well as the mix of client fee arrangements and terms. Clients At December 31, 2003, Presidion served approximately 2,400 clients and
approximately 32,000 worksite employees resulting in an average of
approximately thirteen worksite employees per client. These customers
typically employ fewer than 50 people that earn between $20,000  $30,000
annually. No single client accounted for more than 2% of Presidions revenues
for the year ended December 31, 2003. Presidions client base is broadly distributed throughout a wide variety of
industries. Approximately 80% of its customers are in the light industrial
service, hospitality or distribution sectors while the remaining 20% are in
retail or professional services. Presidion and its customers enter into a Client Service Agreement that details
both parties employer-related obligations. While Presidion becomes the legal
employer for most purposes, the client remains in operational control of its
business. In most arrangements, Presidion also becomes the employer of record
for its clients supervisory and management staffs. The client, however,
maintains on-site supervision of the worksite employees, including such key
roles as hiring, termination, promotions and setting salary levels. The
standard terms for the Client Service Agreements are one year with automatic
renewals thereafter. The agreements include an automatic and immediate
termination provision for the benefit of Presidion in cases where a customer
fails to make a payment. The Client Service Agreement establishes a three-party relationship among
Presidion, the client and the worksite employees. The agreement provides for an
initial one year term, subject to cancellation on 30 days notice by either
Presidion or the client, and sets forth the service fee payable to Presidion.
Such service fee is based on the gross payroll of each worksite employee plus
the estimated costs of employment related taxes, providing human resource
services, performing administrative functions, providing insurance coverage and
benefit plans and other services offered by Presidion. This structure yields a
comprehensive service fee percentage to be applied to each worksite employees
gross pay. These fees are invoiced along with each periodic payroll. Pursuant
to the Client Service Agreement, Presidion has the obligation to pay all direct
costs associated with its worksite employees enumerated in that agreement,
regardless of whether the client company makes timely payment to Presidion for
the associated service fee. The most significant direct cost associated with
each Client Service Agreement is the salaries and wages of worksite employees. Client attrition has typically been attributable to the following factors:  
    
    competitive pricing of services;  
    
    sale or acquisition of the client;  
    
    termination by Presidion resulting from either the clients
inability to make timely payments or risks increasing beyond the
parameters acceptable to Presidions underwriting criteria; and,  
    
    client business failure or downsizing. Presidion believes that the risk of a client terminating its relationship
decreases substantially after the client has been associated with Presidion for
over one year because of the clients increased appreciation of Presidions
value-added services and because of the difficulties associated with a client
resuming the burdens of being the sole employer. 5




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Presidion, while managing its risk portfolio, is continually assessing its client base and is focused on retaining
clients that remain profitable. Presidion
considers clients to represent a high risk if, based upon safety and historical
factors, there is a significant likelihood of on-the-job accidents pertaining
to worksite employees, and such accidents have a high likelihood of being
severe, resulting in significant workers compensation risks. Sales and Marketing Presidion markets its services directly to prospective clients identified by
referrals and by a direct sales force. The background of Presidions sales
executives includes experience in industries such as payroll services,
insurance, temporary staffing, public accounting and business management. Each
of its sales executives enters into an employment agreement with Presidion,
which establishes a performance-based compensation program that includes a base
amount and sales commissions. Presidions sales materials emphasize its broad
range of services and the resulting benefits to clients and worksite employees. Sales leads result in initial presentations to prospective clients. Presidions
sales executives gather information about the prospective client and its
employees. This includes job classification, workers compensation and health
insurance claims history, salary and the desired level of employee benefits.
Presidion performs a risk management analysis of each prospective client, which
involves a review of such factors as the clients credit history, financial
strength, as well as workers compensation, health insurance and unemployment
claims history. Following a review of these factors, a client proposal is
prepared for acceptable clients. Presidion believes that its stringent
underwriting procedures greatly reduce its efforts in controlling costs and
liability exposure, and are intended as an aid in achieving a high rate of
client retention. Management Information Systems A key aspect of Presidions strategy is to leverage the technological platform
purchased through the acquisition of Amfinity to enhance operational
efficiencies, add customer value and improve Presidions service delivery
system. This platform, Lawson Software, is a widely used accounting platform
throughout many industries. Presidion has tailored the Lawson system to create a sophisticated and targeted
PEO service delivery platform. This system allows Presidions clients to manage
their payroll data over the internet and enables them to store and retrieve
information regarding all aspects of their businesses, including:  
    
    human resource administration;  
    
    regulatory compliance management;  
    
    employee benefits administration;  
    
    risk management services; and,  
    
    payroll tax administration. A key tenet of Presidions future growth strategy is to benefit from the
incremental savings and improve customer service by providing all of
Presidions clients internet access to Lawson. Presidion believes that this
system has the capability of being upgraded and expanded to meet Presidions
needs for the foreseeable future. Industry The PEO industry began to evolve in the early 1980s largely in response to the
burdens placed on small-to-medium-sized employers in procuring workers
compensation insurance coverage on a cost-effective basis and in operating in
an increasingly complex legal and regulatory environment. While various service providers such as payroll processing firms, benefits
consultants, safety consultants and temporary services firms were available to
assist these businesses with specific tasks, PEOs began to emerge as providers
of a more comprehensive range of services relating to the employer/employee
relationship. As initially conceived, these services involved the concept of
staff leasing, whereby a service provider would become an employer of the
client companys employees and would lease these worksite employees to the
client to perform their intended functions at the worksite. As the industry has
evolved, the term professional employer organization has come to describe an
entity that enters into a three-party relationship, including the PEO, the
client business and the worksite employee. 6




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PEO arrangements generally transfer broad aspects of the employer/employee
relationship to the PEO. Because the business of the PEO is to enter into these
relationships and provide employee related services involving a large number of
employees, the PEO can achieve economies of scale as a professional employer
and perform the employment related functions at a level typically available
only to large corporations with substantial resources to devote to human
resources management. According to the U.S. Small Business Administration, there are more than 6
million businesses in the United States with fewer than 500 employees.
Collectively, these businesses employ an estimated 52 million employees and
represent $1.2 trillion in aggregate annual payroll. The National Association
of Professional Employer Organizations (NAPEO) estimates that the PEO
industry co-employs fewer than 3 million worksite employees. Therefore,
approximately 49 million, or 94 %, of these small business employees are
currently not affiliated with the PEO industry, leaving substantial room for
further market penetration. The growth of the PEO industry has been driven primarily by:  
    
    increasing recognition and acceptance of PEOs by federal and state governmental authorities;  
    
    the need to provide competitive health care and retirement benefits
in a cost-effective and convenient manner;  
    
    the increasing costs associated with health and workers
compensation insurance coverage, workplace safety programs,
employee-related complaints and litigation;
    
    employment-related governmental regulations and the costs of
compliance growing more complex; and,
    
    trends relating to the growth and productivity of the small to
medium-sized business community in the U.S., resulting from
outsourcing, which allows a focus on core competencies. Competition Most PEOs serve a single market or region. Presidion considers its primary
competition to be the traditional in-house provider of employee services. In
addition, Presidion competes, on a very limited basis, with fee-for-service
providers such as payroll processors and human resource consultants. The key competitive factors in the PEO industry are breadth and quality of
employee benefits, in addition to administrative services delivered, price,
financial stability, credibility and integrity of the PEO in managing the
clients payroll, tax and insurance functions. Presidion faces competition
from other PEOs and from firms that provide limited component services, such
as payroll processing, temporary employment services, contract staffing
companies and the insurance industry as a whole. While direct competition for Presidions services is significant, management
believes that the primary selling obstacle in the market is generally the low
level of familiarity that small and medium size businesses have with the
employee outsourcing concept. This tends to make the selling task an
educational process and lengthens the selling cycle. Management believes,
however, that this is indicative of a significant market opportunity. Within its markets, Presidion faces competition from such large competitors as:
Administaff, Gevity HR, ADP Total-Source, Paychex and EPIX, all of
which have significantly greater resources than Presidion. Federal And State Regulation Numerous federal and state laws relating to labor, tax and employment matters
affect Presidions operations. By entering into a co-employer relationship with
employees who are assigned to work at client company locations, Presidion
assumes certain obligations and responsibilities of an employer under these
federal and state laws. Because many of these federal and state laws were
enacted prior to the development of nontraditional employment relationships,
such as professional employer, temporary employment and outsourcing
arrangements, many of these laws do not specifically address the obligations
and responsibilities of non-traditional employers. In addition, the definition
of employer under these laws is not uniform. 7




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Some governmental agencies that regulate employment and labor laws have
developed rules that specifically address labor and employment issues raised by
the relationship among PEOs, client companies and worksite employees.
Existing regulations are relatively new and, therefore, their interpretation
and application by administrative agencies and federal and state courts are
limited or non-existent. The development of additional regulations and
interpretation of existing regulations can be expected to evolve over time.
While Presidion cannot predict with certainty the nature or direction of the
development of federal, state and local regulations, NAPEO is continuing to
pursue a proactive strategy of educating administrative authorities as to the
advantages of PEOs and achieving regulations that appropriately accommodates
their legitimate business function. Certain federal and state statutes and regulations use the terms employee
leasing or staff leasing to describe the arrangement among a PEO, such as
Presidion, and its clients and worksite employees. The terms employee
leasing, staff leasing and professional employer arrangements are
generally synonymous in such contexts and describe the arrangements entered
into by Presidion, its clients and worksite employees. As an employer, Presidion is subject to federal statutes and regulations
governing its employer-employee relationships. Presidion believes that its
operations are in compliance in material respects with applicable federal
statutes and regulations, except for certain payroll tax issues discussed
further in Item 7. Managements Discussion and Analysis of Financial Condition
and Results of Operations. PEOs are subject to extensive state regulations that include operating,
fiscal, licensing and certification requirements. Regulatory requirements vary
from state to state, and as Presidion enters new states it will face new
regulatory and licensing environments. While many states do not explicitly
regulate PEOs, as of December 2003, 22 states have passed laws that have
licensing or registration requirements for PEOs and other states are
considering such regulation. Such laws vary from state to state but generally
provide for monitoring the fiscal responsibility of PEOs. State regulation
assists in screening insufficiently capitalized PEO operations and, in
Presidions view, has the effect of legitimizing the PEO industry generally by
resolving interpretive issues concerning employee status for specific purposes
under applicable state law. In addition to holding a license in Florida, South
Carolina and Texas, Presidion has been registered or certified in Illinois and
Georgia. Whether or not a state has licensing, registration or certification
requirements, Presidion faces a number of other state and local regulations
that could impact its operations. Presidion does not view the burdens of
complying with the above-mentioned regulations as having a material effect on
its business operations. As employer of record, Presidion assumes responsibility for employer payroll
tax requirements. Complying with these requirements entails properly computing
the obligations for both the employer portion and worksite employee portion,
withholding the worksite employee portion, remitting payments to the
appropriate agencies, and maintaining appropriate records. A third party
administrator manages testing and compliance for Presidions qualified
retirement savings plan. Employees As of December 31, 2003, Presidion employed approximately 275 internal and
32,000 worksite employees. 
 Item 2. Properties. Facilities Presidions administrative and corporate staff are housed in approximately
45,000 square feet of leased office space in Sebring, Palm Beach Gardens and
Miami, Florida and Columbia, South Carolina. In addition, PSI leases seven
sales offices located in Florida and Georgia. Senior management is located in
Troy, Michigan in 11,175 square feet of leased office space. Management
believes that these facilities are adequate for Presidions activities as
currently conducted. 8




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Item 3. Legal Proceedings. On December 30, 2003, Accessity Corp. filed a complaint in the Circuit Court of
the 11th Judicial Circuit in and for Miami-Dade County, Florida against
MediaBus Networks, Inc. n/k/a Presidion Corporation; Mercator Group, LLC;
Mercator Advisory Group, LLC; Mercator Momentum Fund, LP; Mercator Momentum
Fund III; Mercator Focus Fund, LP; Taurus Global, LLC; John W. Burcham, II;
Craig A. Vanderburg and James E. Baiers (Defendants). The complaint alleges
interference with a contractual relationship and prospective business
relationship between Presidion Solutions, Inc., a wholly owned subsidiary of
Presidion Corporation, and Accessity Corp. Accessity is demanding judgment in
its favor against the Defendants in amounts to be determined in binding
arbitration. Management believes that the outcome of this litigation will not
have a material impact on Presidions financial position, results of operations
or cash flows. 
 Item 4. Submission of Matters to a Vote of Security Holders. There were no matters submitted to a vote of Presidions security holders
during Presidions fourth quarter ended December 31, 2003. On March 5, 2004, a
majority of the shareholders of Presidion voted through written consents to
establish blank check preferred stock, authorizing Presidions board of
directors to establish the designations, preferences, limitations and relative
rights of Presidions 50,000,000 shares of Preferred Stock. 
 PART II 
 Item 5. Market for Registrants Common Equity and Related Stockholder Matters. Presidions common stock is traded on the Over-the-Counter Bulletin Board under
the symbol PSDI. The following table sets forth for the periods indicated,
the high and low bid prices of a share of common stock during the period of
February 12, 2003 through December 31, 2003. On February 12, 2003, Presidion
Solutions, Inc. was the accounting acquiror in a reverse merger between
MediaBus Networks, Inc. n/k/a Presidion Corporation and Presidion Solutions,
Inc. The prices reflect inter-dealer prices, without retail mark-up, markdown
or commissions and may not necessarily reflect actual transactions. High Bid
    
    Low BidFebruary 11, 2003 through March 31, 2003
    
    $
    1.33
    
    
    $
    0.60April 1, 2003 through June 30, 2003
    
    
    0.87
    
    
    
    0.25July 1, 2003 through September 30, 2003
    
    
    0.88
    
    
    
    0.31October 1, 2003 through December 31, 2003
    
    
    0.59
    
    
    
    0.25
 On April 28, 2004, the closing price per share pertaining to Presidions common
stock was $0.25. Presidion is presently authorized to issue 400,000,000 shares of Common Stock,
$0.0000303 par value. As of April 28, 2004, there were 35 holders of record of Presidions common
stock, and there were 96,766,439 shares of common stock issued and outstanding.
Management believes that there are a large number of holders maintaining
accounts at various brokerage firms. Presidion has never paid any dividends on its capital stock. Presidion
currently expects that it will retain future earnings for use in its operations
and expansion of its business and does not anticipate paying any cash dividends
in the foreseeable future. Any decision on the future payment of dividends
will depend on the earnings and financial position of Presidion at that time
and such other factors as Presidions Board of Directors deem relevant. 9




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A summary of common stock authorized for issuance under equity compensation
plans follows: Number of securitiesto be issued upon
    
    Weighted average
    
    Number ofexercise of
    
    exercise price of
    
    securitiesoutstanding options,
    
    outstanding options,
    
    remaining availablePlan categories
    
    warrants & rights
    
    warrants & rights
    
    for future issuanceEquity compensation
plans approved by
security holders
    
    
    
    
    
    
    
    
    
    
    Equity compensation
plans not approved
by security holders
    
    
    1,800,000
    
    
    $
    0.31
    
    
    
    Total
    
    
    1,800,000
    
    
    $
    0.31
    
    
    
    
 Recent Sales of Unregistered Securities Mercator Momentum Fund, L.P., Mercator Momentum Fund III, L.P. and Mercator
Focus Fund, L.P., (collectively Mercator) purchased convertible debentures
from Presidion in the total face amount of $2,000,000. Presidion and PSI
issued the convertible debentures jointly and severally. Specifically,
Mercator Momentum Fund, L.P. purchased $240,000 of face value of the
convertible debentures, Mercator Momentum Fund III, L.P. purchased $200,000 in
face value of the convertible debentures, and Mercator Focus Fund, L.P.
purchased $1,560,000 in face value of the convertible debentures. Other than
the face amount, the terms of all of the convertible debentures are identical.
The convertible debentures mature on February 12, 2004. Presidion is required
to pay monthly interest payments under the convertible debentures at a rate of
6.5% per annum, accruing daily on the basis of a 360-day year. At its option,
Mercator may elect to receive shares of Presidions common stock instead of
cash for the interest payments due under the convertible debenture. The number
of shares received instead of cash for an interest payment is calculated by
dividing the amount of the interest payment by the lower of (i) $0.34, or (ii)
85% of the average of the lowest three inter-day trading prices during the
twenty trading days preceding the conversion date. The debentures are
convertible at any time at the option of Mercator. The debentures are
convertible at a conversion price equal to the lower of (i) $0.34, or (ii) 85%
of the average of the lowest three inter-day trading prices during the twenty
trading days preceding the conversion date. Upon the occurrence and
continuation of an event of default, as set forth in the convertible
debentures, Mercator may, at its option, elect to accelerate the due date for
all outstanding principal. If Presidion is unable to pay this accelerated
amount, plus all accrued interest, in cash, Mercator may request payment in the
form of shares of common stock. If the event of default remains uncured for
thirty (30) days, the percentage used in the formula for determining the
conversion price from the convertible debentures shall be reduced from 85% to
75% until the event of default is cured. Additionally, the conversion price
for the convertible debentures may be adjusted for certain stock dividends,
stock splits or stock distributions, and other capitalization. Mercator may
not convert the debentures or receive shares of common stock as payment for
interest to the extent that such conversion or receipt of shares would result
in Mercator, or its affiliates, beneficially owning in excess of 9.999% of the
then issued and outstanding shares of common stock. The convertible debentures are immediately due and payable if and when
Presidion raises $4,000,000 or more through the sale of equity securities.
Presidion has the right to redeem the convertible debentures during the first
year the convertible debentures are outstanding by paying Mercator 115% of the
outstanding principal at the time of redemption, plus accrued interest.
Presidions obligations under the convertible debentures are secured by pledge
agreements executed by John W. Burcham II, Craig A. Vanderburg and James E.
Baiers who are officers and directors of Presidion. Presidion does not have
any agreements with Mercator regarding the distribution of common stock
received upon conversion of the debentures, although Mercator may promptly sell
any stock received upon conversion under the convertible debentures. The
debentures are currently in default. Presidion has received a waiver of default and
an extension on the maturity of the convertible debentures to July 31, 2004. Mercator Momentum Fund, L.P. also received warrants to purchase 850,000 shares
of common stock at a purchase price of the greater of $1.00 or the market price
of the common stock as of the closing date of the Securities Purchase Agreement
dated February 12, 2003. Based on the market price on February 12, 2003, as
determined pursuant to the terms of the warrant, the purchase price of the
shares of the common stock under the warrants is $1.08. 10




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Item 6. Selected Financial Data. The following selected consolidated financial data should be read in
conjunction with Item 7. Managements Discussion and Analysis of Financial
Condition and Results of Operations and Item 8.
Financial Statements and Supplementary Data of this Form 10-K. The historical results presented are not necessarily indicative of the results
of operations to be expected for future periods. Consolidated Statement of Operations Data: Years ended December 31,2003 (1)
    
    2002 (2)(3)
    
    2001Revenues
    
    $
    125,205,806
    
    
    $
    123,712,345
    
    
    $
    65,719,434Direct expenses
    
    
    95,571,093
    
    
    
    94,962,354
    
    
    
    50,623,348Gross profit
    
    $
    29,634,713
    
    
    $
    28,749,991
    
    
    $
    15,096,086Operating income (loss)
    
    $
    (1,380,735
    )
    
    $
    1,938,009
    
    
    $
    1,889,143Net income (loss)
    
    $
    (6,033,907
    )
    
    $
    107,257
    
    
    $
    653,012Basic earnings (loss) per common share
outstanding
    
    $
    (0.06
    )
    
    
    
    
    
    $
    0.01Diluted earnings (loss) per common share
    
    $
    (0.06
    )
    
    
    
    
    
    $
    0.01Basic weighted average number of common
shares outstanding
    
    
    96,690,806
    
    
    
    93,508,835
    
    
    
    90,850,889Diluted weighted average number of
common shares outstanding
    
    
    96,690,806
    
    
    
    93,508,835
    
    
    
    90,850,889
 Consolidated Balance Sheet Data: As of December 31,2003
    
    2002
    
    2001Total assets
    
    $
    54,085,591
    
    
    $
    58,022,352
    
    
    $
    35,042,803Total long-term debt
    
    
    5,137,510
    
    
    
    8,581,509
    
    
    
    10,450,885Total stockholders equity (deficit)
    
    
    (514,035
    )
    
    
    3,560,269
    
    
    
    1,453,012
  (1)
    
    On February 11, 2003, MediaBus Networks, Inc. and Presidion Solutions,
Inc. entered into a reverse acquisition transaction pursuant to which
Presidion Solutions, Inc. became the accounting acquiror. Therefore, the
financial information presented for the years ended December 31, 2003,
2002 and the period of May 3, 2001 through December 31, 2001 is that of
the accounting acquiror, Presidion Solutions, Inc.  (2)
    
    Reflects the acquisition of Amfinity Business Solutions, Inc., which has
been included in our results since January 1, 2002.  (3)
    
    On January 1, 2002, Presidion adopted the SFAS No. 142, Goodwill and
Other Intangible Assets, pursuant to which Presidion recognized no
goodwill amortization expense during 2003 and 2002 compared to the
recognition of goodwill amortization expense amounting to $655,351 during
the period May 3, 2001 through December 31, 2001. 11




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Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations. The following discussion and analysis of Presidions financial condition and
results of operations should be read in conjunction with Presidions audited
consolidated financial statements and related footnotes. This discussion and
analysis contains forward-looking statements within the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. These
statements relate to expectations concerning matters that are not historical
facts. These statements and all phases of our operations are subject to known
and unknown risks, uncertainties and other factors. Readers are cautioned not
to place undue reliance on these forward-looking statements. Presidions
actual results, levels of activity, performance or achievements and those of
Presidions industry may be materially different from any future results,
levels of activity, performance or achievements expressed or implied by these
forward-looking statements. Presidion undertakes no obligation to update the
forward-looking statements in this filing. Overview Presidion operates as a PEO and provides comprehensive and integrated human
resource management services to small and medium sized businesses on a service
agreement basis. Presidion provides services to approximately 2,400 clients
through approximately 32,000 worksite employees primarily in the state of
Florida. Presidions services consist of the following:  
    
    Human resources administration;
    
    Employer regulatory compliance management;
    
    Employee benefits administration;
    
    Risk management services and employer liability protection; and
    
    Payroll and payroll tax administration. Critical Accounting Policies and Estimates Presidions discussion and analysis of its financial condition and results of
operations is based upon its audited 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
Presidion to make estimates and judgments that affect the reported amounts of
assets and liabilities as well as the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Presidion bases its estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying value
of assets and liabilities. Actual results may differ from these estimates. The following represents a summary of Presidions critical accounting policies
that require managements most difficult and subjective judgments. Revenue Recognition. Presidions revenues represent service fees charged to
its clients, pursuant to a client service agreement, less associated worksite
employee wage costs. Revenue is recognized ratably over the periods in which
the applicable worksite employees perform services at client worksite
locations. The service agreement provides for an initial one-year term,
subject to cancellation upon 30 days notice by either Presidion or the client.
The service fees are based upon the gross payroll of each worksite employee
plus the estimated costs of employment related taxes, human resources and
administrative services as well as insurance coverage and benefit plans. This
structure results in a comprehensive service fee applied to each worksite
employees gross wage. Under the service agreement, Presidion has the
obligation to provide the benefits and services covered by the agreement, as
well as the obligation to pay the direct costs associated with such services,
regardless of whether the client company makes timely payment to Presidion of
the associated service fee. Presidion estimates a markup component included in its gross billings to
clients based upon the above mentioned costs. Therefore, Presidions ability to
accurately estimate, control and manage its worksite employee wages and related
direct costs has a significant impact on Presidions operating results. 12




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If Presidion underestimates its direct costs in developing its gross billings
for the year ended December 31, 2003 by 5% to 10%, its operating loss would
increase in the approximate range of $4.8 million to $9.6 million. Health Insurance Costs. Presidion provides health care insurance to its
worksite and internal employees through several plans. The cost pertaining to
some plans is fixed and determinable, while Presidion retains some risk through
others. In the case of plans in which Presidion retains risk, Presidion makes claim
payments as claims are incurred up to a predetermined claim liability. The
insurance carrier is responsible for all amounts in excess of the predetermined
claim liability. Presidion estimates liabilities pertaining to these plans
based on claims data provided by the insurance carrier and internal and
external factors such as payment patterns, expected rates of increase in
medical care costs and known specific occurrences. Presidion establishes a
liability for claims that have been reported but not paid, and claims that have
been incurred but not reported at the end of each accounting period. The
medical care cost trend, which is the rate of increase in health care costs,
and the volatility in the number of claims incurred per period have the most
significant impact on Presidions health care expenses. Presidion charges its clients for the costs of its medical plans. However,
Presidion bears the risk for the amount of claims in excess of such charges. Presidion uses estimates and judgment in the process of determining health care
liabilities and in factoring health care costs into Presidions gross billings
to clients. The impact of unanticipated increases in health insurance expense of 10% of the
2003 expense, would result in an increase to expense of approximately $1.2
million. Workers Compensation Costs. Workers compensation costs include premiums,
administrative costs and expenses related to claims under Presidions workers
compensation programs. Presidion is a participant in several large-deductible
workers compensation programs. Presidion has recognized expenses and the
corresponding liabilities associated with these plans based upon the historical
claim experience of Presidions operating units utilizing actuarial assumptions
and estimated discount rates to determine the present value of future payments
to be made in conjunction with these programs. Workers compensation claims can remain open for a significant number of years.
As a result of the potential long life of these claims, the final costs to
Presidion associated with these programs are subject to a significant degree of
judgment and estimation. Due to the uncertainty in estimating workers compensation claims, adjustments
to workers compensation costs could be significant and may result in a
material impact on Presidions results of operations, financial position and
cash flows. The impact of unanticipated increases in workers compensation
expense in 5% to 10% increments, based upon Presidions workers compensation
expense for the year ended December 31, 2003, would result in an increase to expense of approximately $1.4 million (5%) to $2.8 million (10%). To limit some of this risk and uncertainty, Presidion entered into a deductible
reimbursement reinsurance agreement with an insurance carrier for workers
compensation coverage pertaining to certain of Presidions workers
compensation programs. This agreement is dated May 19, 2003. See Note 16 of
the Notes to Consolidated Financial Statements in Item 8. Financial Statements
and Supplementary Data. Goodwill. SFAS No. 142, Goodwill and Other Intangible Assetsrequires that no
amortization be recognized in relation to goodwill. However, SFAS No. 142
requires a test for impairment of goodwill to be performed annually, or
immediately if conditions indicate that impairment could exist. The evaluation
of Presidions reporting unit in relation to impairment testing requires
significant judgment and estimation. Events or changes in business
circumstances may indicate that the carrying value pertaining to goodwill might
not be recoverable. As a result of such an indication, a significant charge
may be required in Presidions Statement of Operations. If impairment pertaining to Presidions reporting unit is indicated, Presidion
may be required to recognize an impairment charge of up to $14.7 million, with
no corresponding tax benefit because the impairment charge would be
non-deductible for tax return purposes. There would be no income tax return
effect unless the reporting unit were abandoned or sold. 13




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Property and Equipment. Presidions property and equipment consist of
furniture and fixtures, leasehold improvements, vehicles and computer equipment
and software. The capitalized costs associated with property and equipment are
depreciated over the estimated useful lives of the applicable asset on a
straight-line basis. Depreciation expense could be accelerated if the useful
lives of these assets were determined to be shorter than current estimates.
This situation would have the effect of decreasing net income or increasing net
loss in periods subsequent to such a determination. Presidion is also required
to periodically evaluate the carrying amounts of its property and equipment in
accordance with SFAS No. 144, Accounting for Impairment or Disposal of
Long-Lived Assets. SFAS No. 144 contains requirements concerning the
recognition and measurement of an impairment loss for property and equipment.
If events or circumstances were to indicate that impairment might be applicable
to Presidions property and equipment, Presidion may be required to recognize
an impairment loss, which could have a significant adverse impact on
Presidions operating results. If the average estimated useful lives of property and equipment were adjusted
by just one year, depreciation expense would increase by approximately $0.5
million on an annual basis. If impairment were indicated in the range of 5% to
10%, Presidion would recognize a charge to income in the approximate range of
$83,062 and $166,125, respectively. Taxes. Presidion is required to make estimates of income tax expense or
benefit, as applicable, in each tax jurisdiction in which Presidion operates.
This process incorporates an assessment of current taxes payable and/or
receivable with temporary differences between the tax bases of assets and
liabilities and their reported amounts in the financial statements. These
differences result in deferred tax assets and deferred tax liabilities included
in Presidions audited consolidated balance sheets. Managements judgment and
estimation is utilized to determine whether it is more likely than not that all
of the deferred tax asset amounts will be realized. A valuation allowance has
been established in the amount of $1.5 million, which pertains to general
business tax credits recognized by Presidion. The amount of the deferred tax
assets considered realizable, however, could be reduced in the future. The
recognition of a valuation allowance in relation to Presidions deferred tax
assets could result in a significant increase in income tax expense. At December 31, 2003, Presidion accrued an estimated $2.4 million in relation
to tax penalties associated with late payments of payroll taxes representing
approximately 2% of annual tax liabilities to the Company, which remain in arrears. Should Presidion be successful in abating such penalties, the applicable amounts would
be recognized as income with no corresponding tax expense as these penalties
were not deducted for tax purposes. Results Of Operations The Year Ended December 31, 2003 Compared To The Year Ended December 31, 2002 Revenues. Revenues, representing gross billings less associated direct wage
costs, increased approximately $1.5 million (1.2%), to $125.2 million during
2003 from $123.7 million in 2002. This increase reflected a full year of
business activity in relation to certain contracts acquired in June 2002.
Revenues pertaining to these contracts increased in 2003 over 2002. This
increase was partially offset by a decline in revenues of Presidions other
businesses, which reflected a change in client mix resulting in higher gross
margins. This trend is a reflection of Presidions decision to serve clients
with a lower risk profile and to cease serving certain high-risk clients.
During 2003, Presidion terminated certain high-risk clients, which resulted in
a negative impact on Presidions revenue. However, this impact was partially
offset by the addition of clients throughout 2003. Presidion is continually
assessing its client base and is focusing on retaining clients that remain
profitable and adding new low risk clients with the potential of increasing
profitability. Presidion considers clients to represent a high risk if, based
upon safety and historical factors, there is a great likelihood of frequent of
on-the-job accidents pertaining to worksite employees and such accidents have a
high likelihood of being severe. Presidions management believes that the
volatility of earnings associated with the costs of workers compensation
insurance programs will decrease as a result of not serving such high-risk
clients. Volatility pertaining to workers compensation costs results when the
number and severity of such accidents cannot be reasonably estimated, resulting
in a wide range of possible losses for an insurance policy year. 14




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Gross Profit. Gross profit increased to $29.6 million in 2003 from $28.7
million in 2002, or approximately $0.9 million (3.1%). Gross margin increased
to 23.7% during 2003 from 23.2% in 2002. This increase was a result of the
above-mentioned additional revenue, which was partially offset by an increase
in direct expenses of approximately $0.6 million. Health insurance and payroll
tax expenses increased approximately $1.5 million and $1.3 million,
respectively, and partially offset a decline of approximately $2.2 million for
workers compensation expense. The decline in workers compensation expense
resulted primarily from Presidions decision to end serving certain high-risk
clients as discussed above under Revenues. In May 2003, Presidion entered
into a deductible reimbursement reinsurance agreement with an insurance carrier
for workers compensation coverage pertaining to certain of Presidions
workers compensation programs to limit the risk and uncertainty associated
with the expenses pertaining to those programs. The increase in payroll taxes
was a consequence of the recognition of approximately $2.4 million of tax
penalties during 2003 in comparison to the recognition of $150,000 of penalties
during 2002. This increase is associated with late payments of payroll taxes representing approximately 2% of annual
tax liabilities to Presidion, which remain in arrears. The higher expense associated with health insurance for 2003
resulted primarily from a higher medical cost rate. Selling, General and Administrative. Selling, general and administrative
expenses increased approximately $2.8 million, or 11.1%, to $28.2 million in
2003 from $25.4 million during 2002. This increase resulted from professional
fees primarily associated with Presidions reverse merger and public offering.
As a result of the integration of two business acquisitions that were completed
during 2001 and 2002, Presidion increased internal headcount in 2003 and the
costs associated with headcount. Depreciation and Amortization. Depreciation and amortization expense for 2003
of $1.9 million was approximately $0.5 million higher than for 2002.
Depreciation expense accounted for approximately $0.3 million of this increase.
This was a result of higher property and equipment balances during 2003. The
increase in amortization expense was attributable to client contracts acquired
by Presidion in June 2002. Operating Income (Loss). Presidion recognized an operating loss in the amount
of $1.4 million in 2003 compared to an operating income amounting to $1.9
million during 2002. The operating loss for 2003 was attributable to the
selling general and administrative expenses and depreciation and amortization
expenses mentioned above, and to the write-off of notes receivable in the
amount of $0.9 million. Other Income (Expense). Other expense, net increased approximately $3.6
million to $4.9 million in 2003 from $1.3 million in 2002. This increase was
attributable to increased interest expense of approximately $3.6 million and to
a significantly lesser extent, a decline in interest income. The recognition
of the fair values of a warrant and the beneficial conversion feature
associated with convertible debentures issued by Presidion in February 2003
accounted for $0.9 million of the increase in interest expense. The remainder
of the increase in interest expense is primarily associated with the
amortization of direct financing costs pertaining to the debenture mentioned
above, irrevocable letter of credit fees pertaining to certain debt agreements
and interest costs associated with Presidions line of credit. The slight
decline in interest income resulted from discontinuing the recognition of
interest in relation to certain notes receivable. Provision for Income Taxes. Presidion recognized an income tax benefit
amounting to $0.2 million during 2003 in association with a pre-tax loss of
$6.3 million. For 2002, Presidion had income tax expense of approximately $0.6
million on pre-tax income of $0.6 million. The effective tax benefit rate for
2003 was 3.5% and the effective tax (expense) rate for 2002 was 83.7%. Both of
these tax rates resulted from expenses recognized for financial statement
purposes that are not deductible for tax return purposes. During 2003, these
non-deductible items included the interest expense associated with the warrant
and beneficial conversion feature associated with Presidions secured
convertible debentures amounting to $0.9 million, tax penalties amounting to
$2.4 million and the write-off of notes receivable in the amount of $0.9
million. Presidion also recognized state income taxes amounting to $0.7
million in 2003. Net Loss. Presidion recognized a net loss of approximately $6.0 million in
2003 compared to the recognition of net income in the amount of approximately
$0.1 million during 2002. The net loss in 2003 resulted primarily from
increased operating expenses of $4.2 million and the significantly higher
interest charges described above. 15




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##### Table of Contents



Year Ended December 31, 2002 Compared To The Year Ended December 31, 2001 Revenues. Presidion commenced business operations in May 2001 with the
acquisition of the Sunshine Companies; therefore, Presidions business
operations covered a period of only approximately eight months during 2001.
Revenues increased $58.0 million, or 88.2%, for 2002 over 2001. This increase
resulted from the Amfinity business acquisition in January 2002, as well as the
acquisition of client contracts in June 2002. These acquisitions added revenue
of approximately $24.5 million and $15.4 million, respectively, during 2002. In
addition, Presidions continuation of business from its predecessor company,
representing the operations of the Sunshine Companies, recognized an increase
in revenues of approximately $18.1 million for 2002 compared to 2001. Gross Profit. Gross profit increased $13.7 million (90.4%) for 2002 compared
to 2001. Gross profit as a percentage of sales increased slightly to 23.2% in
2002 from 23.0% in 2001. The increased gross profit resulted from the higher
revenue associated with the increased business activities mentioned above. Selling, General and Administrative. Selling, general and administrative
expenses increased approximately $13.1 million to $25.4 million during 2002
from $12.3 million during 2001. This increase in expenses offset the increase
in gross profit. The increase in expense occurred because of the significant
rise in business activities during 2002, as well as the fact that Presidions
business operations covered a period of only approximately eight months during
2001. Depreciation and Amortization. Depreciation and amortization expense increased
$0.5 million, or 59.4%, from 2001 to 2002. This increase reflected the
commencement of amortization expense ($0.4 million) associated with client
contracts obtained during 2002. Depreciation expense increased $0.7 million
over the prior period as a consequence of higher property and equipment
balances during the 2002 period. The above mentioned increases were partially
offset by amortization expense of $0.7 million associated with goodwill that
was recognized during 2001, while no amortization expense for goodwill was
recognized during 2002, due to compliance with SFAS No. 142, Goodwill and
Other Intangible Assets. Operating Income. Operating income for 2002 increased slightly (2.6%) from
operating income in 2001. This increase resulted from the higher revenues
associated with increased business activities during 2002. The effect of the
higher revenues was substantially offset by the recognition of significant
expenses of integrating Presidions business acquisitions that were consummated
during 2002 and 2001. Other Income (Expense). Other expense, net increased $0.5 million, or 60.9%,
to $1.3 million in 2002 from $0.8 million during 2001. This increase was
primarily attributable to a $0.4 million increase in interest expense and a
small increase in miscellaneous expenses. The increase in interest expense was
due to significantly higher borrowing activity and financing fees associated
with letters of credit. There was a slight increase in interest income from
2001. Provision for Income Taxes. Presidions provision for income taxes increased
$0.1 million, or 25.0%, in 2002 compared to 2001. Presidions effective tax
rate increased to 83.7% in 2002 from 40.3% in 2001. The significantly higher
effective tax rate for 2002 versus 2001 reflects expenses recognized for
financial reporting purposes that are not deductible for tax return purposes. Net Income. Net income declined $0.5 million from 2001 to 2002. This decline
was primarily attributable to the $0.4 million increase in interest expense and
the high effective tax rate of 83.7% mentioned above. Liquidity and Capital Resources During 2003, Presidions cash requirements were met through operations,
borrowings from Presidions credit facility and the issuance of 6.5% Secured
Convertible Debentures in the aggregate principal amount of $2.0 million. The
net proceeds associated with the debentures amounted to $1.7 million, which was
utilized to reduce the outstanding balance on Presidions bank line of credit.
See Notes 6 and 7 of the Notes to Consolidated Financial Statements in Item 8.
Financial Statements and Supplementary Data. Net cash provided by operating activities amounted to $6.0 million for 2003
compared to net cash provided by operations of $3.4 million during 2002. The
net cash provided during 2003 was primarily attributable to significantly
higher deposits, higher accrued payroll tax liabilities and higher accrued
liability amounts. 16




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Net cash used in investing activities amounted to $2.4 million in 2003 compared
to net cash used in the amount of $3.0 million during 2002. During 2003,
there were lower capital expenditures and net loan activities with related
parties in the amounts of $0.3 million and $0.8 million, respectively. The
impact of these declines was partially offset by an increase in payments to a
related party for acquired client contracts and payments pertaining to an
equity agreement for a human resources outsourcing arrangement. Net cash used in financing activities was $3.9 million during 2003 and $0.1
million in 2002. The increase in cash used in financing activities is mainly
attributable to increased net payments on the bank line of credit. Mercator Momentum Fund, L.P., Mercator Momentum Fund III, L.P. and Mercator
Focus Fund, L.P., (collectively Mercator) purchased convertible debentures
from Presidion in the total face amount of $2,000,000. Presidion and PSI
issued the convertible debentures jointly and severally. Specifically,
Mercator Momentum Fund, L.P. purchased $240,000 of face value of the
convertible debentures, Mercator Momentum Fund III, L.P. purchased $200,000 in
face value of the convertible debentures, and Mercator Focus Fund, L.P.
purchased $1,560,000 in face value of the convertible debentures. Other than
the face amount, the terms of all of the convertible debentures are identical.
The convertible debentures mature on February 12, 2004. Presidion is required
to pay monthly interest payments under the convertible debentures at a rate of
6.5% per annum, accruing daily on the basis of a 360-day year. At its option,
Mercator may elect to receive shares of Presidions common stock instead of
cash for the interest payments due under the convertible debenture. The number
of shares received instead of cash for an interest payment is calculated by
dividing the amount of the interest payment by the lower of (i) $0.34, or (ii)
85% of the average of the lowest three inter-day trading prices during the
twenty trading days preceding the conversion date. The debentures are
convertible at any time at the option of Mercator. The debentures are
convertible at a conversion price equal to the lower of (i) $0.34, or (ii) 85%
of the average of the lowest three inter-day trading prices during the twenty
trading days preceding the conversion date. Upon the occurrence and
continuation of an event of default, as set forth in the convertible
debentures, Mercator may, at its option, elect to accelerate the due date for
all outstanding principal. If Presidion is unable to pay this accelerated
amount, plus all accrued interest, in cash, Mercator may request payment in the
form of shares of common stock. If the event of default remains uncured for
thirty (30) days, the percentage used in the formula for determining the
conversion price from the convertible debentures shall be reduced from 85% to
75% until the event of default is cured. Additionally, the conversion price
for the convertible debentures may be adjusted for certain stock dividends,
stock splits or stock distributions, and other capitalization. Mercator may
not convert the debentures or receive shares of common stock as payment for
interest to the extent that such conversion or receipt of shares would result
in Mercator, or its affiliates, beneficially owning in excess of 9.999% of the
then issued and outstanding shares of common stock. The convertible debentures are immediately due and payable if and when
Presidion raises $4,000,000 or more through the sale of equity securities.
Presidion has the right to redeem the convertible debentures during the first
year the convertible debentures are outstanding by paying Mercator 115% of the
outstanding principal at the time of redemption, plus accrued interest.
Presidions obligations under the convertible debentures are secured by pledge
agreements executed by John W. Burcham II, Craig A. Vanderburg and James E.
Baiers who are officers and directors of Presidion. Presidion does not have
any agreements with Mercator regarding the distribution of common stock
received upon conversion of the debentures, although Mercator may promptly sell
any stock received upon conversion under the convertible debentures. The
debentures are currently in default. Presidion has received a waiver of default and an extension
on the maturity of the convertible debentures to July 31, 2004. Mercator Momentum Fund, L.P. also received warrants to purchase 850,000 shares
of common stock at a purchase price of the greater of $1.00 or the market price
of the common stock as of the closing date of the Securities Purchase Agreement
dated February 12, 2003. Based on the market price on February 12, 2003, as
determined pursuant to the terms of the warrant, the purchase price of the
shares of the common stock under the warrants is $1.08. During 2003, Presidion had a line of credit arrangement, amounting to $6.0
million, with an expiration date of May 31, 2004. Borrowings pertaining to
this line of credit are restricted by certain formula calculations. At
December 31, 2003, outstanding borrowings pertaining to this credit facility
amounted to $4.6 million with amounts available for borrowing totaling $0.2
million. Presidion is currently in violation of covenants in relation to this
arrangement. Presidion is presently in negotiations with the financial
institution to waive these events of non-compliance. See Note 6 of the Notes
to Consolidated Financial Statements in Item 8. Financial Statements and
Supplementary Data. 17




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Presidions ability to continue as a going concern is contingent upon its
ability to obtain adequate financing to support its operations and its ability
to restructure its debt. Presidion will require additional financing in
connection with its business. Presidion may seek additional funds from time to
time through equity offerings and/or debt financing. Presidion is in default
of its existing debt agreements; Presidion is in violation of covenants
pertaining to its line of credit agreement, as amended; its current debt
service obligations are in excess of anticipated cash flows from operations;
and Presidion has a negative current ratio. Management has taken significant
actions through April 2004 to enable Presidion to meet its current debt service
obligations and provide adequate working capital to support its operations.
These actions include attempts to successfully restructure its debt agreements
to extend maturities and reduce debt service requirements to be more closely
aligned with its expected cash flows from operations, to continue negotiations
with the provider of its line of credit agreement to obtain waivers of events
of default, and to renew the facility through May 31, 2005 on comparable terms.
Presidion is also attempting to obtain additional equity and
debt financing. However, there is no assurance that Presidion will be able to
successfully restructure its debt or obtain adequate financing on terms
favorable to Presidion. Should these negotiations to restructure its current
debt structure be unsuccessful, Presidion has received a binding commitment
from an unrelated third party to provide financing of up to $12.0 million to
replace the line of credit facility, provide working capital and repay certain
other obligations of Presidion. The Company has no existing off-balance sheet arrangements beyond the
commitments disclosed regarding letters of credit supporting the reserves for
workers compensation and Seller Financed Note C. The following is a summary of the time periods in which Presidions contractual
obligations are due: Total
    
    Less than one year
    
    From 1 to 3 years
    
    From 3 to 5 years
    
    After 5 yearsShort term debt
    
    $
    10,562,516
    
    
    $
    10,562,516
    
    
    
    
    
    
    
    
    
    
    
    Long term debt
    
    
    5,137,510
    
    
    
    5,052,407
    
    
    $
    80,820
    
    
    $
    4,283
    
    
    
    Operating leases
    
    
    2,430,002
    
    
    
    1,081,636
    
    
    
    1,238,234
    
    
    
    109,104
    
    
    $
    1,028
 Recently Issued Accounting Standards In May 2003, the Financial Accounting Standards Board (FASB) issued SFAS No.
150, Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity. SFAS No. 150 establishes standards for the
classification and measurement of certain financial instruments with
characteristics of both liabilities and equity. It requires the classification
of a financial instrument that is within its scope as a liability (or an asset
in some circumstances). Many of those instruments were previously classified
as equity. SFAS No. 150 is effective for financial instruments entered into or
modified after May 31, 2003 and otherwise on July 1, 2003. This standard does
not have a material impact on the Companys consolidated financial statements. In January 2003, the FASB issued Financial Interpretation Number 46 (FIN 46),
Consolidation of Variable Interest Entities, which requires variable interest
entities, which are entities subject to consolidation according to the
provisions of this Interpretation, to be consolidated by a company if that
company is subject to a majority of the risk of loss from the entitys
activities, or is entitled to receive a majority of the entitys residual
returns, or both. The consolidation provisions of FIN 46 apply immediately to
variable interest entities created after January 31, 2003 and to variable
interest entities created before January 31, 2003 in the first fiscal year or
interim period beginning after December 15, 2003. Certain disclosure
provisions apply to financial statements issued after January 31, 2003. The
Company is currently evaluating FIN 46 and has yet to form an opinion on
whether adoption will have any significant impact on the Companys consolidated
financial statements. 18




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##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Presidion is exposed to changes in interest rates in its cash and debt
transactions. Presidion does not hold derivative financial instruments for
trading or speculative purposes. Presidions exposure related to adverse movements in interest rates is
primarily derived from the variable rates associated with its line of credit
facility. At December 31, 2003, Presidion had approximately $0.2 million
available for borrowing under this facility at the financial institutions
prime rate of interest plus 0.25%. At December 31, 2003, borrowings
outstanding pertaining to this facility aggregated $4.6 million at an interest
rate of 4.25%. Based upon the outstanding balance of this facility at December
31, 2003, an increase of 100% in the annual interest rate would cause a
corresponding increase in interest expense of $0.2 million on an annual basis. 19




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Item 8. Financial Statements and Supplementary Data. 
 Independent Auditors Report The Board of Directors and Stockholders
Presidion Corporation We have audited the accompanying consolidated balance sheet of Presidion
Corporation, as of December 31, 2003, and the related consolidated statements
of operations, stockholders equity (deficit), and cash flows for the year then ended.
Our audit also included the financial statement schedule for the year ended
December 31, 2003 listed at Item 15(a). These consolidated financial statements
and schedule are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audit. We conducted our audit 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 financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Presidion
Corporation and subsidiaries as of December 31, 2003, and the results of their
operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America. Also,
in our opinion, the related financial statement schedule for the year ended
December 31, 2003, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein. /s/ Follmer Rudzewicz PLC
     Follmer Rudzewicz PLC
Southfield, Michigan
April 13, 2004 Independent Auditors Report Stockholders and Board of Directors
Presidion Solutions, Inc. We have audited the accompanying consolidated balance sheet of Presidion
Solutions, Inc. as of December 31, 2002 and the related consolidated
statements of operations, stockholders equity and cash flows
for the years ended December 31, 2002 and 2001. These financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Presidion
Solutions, Inc. at December 31, 2002 and the consolidated results of
their operations and their cash flows for the years ended December
31, 2002 and 2001 in conformity
with accounting principles generally accepted in the United States. As discussed in Note 2, on January 1, 2002, the Company changed its method of
accounting for goodwill and other intangibles. /S/ Ernst & Young LLP
     Ernst & Young LLP Detroit, Michigan
June 23, 2003




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##### Table of Contents



Presidion CorporationConsolidated Balance SheetsAs of December 31, 2003 & 2002 December 31,2003
    
    2002AssetsCurrent assets:Cash and cash equivalents
    
    $
    263,105
    
    
    $
    515,620Accounts receivable, less allowance for doubtful
accounts of $132,889 and $129,730, respectively
    
    
    18,305,182
    
    
    
    17,363,795Notes receivable
    
    
    947,727
    
    
    
    944,443Related party receivables
    
    
    1,453,566
    
    
    
    1,586,885Deferred income taxes
    
    
    1,072,797
    
    
    
    1,295,000Deferred financing costs
    
    
    559,566
    
    
    
    Deposits
    
    
    8,567,872
    
    
    
    14,034,098Prepaid expenses and other current assets
    
    
    1,871,475
    
    
    
    1,282,625Total current assets
    
    
    33,041,290
    
    
    
    37,022,466Property and equipment, net
    
    
    1,664,537
    
    
    
    2,223,743Restricted cash
    
    
    120,405
    
    
    
    120,000Notes receivable, less current portion
    
    
    298,215
    
    
    
    1,116,006Related party receivables, less current portion
    
    
    761,323
    
    
    
    Deferred income taxes
    
    
    1,859,230
    
    
    
    1,701,000Deferred financing costs
    
    
    43,244
    
    
    
    Client contracts, net of accumulated amortization of $1,178,220
and $466,535, respectively
    
    
    1,320,045
    
    
    
    1,132,946Investments
    
    
    271,111
    
    
    
    Goodwill, net
    
    
    14,706,191
    
    
    
    14,706,191Total assets
    
    $
    54,085,591
    
    
    $
    58,022,352
 See accompanying notes to consolidated financial statements. 20




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##### Table of Contents



Presidion CorporationConsolidated Balance Sheets (Continued)As of December 31, 2003 & 2002 December 31,2003
    
    2002Liabilities and stockholders equityCurrent liabilities:Bank line of credit
    
    $
    4,600,000
    
    
    $
    5,235,939Drafts outstanding
    
    
    3,962,516
    
    
    
    4,837,537Secured convertible debentures
    
    
    2,000,000
    
    
    
    Accounts payable
    
    
    1,828,890
    
    
    
    1,987,860Accrued compensation and benefits
    
    
    16,819,680
    
    
    
    16,306,597Accrued payroll taxes
    
    
    7,703,633
    
    
    
    1,046,337Accrued workers compensation premiums
    
    
    1,100,714
    
    
    
    1,951,644Other accrued liabilities
    
    
    4,467,446
    
    
    
    1,751,085Current portion of workers compensation reserve
    
    
    2,014,603
    
    
    
    5,539,903Current portion of long-term debt
    
    
    5,052,407
    
    
    
    4,085,183Total current liabilities
    
    
    49,549,889
    
    
    
    42,742,085Long-term debt
    
    
    85,103
    
    
    
    4,496,326Workers compensation reserve
    
    
    4,761,839
    
    
    
    6,265,083Other liabilities
    
    
    202,795
    
    
    
    958,589Total liabilities
    
    
    54,599,626
    
    
    
    54,462,083Stockholders equity (deficit):Preferred stock:50,000,000 shares authorized, 1,000 shares issued and outstanding.
    
    
    1,000,000
    
    
    
    1,000,000Common stock:400,000,000 shares authorized and par value at $0.0000303 per
share, for both periods. Shares issued and outstanding are
96,766,439 and 94,794,589, respectively.
    
    
    2,932
    
    
    
    2,872Additional paid-in capital
    
    
    3,756,671
    
    
    
    1,797,128Retained earnings (deficit)
    
    
    (5,273,638
    )
    
    
    760,269Total stockholders equity (deficit)
    
    
    (514,035
    )
    
    
    3,560,269Total liabilities and stockholders equity (deficit)
    
    $
    54,085,591
    
    
    $
    58,022,352
 See accompanying notes to consolidated financial statements. 21




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##### Table of Contents



Presidion CorporationConsolidated Statements of OperationsPeriods ended December 31, 2003, 2002 & 2001 Year ended December 31,2003
    
    2002
    
    2001Revenues (gross billings of $774,723,105, $780,107,767
and $381,661,949 less direct wage costs of
$649,517,299, $656,395,422 and $315,942,515,
respectively)
    
    $
    125,205,806
    
    
    $
    123,712,345
    
    
    $
    65,719,434Direct expenses:Payroll taxes, benefits and workers compensation
    
    
    95,571,093
    
    
    
    94,962,354
    
    
    
    50,623,348Gross profit
    
    
    29,634,713
    
    
    
    28,749,991
    
    
    
    15,096,086Operating expenses:Selling, general and administrative
    
    
    28,213,926
    
    
    
    25,398,414
    
    
    
    12,320,083Depreciation and amortization
    
    
    1,916,324
    
    
    
    1,413,568
    
    
    
    886,860Write-off of notes receivable
    
    
    885,198
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    (1,380,735
    )
    
    
    1,938,009
    
    
    
    1,889,143Interest income
    
    
    46,793
    
    
    
    124,499
    
    
    
    115,075Interest expense
    
    
    (4,912,248
    )
    
    
    (1,353,593
    )
    
    
    (911,206
    )Other
    
    
    (6,138
    )
    
    
    (51,658
    )
    
    
Income (loss) before provision for income taxes
    
    
    (6,252,328
    )
    
    
    657,257
    
    
    
    1,093,012Income tax expense (benefit)
    
    
    (218,421
    )
    
    
    550,000
    
    
    
    440,000Net income (loss)
    
    $
    (6,033,907
    )
    
    $
    107,257
    
    
    $
    653,012Basic and diluted income (loss) per share of
common stock
    
    $
    (0.06
    )
    
    
    
    
    
    $
    0.01Basic and diluted average number of common shares
outstanding
    
    
    96,690,806
    
    
    
    93,508,835
    
    
    
    90,850,889
 See accompanying notes to consolidated financial statements 22




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##### Table of Contents



Presidion CorporationConsolidated Statements of Stockholders Equity (Deficit)Periods ended December 31, 2003, 2002 & 2001 Retained
    
    TotalAdditional Paid
    
    Earnings
    
    StockholdersPreferred Shares
    
    Preferred Stock
    
    Common Shares
    
    Common Stock
    
    in Capital
    
    (Deficit)
    
    Equity (Deficit)Balance at January 1, 2001
    
    
    
    
    
    
    
    
    
    
    90,850,889
    
    
    $
    2,752
    
    
    
    
    
    
    
    
    
    
    $
    2,752Capital contribution
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
$
    797,248
    
    
    
    
    
    
    
    797,248Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
$
    653,012
    
    
    
    653,012Balance as of
December 31, 2001
    
    
    
    
    
    
    
    
    
    
    90,850,889
    
    
    $
    2,752
    
    
    $
    797,248
    
    
    $
    653,012
    
    
    $
    1,453,012Issuance of preferred
stock
    
    
    1,000
    
    
    $
    1,000,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,000,000Issuance of common
stock
    
    
    
    
    
    
    
    
    
    
    3,943,700
    
    
    $
    120
    
    
    $
    999,880
    
    
    
    
    
    
    
    1,000,000Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    107,257
    
    
    
    107,257Balance as of
December 31, 2002
    
    
    1,000
    
    
    $
    1,000,000
    
    
    
    94,794,589
    
    
    $
    2,872
    
    
    $
    1,797,128
    
    
    $
    760,269
    
    
    $
    3,560,269Issuance of common
stock
    
    
    
    
    
    
    
    
    
    
    1,971,850
    
    
    $
    60
    
    
    $
    1,037,800
    
    
    
    
    
    
    $
    1,037,860Fair value of
warrants and
conversion feature
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    921,743
    
    
    
    
    
    
    
    921,743Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (6,033,907
    )
    
    
    (6,033,907
    )Balance as of
December 31, 2003
    
    
    1,000
    
    
    $
    1,000,000
    
    
    
    96,766,439
    
    
    $
    2,932
    
    
    $
    3,756,671
    
    
    $
    (5,273,638
    )
    
    $
    (514,035
    )
 See accompanying notes to consolidated financial statements 23




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##### Table of Contents



Presidion CorporationConsolidated Statements of Cash FlowsPeriods ended December 31, 2003, 2002 & 2001 Year ended December 31,2003
    
    2002
    
    2001Cash flows from operating activitiesNet income (loss)
    
    $
    (6,033,907
    )
    
    $
    107,257
    
    
    $
    653,012Adjustments to reconcile net income to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    1,916,324
    
    
    
    1,413,568
    
    
    
    886,860Deferred income taxes
    
    
    63,974
    
    
    
    119,963
    
    
    
    314,216Loss on disposal of assets
    
    
    10,385
    
    
    
    (89,562
    )
    
    
    Non-cash interest expense
    
    
    921,743
    
    
    
    53,732
    
    
    
    Non-cash deferred financing costs
    
    
    760,141
    
    
    
    
    
    
    
    Write-off of notes receivable
    
    
    885,198
    
    
    
    
    
    
    
    Other non-cash items
    
    
    
    
    
    
    152,130
    
    
    
    Changes in operating assets and liabilities,
excluding effects of acquisition:Accounts receivable
    
    
    (941,387
    )
    
    
    1,945,163
    
    
    
    (423,765
    )Notes receivable
    
    
    (133,115
    )
    
    
    
    
    
    
    Deposits
    
    
    5,466,226
    
    
    
    (7,865,041
    )
    
    
    (915,636
    )Prepaid expenses and other
    
    
    (589,255
    )
    
    
    438,706
    
    
    
    (604,308
    )Accounts payable
    
    
    (158,970
    )
    
    
    (1,094,819
    )
    
    
    (1,306,177
    )Accrued compensation and benefits
    
    
    7,170,379
    
    
    
    2,169,586
    
    
    
    (2,477,828
    )Accrued other liabilities
    
    
    2,571,292
    
    
    
    632,099
    
    
    
    175,359Accrued workers compensation premiums
    
    
    (850,930
    )
    
    
    (258,603
    )
    
    
    1,838,090Workers compensation reserve
    
    
    (5,028,544
    )
    
    
    5,684,086
    
    
    
    325,000Net cash provided by (used in) operating activities
    
    
    6,029,554
    
    
    
    3,408,265
    
    
    
    (1,535,177
    )Cash flows from investing activitiesPurchase of property and equipment
    
    
    (679,547
    )
    
    
    (952,672
    )
    
    
    (179,947
    )Loans and advances to related parties
    
    
    (2,538,088
    )
    
    
    (3,834,661
    )
    
    
    (851,619
    )Payments on loans and advances from related parties
    
    
    1,910,084
    
    
    
    2,453,033
    
    
    
    Restricted cash
    
    
    
    
    
    
    
    
    
    
    (120,000
    )Principal payments received on notes receivable
    
    
    62,424
    
    
    
    60,470
    
    
    
    51,658Purchase of Sunshine companies
    
    
    
    
    
    
    
    
    
    
    (1,400,000
    )Purchase of Amfinity, less cash acquired
    
    
    
    
    
    
    (393,411
    )
    
    
    Proceeds on disposal of property and equipment
    
    
    2,320
    
    
    
    10,075
    
    
    
    Payments on acquired client contracts
    
    
    (898,785
    )
    
    
    (357,446
    )
    
    
    Investments
    
    
    (271,111
    )
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    (2,412,703
    )
    
    
    (3,014,612
    )
    
    
    (2,499,908
    )Cash flows from financing activitiesPayments on borrowings
    
    
    (4,192,080
    )
    
    
    (5,045,192
    )
    
    
    (1,356,021
    )Proceeds from borrowings
    
    
    158,765
    
    
    
    49,720
    
    
    
    Proceeds from issue of 6.5% secured convertible debentures
    
    
    2,000,000
    
    
    
    
    
    
    
    Payments on other long-term obligations
    
    
    
    
    
    
    (655,697
    )
    
    
    Payments on bank line of credit
    
    
    (15,300,000
    )
    
    
    (106,172,115
    )
    
    
    (92,000
    )Borrowings on bank line of credit
    
    
    14,664,061
    
    
    
    108,331,360
    
    
    
    3,030,000Deferred financing costs
    
    
    (325,091
    )
    
    
    (570,000
    )
    
    
    Drafts outstanding
    
    
    (875,021
    )
    
    
    2,991,574
    
    
    
    1,845,963Issuance of common and preferred stock
    
    
    
    
    
    
    1,000,000
    
    
    
    Capital contributions
    
    
    
    
    
    
    
    
    
    
    799,000Net cash provided by (used in) financing activities
    
    
    (3,869,366
    )
    
    
    (70,350
    )
    
    
    4,226,942Net increase (decrease) in cash
    
    
    (252,515
    )
    
    
    323,303
    
    
    
    191,857Cash at beginning of period
    
    
    515,620
    
    
    
    192,317
    
    
    
    460Cash at end of period
    
    $
    263,105
    
    
    $
    515,620
    
    
    $
    192,317Supplemental Disclosures:Cash paid for interest
    
    $
    3,133,478
    
    
    $
    1,110,240
    
    
    $
    735,847Cash paid for income taxes
    
    $
    19,234
    
    
    
    
    
    
    
    
 See accompanying notes to consolidated financial statements 24




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##### Table of Contents



Presidion Corporation
Notes to Consolidated Financial Statements
For the Periods Ended December 31, 2003, 2002 and 2001 1. Nature of Business and Basis of Presentation Except as the context otherwise indicates, the term the Company refers to
Presidion Corporation and its subsidiaries. The Company was incorporated in the State of Florida in 2000, and is headquartered in Troy, Michigan. The Company provides outsourced business services through a co-employment
relationship on a service agreement basis. The Company provides services to
approximately 2,400 businesses through approximately 32,000 worksite employees. The Company operates as a professional employer organization (PEO) and,
therefore, operates under one reportable segment in conformity with Statement
of Financial Accounting Standards (SFAS) No. 131, Disclosures about Segments
of an Enterprise and Related Information. On February 11, 2003, MediaBus Networks, Inc. (MediaBus) acquired 100% of the
outstanding common stock of Presidion Solutions, Inc. by the issuance of
84,749,980 shares of common stock of MediaBus to the shareholders of Presidion
Solutions, Inc., representing an 87.5% ownership interest in MediaBus. At the
time of this transaction, Presidion Solutions, Inc. became a wholly owned
subsidiary of MediaBus. Immediately prior to this transaction, MediaBus was a
publicly traded development stage company with no business operations.
Accordingly, this transaction has been accounted for as a reverse acquisition
with Presidion Solutions, Inc. as the accounting acquiror. Historical
stockholders equity of Presidion Solutions, Inc. (the accounting acquiror)
prior to the merger has been retroactively restated for the equivalent number
of shares received in the acquisition by the accounting acquiror after giving
effect to any difference in par value of MediaBus and the acquirors common
stock with an offset to additional paid in capital. Retained earnings of
Presidion Solutions, Inc. were carried forward subsequent to the merger.
Operations for all periods presented are those of Presidion Solutions, Inc.
Earnings per share for periods prior to the merger were restated to reflect the
recapitalization described above as if the number of equivalent shares received
by MediaBus had been issued at the beginning of the earliest period presented.
Pro forma information is not presented since this combination is considered a
recapitalization and not a business combination. On February 28, 2003 and May 15, 2003, respectively, MediaBus changed its name
to Presidion Corporation and changed its year-end to December 31 from June 30. The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. The Companys ability to
continue as a going concern is contingent upon its ability to obtain adequate
financing to support its operations and its ability to restructure its debt.
The Company is in default of its existing debt agreements (Notes 7 and 8); the
Company is in violation of covenants pertaining to its line of credit
agreement, as amended (Note 6); its current debt service obligations are in
excess of anticipated cash flows from operations; and the Company has a
negative current ratio. Management has taken significant actions through April
2004 to enable the Company to meet its current debt service obligations and
provide adequate working capital to support its operations. These actions
include attempts to successfully restructure its debt agreements to extend
maturities and reduce debt service requirements to be more closely aligned with
its expected cash flows from operations (Note 8), to continue negotiations with
the provider of its line of credit agreement to obtain waivers of events of
default, and to renew the facility through May 31, 2005 on comparable terms
(Note 6). The Company is also attempting to obtain
additional equity and debt financing. However, there is no assurance that the
Company will be able to successfully restructure its debt or obtain adequate
financing on terms favorable to the Company. Should these negotiations to
restructure its current debt structure be unsuccessful, the Company has
received a binding commitment from an unrelated third party to provide
financing of up to $12,000,000 to replace the line of credit facility, provide
working capital and repay certain other obligations of the Company. 25




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##### Table of Contents



Presidion Corporation
Notes to Consolidated Financial Statements (continued)
For the Periods Ended December 31, 2003, 2002 and 2001 2. Summary of Significant Accounting Policies Cash and Cash Equivalents Cash and cash equivalents consist primarily of demand deposits with financial
institutions. The Company, from time to time during the periods covered by
these financial statements, may have bank balances in excess of its insured
limits. Management has deemed this as a normal business risk. Restricted Cash At December 31, 2003 and 2002, $120,405 and $120,000 of cash, respectively,
were restricted as a lease deposit on the Companys corporate office. Financial Instruments Accounts receivable primarily represent financial instruments that potentially
subject the Company to concentrations of credit risk. At December 31, 2003 and
2002, no single client represented over 10% of the Companys accounts
receivable balance. The carrying amounts of the Companys accounts receivable and payable balances,
including drafts, approximate fair value because of the short maturity of these
instruments. The carrying amounts of the Companys bank borrowings under its
bank line of credit facility approximate fair value because the applicable
interest rates are based on floating rates, identified by reference to market
rates. The Company does not believe it is practicable to effectively measure the fair
value of long-term debt and notes receivable due to the cross collateralization
of certain financial instruments and the lack of a ready market for such
financial instruments. See Notes 8 and 9. Accounts and Notes Receivable The Company provides an allowance for uncollectible accounts receivable based
on prior experience and managements assessment of the collectibility of
existing specific accounts. Accounts receivable are considered past due the
day after the payment was required, with a grace period until the clients next
payroll date, which can be as much as 13 days. The Company evaluates whether a
write off for uncollectible and impaired notes receivable is required based on
managements expectations as to whether all principal and interest will be
collected according to the contractual terms of the notes and the value of the
collateral underlying the notes. Such write offs are recognized in the
Companys Consolidated Statement of Operations for the periods in which the
applicable notes are deemed uncollectible. See Note 9. Long-Lived Assets Property and equipment is stated at cost. Upon sale or retirement of property
and equipment, the cost and related accumulated depreciation are eliminated
from the respective accounts, and the resulting gain or loss is included in the
Consolidated Statement of Operations. Depreciation expense is computed using the straight-line method over the following estimated useful lives: 
    
    Furniture and fixtures
    
    5 to 8 years
    
    Leasehold improvements
    
    7 to 10 years
    
    Computer equipment and software
    
    2 to 5 years
 26




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Presidion Corporation
Notes to Consolidated Financial Statements (continued)
For the Periods Ended December 31, 2003, 2002 and 2001 Amortization expense pertaining to assets subject to capital lease arrangements
is computed using the straight-line method over the term of the applicable
lease. The Company periodically evaluates its long-lived assets for impairment in
accordance with SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets.SFAS No. 144 requires that an impairment loss be recognized
for assets to be disposed of or held-for-use when the carrying amount of an
asset is deemed to not be recoverable. If events or circumstances were to
indicate that any of the Companys long-lived assets might be impaired, the
Company would analyze the estimated undiscounted future cash flows to be
generated from the applicable asset. In addition, the Company would record an
impairment loss to the extent that the carrying value of the asset exceeded the
fair value of the asset. Fair value is generally determined using an estimate
of discounted future net cash flows from operating activities or disposal of
the asset. Goodwill Goodwill represents the excess cost of businesses acquired over the fair value
of identifiable net assets at the date of acquisition. Goodwill was amortized
using the straight-line method over 10 years prior to January 1, 2002. In
addition, goodwill is reviewed for impairment whenever the facts and
circumstances indicate that the carrying amount might not be recoverable. On January 1, 2002, the Company adopted SFAS No. 142, Goodwill and Other
Intangible Assets. Effective January 1, 2002, the Company is no longer
required to amortize indefinite life goodwill and other indefinite life
intangible assets as charges to earnings. During 2002, an initial impairment
analysis was conducted. In addition, the Company is required to conduct an
annual review of goodwill and other intangible assets for potential impairment.
The Companys impairment analysis compares the fair value of the Companys
reporting unit, based on discounted cash flow analyses, to the related net book
values. Based upon the impairment analyses conducted by the Company to date,
management has determined that no impairment exists. The impact of adopting SFAS No. 142 on net income (loss) for the periods ended
December 31, 2003, 2002 and 2001, had the standard been adopted on January 1,
2001, is summarized as follows: 2003
    
    2002
    
    2001Net income (loss) as reported
    
    $
    (6,033,907
    )
    
    $
    107,257
    
    
    $
    653,012Amortization of goodwill, net of tax
    
    
    
    
    
    
    
    
    
    
    655,351Adjusted net income (loss)
    
    $
    (6,033,907
    )
    
    $
    107,257
    
    
    $
    1,308,363
 A summary of changes in goodwill for the periods ended December 31, is as
follows: 2003
    
    2002
    
    2001Balance at beginning of year
    
    $
    14,706,191
    
    
    $
    9,174,934
    
    
    
    Additional purchase price allocation
    
    
    
    
    
    
    825,141
    
    
    
    Goodwill arising from business acquisitions
    
    
    
    
    
    
    4,706,116
    
    
    $
    9,830,285Amortization expense
    
    
    
    
    
    
    
    
    
    
    (655,351
    )Balance at end of year
    
    $
    14,706,191
    
    
    $
    14,706,191
    
    
    $
    9,174,934
 27




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##### Table of Contents



Presidion Corporation
Notes to Consolidated Financial Statements (continued)
For the Periods Ended December 31, 2003, 2002 and 2001 Client Contracts Acquired Client contracts represent the fair value of contracts acquired. Client
contracts are amortized on a straight-line basis over five years from the date
of acquisition. A summary of client contracts as of December 31 is as follows: 2003
    
    2002Balance at beginning of year
    
    $
    1,132,946
    
    
    
    Fair value of contracts purchased (Note 3)
    
    
    
    
    
    $
    879,242Payments for contracts acquired from an affiliate (Note 4)
    
    
    898,785
    
    
    
    720,239Amortization expense
    
    
    (711,686
    )
    
    
    (466,535
    )Balance at end of year
    
    $
    1,320,045
    
    
    $
    1,132,946
 The Company anticipates recording amortization expense of approximately
$711,973 in 2004, $711,973 in 2005, $711,973 in 2006 and $245,727 in 2007
related to these contracts, at which time such contracts will be fully
amortized. 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 and disclosure of contingent assets and liabilities at the date of
the financial statements. Estimates also affect the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. Revenue and Associated Cost Recognition The Companys revenues represent service fees charged to its clients under its
subscriber service agreements, less applicable worksite employee wages.
Revenue and applicable worksite employee wages are recognized ratably over the
periods in which these employees perform services at client worksites. Gross
billings that have been recognized and that have not been billed are included
in accounts receivable on the accompanying consolidated balance sheets and
amounted to $15,204,331 and $15,347,247, respectively, at December 31, 2003 and
2002. In addition, $14,555,106 and $14,727,668 of accrued payroll for the
above mentioned employees were recognized as an accrued liability at December
31, 2003 and 2002, respectively. Stock Options SFAS No. 123, Accounting for Stock-Based Compensationencourages, but does not
require, companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has chosen to continue to
account for stock-based compensation using the intrinsic value method,
prescribed in Accounting Principles Board Opinion (APB) No. 25, Accounting
for Stock Issued to Employees, and its related interpretations. Accordingly,
the Company recognizes compensation costs in an amount equal to the excess of
the quoted market price on the measurement date over the option price. Such
compensation costs are recognized as expense at the measurement date for
options fully vested. For options with a vesting period, the compensation
costs are recognized as expense over the vesting period. The Company has not
recognized any stock-based compensation expense for 2003. The Company had no
stock options outstanding during 2002 and 2001. See Note 11. 28




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##### Table of Contents



Presidion Corporation
Notes to Consolidated Financial Statements (continued)
For the Periods Ended December 31, 2003, 2002 and 2001 Income Taxes The Company accounts for income taxes under SFAS No. 109, Accounting for Income
Taxes. Deferred income tax assets and liabilities are determined based upon
differences between financial reporting and tax bases of assets and liabilities
and are measured using enacted tax rates and laws that will be in effect when
the differences are expected to reverse. Earnings (Loss) Per Share Basic earnings (loss) per share are calculated by dividing consolidated net
income (loss) by the weighted average number of common shares outstanding
during the period. Diluted earnings per common share incorporates the
incremental shares issuable upon the assumed exercise of a stock option and a
warrant and upon the assumed conversion of convertible debentures as if
exercise and conversion into common shares had occurred at the beginning of the
year. Net income shall also be adjusted for interest expense pertaining to the
convertible debentures. The effects of common stock equivalents have not been
included in diluted loss per share for 2003 as the effect would be
anti-dilutive. During 2002 and 2001, the Company had no common stock
equivalents outstanding. Recently Issued Accounting Standards In May 2003, the Financial Accounting Standards Board (FASB) issued SFAS No.
150, Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity. SFAS No. 150 establishes standards for the
classification and measurement of certain financial instruments with
characteristics of both liabilities and equity. It requires the classification
of a financial instrument that is within its scope as a liability (or an asset
in some circumstances). Many of those instruments were previously classified
as equity. SFAS No. 150 is effective for financial instruments entered into or
modified after May 31, 2003 and otherwise on July 1, 2003. This standard does
not have a material impact on the Companys consolidated financial statements. In January 2003, the FASB issued Financial Interpretation Number 46 (FIN 46),
Consolidation of Variable Interest Entities, which requires variable interest
entities, which are entities subject to consolidation according to the
provisions of this Interpretation, to be consolidated by a company if that
company is subject to a majority of the risk of loss from the entitys
activities, or is entitled to receive a majority of the entitys residual
returns, or both. The consolidation provisions of FIN 46 apply immediately to
variable interest entities created after January 31, 2003 and to variable
interest entities created before January 31, 2003 in the first fiscal year or
interim period beginning after December 15, 2003. Certain disclosure
provisions apply to financial statements issued after January 31, 2003. The
Company is currently evaluating FIN 46 and has yet to form an opinion on
whether adoption will have any significant impact on the Companys consolidated
financial statements. 3. Business Acquisition Effective January 1, 2002, the Company acquired all of the outstanding common
stock of Amfinity Business Solutions, Inc. (Amfinity) to expand its market
position in the southeastern United States. The purchase price, which has been
amended, consisted of $400,000 in cash paid at closing, 3,943,700 shares of the
Companys common stock valued at $1,000,000 issued on May 15, 2002, a
promissory note in the amount of $2,592,348 and additional consideration,
agreed to on January 15, 2003 represented by an increase of $610,725 in a note
payable. See Note 8. The operating results of Amfinity have been included in the Companys
consolidated financial statements since January 1, 2002. 29




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##### Table of Contents



Presidion Corporation
Notes to Consolidated Financial Statements (continued)
For the Periods Ended December 31, 2003, 2002 and 2001 4. Assumption of Contracts On June 14, 2002, the Company acquired certain client contracts of a wholly
owned subsidiary of a company owned by the Companys Chairman (Affiliate) who
is also a significant shareholder of the Company. The Company shall pay the
Affiliate 1% of monthly gross payroll collected on the contracts acquired, for
a period of three years commencing October 1, 2002. The aggregate amount of
these payments is presently estimated to be $3,600,000. As of December 31,
2003, the Company accrued $1,619,024 in payments, which is included as an
offset within related parties receivables in the accompanying Consolidated
Balance Sheet. Such amounts have been recorded as client contracts and are
being amortized on a straight-line basis over five years from the date of
acquisition. In addition to amounts offset against receivables with related
parties, the Company has advanced approximately $927,000 to the Affiliate in
relation to future payments on such assumed contracts, which is included in
related party receivables on the accompanying Consolidated Balance Sheets at
December 31, 2003. 5. Property and Equipment A summary of property and equipment as of December 31, is as follows: 2003
    
    2002Furniture and fixtures
    
    $
    1,062,091
    
    
    $
    1,074,675Leasehold improvements
    
    
    36,917
    
    
    
    36,917Computer equipment and software
    
    
    3,351,187
    
    
    
    2,744,278Vehicles
    
    
    162,373
    
    
    
    265,129Property and equipment, gross
    
    
    4,612,568
    
    
    
    4,120,999Less: accumulated depreciation
    
    
    2,948,031
    
    
    
    1,897,256Property and equipment, net
    
    $
    1,664,537
    
    
    $
    2,223,743
 6. Bank Line of Credit The Company has a line of credit agreement, as amended, with a financial
institution. The line of credit is collateralized by all of the Companys
assets. The line allows the Company to draw an amount not to exceed $6,000,000
in aggregate principal at any one time. This line of credit expires on May 31,
2004. The outstanding balance on this line was $4,600,000 and $5,235,939 at
December 31, 2003 and December 31, 2002, respectively. The Company had amounts
available for borrowing associated with this arrangement totaling $241,888 on
December 31, 2003. Borrowings are restricted by certain formula calculations.
Interest is at the prime rate plus .25% payable monthly, and the outstanding
principal is due on demand. During 2003, the maximum borrowings under this
arrangement were $5,900,000; average borrowings were $4,181,122 at a weighted
average interest rate of 4.18%. The Company pays a commitment fee on the unused
portion of the line of credit, which varies based on certain requirements in
the line of credit agreement. This facility requires that the Company maintain
compliance with certain restrictive financial covenants, which include
limitations on capital expenditures and the declaration and payment of
dividends. At December 31, 2003, the Company was not in compliance with certain
covenant, default and warranty provisions of this line of credit agreement. The
Company is presently in negotiations with the financial institution to attempt
to obtain a waiver of these events of non-compliance. 30




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##### Table of Contents



Presidion Corporation
Notes to Consolidated Financial Statements (continued)
For the Periods Ended December 31, 2003, 2002 and 2001 7. Secured Convertible Debentures On February 12, 2003, the Company issued 6.5% Secured Convertible Debentures in
the aggregate principal amount of $2,000,000, due February 12, 2004, pursuant
to which up to $2,000,000 of the common stock of the Company may be issued upon
conversion of the debentures. The debentures are immediately convertible into
shares of the Companys common stock at a conversion price representing the
lower of $0.34 or 85% of the average of the lowest three inter-day trading
prices during the 20 trading days immediately preceding the applicable
conversion date. A warrant to purchase 850,000 aggregate shares of the common
stock of the Company at $1.08 per share was issued to a holder of these
debentures. The warrant is immediately exercisable and expires on February 12,
2006. The Company recognized interest expense in the aggregate amount of $921,743
with a corresponding amount reflected in additional paid-in capital in relation
to the beneficial conversion feature and the fair value of the warrant
associated with these debentures. The Company also incurred certain costs directly related to issuing the
debentures in the amount of $325,091. These costs have been capitalized as
deferred financing costs and are being accreted as additional interest expense
over the term of the debentures. The accretion of this additional interest
expense amounted to $284,455 for the year ended December 31, 2003. The debentures are secured by a pledge of shares of the Companys common stock
held by three significant shareholders of the Company. The debentures shall
become due and immediately payable upon the Company raising $4,000,000 or more
through the sale of its equity securities. The Company, at its option, has the
right to redeem, with 10 business days advance written notice, a portion of or
all of the outstanding balance of the debentures. The redemption price shall
be at 115% of the principal amount redeemed plus accrued interest. The Company
had the right to redeem the debentures until February 11, 2004, which the
Company did not elect. The Company was in default in relation to the debentures for failure to timely
file a registration statement with the United States Securities and Exchange
Commission. The Company obtained a waiver of this event
of default through July 31, 2004. On November 13, 2003, in consideration for a previous waiver,
the Company issued warrants to the holders of the debentures for the purchase of an aggregate
500,000 shares of the Companys common stock at $1.08 per share. The warrants
are immediately exercisable on the date of issuance and expire on November 13,
2006. The Company is presently in default in relation to the payment of
principal, amounting to $2,000,000, associated with the debentures. The Company has received a waiver of default and an extension on the maturity of the convertible debentures to July 31, 2004. 8. Long-term Debt Long-term debt at December 31, is as follows: 2003
    
    2002Note payable dated October 1, 1999,
uncollateralized, to the Florida Department of
Insurance, due in two installments of $145,000
plus interest at 4.5% per annum on March 31,
2004 and June 30, 2004.
    
    $
    290,000
    
    
    $
    580,000Seller Financed Note A: non-interest bearing
    
    
    954,926
    
    
    
    1,999,903Seller Financed Note B: non-interest bearing
    
    
    1,076,421
    
    
    
    2,863,324Seller Financed Note C: bearing interest at 10%
    
    
    2,672,664
    
    
    
    3,061,938Other
    
    
    143,499
    
    
    
    76,3445,137,510
    
    
    
    8,581,509Less current portion
    
    
    5,052,407
    
    
    
    4,085,183Total
    
    $
    85,103
    
    
    $
    4,496,326
 31




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##### Table of Contents



Presidion Corporation
Notes to Consolidated Financial Statements (continued)
For the Periods Ended December 31, 2003, 2002 and 2001 On March 31, 2002, the Company entered into an agreement with the holder of a
non-interest bearing note payable (Seller Financed Note A) with an outstanding
balance of $954,926, net of imputed interest of $45,074, at December 31, 2003
whereby, in exchange for modifying the payment terms of the original note and
in consideration for the holder transferring the holders interest in a
building to the Company upon payment of the note, the Company agreed to cancel
the holders note receivable in the amount of $162,641. In accordance with the
terms of the amended agreement, the Company is obligated to make payments of
$100,000 per month through October 10, 2004. On March 31, 2003, the Company entered into a revised agreement with the holder
of a non-interest bearing note payable (Seller Financed Note B) in the amount
of $1,076,421, net of imputed interest of $15,246, at December 31, 2003.
Pursuant to the terms of this agreement, the Company made principal payments to
the holder aggregating $2,057,736 during 2003. This includes an increase to
the note payable of $270,833, which was effective March 31, 2003. The Company
was paying this additional principal amount without interest in 10 monthly
installments of $27,083 beginning on March 17, 2003 and ending on December 15,
2003. A principal payment in the amount of $1,076,421 was due on January 28,
2004, and the Company has defaulted in relation to this payment. On January 15, 2003 and February 27, 2003, the Company entered into agreements
with the holder of a 10% promissory note (Seller Financed Note C) in the amount
of $2,672,664 at December 31, 2003, pertaining to the Amfinity acquisition, to
extend the maturity of the note, release a pledge of the Companys common stock
and provide replacement collateral to the holder. Under these agreements, a
principal payment of $1,000,000 was made in July 2003, and the remainder of the
principal is to be deposited in 12 equal monthly payments into a collateral
account beginning January 15, 2004 through December 15, 2004. The Company
has deposited approximately $150,000 into the collateral account. The payments are
secured by a letter of credit in an amount equal to the balance due on the
note. In consideration for such extensions, the Company issued 1,971,850
shares of the Companys common stock to the holder in January 2003 valued at
$1,037,860. The value of this common stock has been recorded as a deferred
financing cost, which is being accreted as additional interest expense over the
term of the extension of this borrowing. This interest expense amounted to
$475,686 during the year ended December 31, 2003. In addition, the Company is
obligated to issue 3,000,000 shares of the Companys common stock to the holder
if the Company does not prepay the outstanding amount associated with this note
by December 31, 2003. The Company did not prepay the outstanding amount
associated with this note by December 31, 2003. However, the holder has agreed
to suspend the Companys obligation to issue the 3,000,000 shares until the
holder provides the Company with five days written notice of its intent to
terminate this suspension. See Note 3. The aggregate principal amounts of long-term debt maturing for each of the five
years following December 31, 2003 are as follows: Years ending December 31,2004
    
    $
    5,052,4072005
    
    
    49,6612006
    
    
    31,1592007
    
    
    4,283Total
    
    $
    5,137,510
 32




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##### Table of Contents



Presidion Corporation
Notes to Consolidated Financial Statements (continued)
For the Periods Ended December 31, 2003, 2002 and 2001 9. Notes Receivable Notes receivable consist of the following at December 31: 2003
    
    2002Notes receivable, due at various dates through
April 2006, interest ranging from 6% to 7% per
annum
    
    $
    354,030
    
    
    $
    1,121,686Note receivable from holder of Seller Financed
Note B, due December 2005, interest at 6% per
annum (see Note 8)
    
    
    383,739
    
    
    
    375,856Note receivable from holder of Seller Financed
Note A, due December 2005, interest at 6% per
annum (see Note 8)
    
    
    345,532
    
    
    
    338,434Note receivable, non-interest bearing, secured
by interest in real property
    
    
    162,641
    
    
    
    162,641Notes receivable, non-interest bearing,
guaranteed by the holder of Seller Financed Note
A
    
    
    
    
    
    
    61,8321,245,942
    
    
    
    2,060,449Less: current portion
    
    
    947,727
    
    
    
    944,443Long-term portion
    
    $
    298,215
    
    
    $
    1,116,006
 Notes receivable aggregating $885,198 were written off at December 31, 2003 as
these notes were deemed to be uncollectible. 10. Stockholders Equity On March 5, 2004, the Company amended its Articles of Incorporation by
establishing designations, preferences, limitations and relative rights of the
Companys 50,000,000 shares of authorized preferred stock, par value $0.001,
including the authority to create different series of preferred stock, each
containing different preferences, limitations and relative rights. The Companys outstanding preferred stock has no voting rights, no conversion
or redemption rights, no call or put features, no liquidation preferences, no
participation rights, and does not have a stated dividend rate. The Companys
by-laws prohibit the payment of dividends in relation to this stock. 33




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##### Table of Contents



Presidion Corporation
Notes to Consolidated Financial Statements (continued)
For the Periods Ended December 31, 2003, 2002 and 2001 11. Stock-Based Compensation On September 8, 2003, the Company granted an option to a member of its Board of
Directors for the purchase of 1,800,000 shares of the Companys common stock at
$0.31 per share, which was the quoted market price of the Companys common
stock at the date of grant. Effective October 1, 2003, 675,000 shares subject
to the option are exercisable. On the first day of each calendar quarter,
commencing with the calendar quarter beginning on January 1, 2004 and ending
with the calendar quarter beginning on January 1, 2005, 225,000 shares subject
to the option become exercisable. The option is subject to partial forfeiture
and accelerated vesting under certain circumstances. The Company accounted for
this stock option using the intrinsic value method in accordance with APB No.
25 and its related interpretations. No stock-based compensation cost is
reflected in net loss for 2003 because the option granted has an exercise price
equal to the market value of the underlying common stock at the date of grant.
The Company uses the Black-Scholes option-pricing model to determine the
pro-forma impact on the Companys net loss and net loss per share under SFAS
No. 123, Accounting for Stock-Based Compensationand SFAS No. 148, Accounting
for Stock-Based Compensation-Transition and Disclosure. The model utilizes a
risk-free interest rate of 4.25% and certain assumptions such as expected life
of the option of 2 years, expected volatility of 26.27% and expected dividend
yield of 0%. The following table illustrates the effect on net loss and loss
per share for 2003 if the Company had applied the fair value recognition
provisions of SFAS No. 123 to this option, for the year ended December 31,
2003. Net loss, as reported
    
    $
    (6,033,907
    )Add: stock based compensation
expense determined under fair value method
    
    
    (51,480
    )Pro forma loss
    
    $
    (6,085,387
    )Loss per share:Basic - as reported
    
    $
    (0.06
    )Basic - pro forma
    
    $
    (0.06
    )Diluted - as reported
    
    $
    (0.06
    )Diluted - pro forma
    
    $
    (0.06
    )
 The Company had no stock options outstanding during 2002 and 2001. 12. Retirement Plans The Company sponsors several defined contribution plans covering certain of its
internal and worksite employees. The Company may contribute discretionary
amounts on behalf of its internal employees. The Company may also make
discretionary contributions in varying amounts on behalf of its worksite
employees based upon client company elections. The Company made matching
contributions during 2003 amounting to $63,344, which is reflected in selling,
general and administrative expense on the accompanying Consolidated Statement
of Operations. The Company made no contributions to these plans during 2002
and 2001. 34




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##### Table of Contents



Presidion Corporation
Notes to Consolidated Financial Statements (continued)
For the Periods Ended December 31, 2003, 2002 and 2001 13. Income Taxes The components of income tax expense (benefit) for the periods ended December
31, are: 2003
    
    2002
    
    2001Current:Federal
    
    $
    (595,397
    )
    
    $
    340,037
    
    
    $
    197,785State
    
    
    673,672
    
    
    
    90,000
    
    
    
    77,00078,275
    
    
    
    430,037
    
    
    
    274,785Deferred
    
    
    (296,696
    )
    
    
    119,963
    
    
    
    165,215Total
    
    $
    (218,421
    )
    
    $
    550,000
    
    
    $
    440,000
 Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts utilized for income tax purposes. Significant
components of the Companys deferred tax assets and liabilities at December 31,
2003 and 2002 are as follows: 2003
    
    2002Deferred tax assetsAllowance for doubtful accounts
    
    $
    45,182
    
    
    $
    48,817Accrued workers compensation
    
    
    2,303,990
    
    
    
    2,618,773Accruals
    
    
    254,845
    
    
    
    219,917Contracts acquired
    
    
    240,205
    
    
    
    98,835Tax credits
    
    
    1,758,542
    
    
    
    75,819Other
    
    
    
    
    
    
    24,530Deferred tax assets
    
    
    4,602,764
    
    
    
    3,086,691Valuation allowance
    
    
    (1,450,000
    )
    
    
    Total deferred tax assets
    
    
    3,152,764
    
    
    
    3,086,691Deferred tax liabilitiesProperty and equipment
    
    
    
    
    
    
    (90,691
    )Unbilled receivables, net
    
    
    (220,737
    )
    
    
    Total deferred tax liabilities
    
    
    (220,737
    )
    
    
    (90,691
    )Net deferred tax assets
    
    $
    2,932,027
    
    
    $
    2,996,000
 At December 31, 2003, the Company had general business tax credits of
approximately $1,760,000, which expire during the years 2020 through 2023.
However, Internal Revenue Code Section 382 may limit the utilization of tax
credit carryforwards aggregating approximately $365,000. The Company has
established a valuation allowance pertaining to $1,450,000 of the above
mentioned business tax credits. 35




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Presidion Corporation
Notes to Consolidated Financial Statements (continued)
For the Periods Ended December 31, 2003, 2002 and 2001 Major differences between income tax expense (benefit) computed using the
United States statutory tax rate and actual income tax expense were as follows: Year ended December 31,2003
    
    2002
    
    2001Federal income taxes at statutory rate of 34%
    
    $
    (2,125,792
    )
    
    $
    223,467
    
    
    $
    371,624State income taxes, net of federal benefit
    
    
    444,624
    
    
    
    83,363
    
    
    
    69,550Fair value of conversion feature and warrant
    
    
    313,393
    
    
    
    
    
    
    
    Goodwill
    
    
    
    
    
    
    
    
    
    
    230,208Business entertainment
    
    
    25,500
    
    
    
    71,695
    
    
    
    4,341Tax penalties
    
    
    822,887
    
    
    
    30,221
    
    
    
    Write off of notes receivable
    
    
    300,967
    
    
    
    
    
    
    
    Tax credits
    
    
    
    
    
    
    
    
    
    
    (235,723
    )Other
    
    
    
    
    
    
    141,254
    
    
    
    Income tax expense (benefit)
    
    $
    (218,421
    )
    
    $
    550,000
    
    
    $
    440,000
 14. Related Party Transactions Related party receivables consist of the following as of December 31: 2003
    
    2002Receivables from affiliates owned by the
Chairman of the Company
    
    $
    2,179,030
    
    
    $
    943,535Note receivable from the President of the
Company, as amended, including interest at 2%
per annum, due October 2004
    
    
    35,859
    
    
    
    35,000Receivable from Presidion Inc.
    
    
    
    
    
    
    608,350Total
    
    
    2,214,889
    
    
    
    1,586,885Less current portion
    
    
    1,453,566
    
    
    
    1,586,885Long-term portion
    
    $
    761,323
    
    
    $
    
 VRBB is a limited liability company that leases aircraft and provides charter
airline service to consumers, primarily corporations. John Burcham, the
Chairman of Presidion, holds a 33% interest in VRBB. During 2003,
Presidion paid VRBB $467,000 for services and utilized $308,000 during the same period.
As a result, the Company has a non-interest bearing deposit of approximately
$160,000 with VRBB, which is expected to be utilized or repaid during the
current fiscal period. During June 2002, John Burcham, the Chairman of Presidion, through a
wholly-owned entity, purchased the stock of BST, Inc., a PEO in Florida. As
part of the acquisition, BST is obligated to make debt payments to the former
shareholders of BST. In June 2002, BST entered into an agreement with
Presidion pursuant to which BST has assigned certain contracts to Presidion,
and Presidion has agreed to make certain earn-out payments to BST. While the
earn-out payments were intended to match the timing of the debt payments owed
to the former shareholders of BST, debt payments to  BST were required prior
to the earned amount per the agreement from Presidion to BST. To prevent a
default by BST on its debt payment obligations, resulting in the loss of the
contracts by Presidion, BST was paid $927,000 in advance
of the scheduled earn-out payments. Through the end of the earn-out agreement,
all of the advanced debt payments shall offset the amounts owed by Presidion to BST.
In addition to funds necessary to cover debt payments, Presidion also
paid third party invoices for BST in the amounts of $163,000 in 2003 and $43,000 during the first half of 2002
to avoid default by BST on its obligations. During 2001, Presidion loaned to Craig Vanderburg, the CEO of the Company,
$35,000 at an interest rate of 2.0% per annum. During 2003, the Company extended
the term of the note from October 2003 to October 2004. Subsequent to December
31, 2003, the balance of the note, including interest, was repaid to Presidion. During 2001 and the first half of 2002, Presidion made advances to the Chairman
of Presidion totaling $885,000 in the form of non-interest bearing notes, for a
total outstanding balance due, including the non debt advances paid
to BST of $206,000, of approximately $1.1 million at December 31, 2003. The Company employs, in various capacities, certain relatives of the Chairman
of the Company and the President of the Company. Aggregate compensation
expense pertaining to these employment arrangements amounted to $129,123 and
$48,338, respectively, for 2003 and 2002. No compensation expense pertaining
to relatives of the Companys management was incurred during 2001. 36




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##### Table of Contents



Presidion Corporation
Notes to Consolidated Financial Statements (continued)
For the Periods Ended December 31, 2003, 2002 and 2001 Presidion Inc. is a company that shares similar ownership with the Company. The
Company made cash advances to Presidion Inc. totaling $608,350 without interest
for the purchase of an office building in Miami, Florida. On April 23, 2003,
Presidion, Inc. entered into an agreement to sell the office building to an
unrelated party. In May 2003, the Company collected $600,000 pertaining to the
receivable from Presidion, Inc. In connection with business-related travel during 2003 and 2002, the Company
paid $54,799 and $104,008, respectively, for a rental home to a relative of the
Companys Chairman and $467,096 and $41,250, respectively, for air travel to an
entity whose ownership includes the Chairman of the Company. At December 31,
2003, these parties owed the Company a net of $159,801. At December 31, 2002,
the Company owed these parties a net of $7,636. 15. Leases Future minimum payments under lease commitments under all noncancellable
operating leases at December 31, 2003 are as follows: Years ending December 31,2004
    
    $
    1,081,6362005
    
    
    874,7642006
    
    
    363,4702007
    
    
    94,4872008
    
    
    14,617Thereafter
    
    
    1,028Total
    
    $
    2,430,002
 Rent expense pertaining to these leases amounted to $1,323,507, $1,288,475,
$401,772, for the periods ended December 31, 2003, 2002 and 2001, respectively. 16. Commitments and Contingencies Litigation The Company and its subsidiaries are, from time to time, subject to claims and
suits arising in the ordinary course of business. In the opinion of management,
after consultation with legal counsel, the ultimate resolution of such pending
proceedings will not have a material effect on the Companys results of
operations, financial position or cash flows. The Company has provided its
best estimate to accrue for such contingencies under FASB No. 5, Accounting for
Contingencies. The estimates made by the Company are subject to significant
uncertainties. Actual results could differ from these estimates. The
following discussion provides a summary of other significant contingencies at
December 31, 2003. 37




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Presidion Corporation
Notes to Consolidated Financial Statements (continued)
For the Periods Ended December 31, 2003, 2002 and 2001 Workers Compensation The Company is a participant in several large deductible workers compensation
programs. The Company provides accruals for its portion of potential workers
compensation claims based upon the historical claim experience of the Companys
operating units utilizing actuarial assumptions, including an estimated
discount rate of 4%, to determine the present value of future payments to be
made in conjunction with these programs. The accretion of such discounting is
included in workers compensation expense in the accompanying Consolidated
Statements of Operations. If actual workers compensation costs differ from the
amounts estimated, applicable adjustments are made to the estimated amounts in
the period in which the adjustment is determined. A reconciliation of the
changes in the Companys accrued workers compensation accrual follows: Balance at December 31, 2001, net of discount of $375,000
    
    $
    3,075,000Adjustments to previous year estimates
    
    
    (121,548
    )Assumption of liability from business acquisition
    
    
    3,045,900Additions to expense
    
    
    9,055,643Payments
    
    
    (3,250,009
    )Balance at December 31, 2002, net of discount of $827,429
    
    $
    11,804,986Adjustments to previous estimates
    
    $
    118,214Deposits transferred to extinguish claims liability
    
    
    (7,796,622
    )Additions to expense
    
    
    6,538,702Payments
    
    
    (3,888,838
    )Balance at December 31, 2003, net of discount of $944,402
    
    $
    6,776,442
 The Company maintains cash deposits in relation to these programs, which
amounted to $6,190,172 and $10,412,000 at December 31, 2003 and 2002,
respectively, and are reflected under the Deposits classification in the
current assets section on the Companys Consolidated Balance Sheets. On May 19, 2003, the Company entered into a deductible reimbursement
reinsurance agreement with an insurance carrier for workers compensation
coverage for certain worksite employees. The agreement is effective for losses
incurred from August 1, 2002 and covers the first dollar of exposure up to the
stop-loss limit insured with the primary carrier. The Company has been legally
released by the primary carrier from its payment obligation for the
retrospective portion of this agreement. Accordingly, on May 19, 2003, the
Company assigned approximately $7,800,000 in deposits to the reinsurer, which
reduced the Companys current portion of workers compensation reserves by the
same amount. Health Insurance The Company provides health insurance to its worksite and internal employees
through three plans. The cost of two plans is fixed and determinable in the
current period, while through the remaining plan, the Company retains some
risk. Effective October 1, 2003, the Company renewed its health insurance plans with
three separate healthcare insurance carriers. One plan has fixed premiums based
on the number of employees enrolled and coverages elected at the beginning of
each month with a maximum additional cost above the fixed premiums based on
actual claims costs during the policy period up to a predetermined amount. The
Company has provided for the ultimate cost of this plan based on claims data
provided by the insurance carrier. The remaining plans have fixed monthly
premiums with no additional exposure to the Company. 38




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##### Table of Contents



Presidion Corporation
Notes to Consolidated Financial Statements (continued)
For the Periods Ended December 31, 2003, 2002 and 2001 Letters of Credit The Company has $27,100,000 in irrevocable letters of credit available for the
benefit of the Companys workers compensation and other insurance carriers.
The irrevocable letters of credit expire at various dates through October 17,
2004 and may be extended under certain circumstances as defined in the
agreements governing such irrevocable letters of credit. The Company pays fees
in relation to these irrevocable letters of credit that totaled $1,987,295 and
$112,500, respectively, for the years ended December 31, 2003 and 2002 and is
reflected in the accompanying Consolidated Statements of Operations. At
December 31, 2003, no draws against such irrevocable letters of credit were
outstanding. On April 9, 2003, the Company entered into a one-year irrevocable letter of
credit in the amount of $2,673,000 for the benefit of the holder of a 10%
promissory note of the Company in the same amount. The Company is required to
pay an annual financing fee of 10% of the amount of the letter of credit. This
letter of credit shall be deemed automatically extended for additional one year
periods, unless 60 days prior to any expiration date, the financial institution
shall notify the Company that it elects not to renew this arrangement. See
Note 8. Employment Agreements On February 12, 2003, the Company entered into employment agreements for
five-year terms with its Chairman, President and Chief Executive Officer, and
Executive Vice President and General Counsel (Executives) at annual salaries
of $300,000, $300,000 and $250,000, respectively. Pursuant to these
agreements, the Executives are eligible to participate in any incentive
compensation plan developed for the Companys key employees and shall be
entitled to certain other executive perquisites. The obligations specified in
these agreements remain in full force and effect for the applicable remaining
terms of the agreements upon cessation of the Executives employment unless the
Executive is terminated for good cause or voluntarily terminates his employment
without good cause. Effective December 12, 2003, the Company entered into an employment agreement
for a two-year term with its Chief Financial Officer (CFO) at an annual
salary of $165,000. Pursuant to this agreement, the CFO is eligible to
participate in certain incentive compensation plans developed for the Companys
key employees and shall be entitled to certain other executive perquisites.
The CFO shall be paid 12 months of his base salary under certain circumstances
upon cessation of his employment. Administrative Services Provider Service Agreement and Equity Agreement On May 16, 2003, the Company entered into a service agreement with a provider
of administrative services provider (ASP) to supply information technology
services to the Company in areas such as finance and accounting, payroll,
benefits and workers compensation administration. The term of the agreement is
for five years from March 11, 2003, the effective date of the agreement. The Company shall pay the ASP a monthly fee based on the number of active
employees in the applicable month. However, in no event shall the monthly fee
be less than $30,000. The monthly fee is guaranteed for the first year of
services to the Company under this agreement and is subject to increase in an
amount not to exceed 5% per year. The Company is also responsible for the
payment of all costs and expenses incurred by the ASP on behalf of the Company.
The Company has paid implementation fees amounting to $21,120 in relation to
this agreement, which has been expensed on the Companys Consolidated Statement
of Operations during 2003. 39




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##### Table of Contents



Presidion Corporation
Notes to Consolidated Financial Statements (continued)
For the Periods Ended December 31, 2003, 2002 and 2001 Also on May 16, 2003, and as part of the service agreement, the Company also
entered into an equity agreement with the ASP which provides that 75% of the
gross monthly fees incurred during the period of May 17, 2003 through May 16,
2004 under the equity agreement shall be applied to the acquisition of
preferred stock of the ASP on May 16, 2004. The remaining 25% of the gross
monthly fees shall be expensed as incurred. The equity percentage of the gross
monthly fees declines to 10% for all applicable years subsequent to the first
year of the equity agreement. The Company has recognized $271,111 in the
Investments classification in the long-term assets section of the Companys
Consolidated Balance Sheet at December 31, 2003 in relation to the portion of
monthly gross fees being applied to the acquisition of preferred stock of the
ASP on May 16, 2004. 17. Quarterly Financial Data (Unaudited) 2003QTR 1
    
    QTR 2
    
    QTR 3
    
    QTR 4 (a)Revenues
    
    $
    31,489,830
    
    
    $
    32,504,696
    
    
    $
    30,217,473
    
    
    $
    30,993,807Gross profit
    
    
    8,451,745
    
    
    
    8,081,335
    
    
    
    7,501,959
    
    
    
    5,599,674Net income (loss)
    
    
    (656,157
    )
    
    
    48,843
    
    
    
    (789,521
    )
    
    
    (4,637,072
    )Basic and diluted
income (loss) per
share of common
stock
    
    $
    (0.01
    )
    
    
    
    
    
    
    
    
    
    $
    (0.05
    )
 2002QTR 1
    
    QTR 2 (b)
    
    QTR 3
    
    QTR 4Revenues
    
    $
    30,253,301
    
    
    $
    29,475,898
    
    
    $
    33,312,109
    
    
    $
    30,671,037Gross profit
    
    
    6,768,592
    
    
    
    6,111,628
    
    
    
    7,650,388
    
    
    
    8,219,383Net income (loss)
    
    
    (55,422
    )
    
    
    93,852
    
    
    
    31,142
    
    
    
    37,685Basic and diluted
income (loss) per
share of common
stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  (a)
    
    The net loss of $4.6 million for the fourth quarter of 2003 includes a
write-off of uncollectible notes receivables of $0.9 million and tax
penalties of $1.8 million.  (b)
    
    On June 14, 2002, the Company acquired certain client contracts of a
wholly owned subsidiary of a company owned by the Chairman of the Company. 40




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##### Table of Contents



Presidion Corporation
Schedule II
Consolidated Schedule of Valuation & Qualifying Accounts AdditionstoBalance
    
    Charged to
    
    (DeductionsBeginning
    
    Costs and
    
    from)
    
    Balance Endof Period
    
    Expenses
    
    Reserve
    
    of PeriodAllowance for
doubtful accounts
for the periods
ended December 31:2003
    
    $
    129,730
    
    
    $
    (101,541
    )
    
    $
    104,700
    
    
    $
    132,8892002
    
    $
    425,000
    
    
    $
    (79,730
    )
    
    $
    (215,540
    )
    
    $
    129,7302001
    
    $
    500,000
    
    
    $
    (31,000
    )
    
    $
    (44,000
    )
    
    $
    425,000Valuation allowance
against tax credits
for the periods
ended December 31:2003
    
    
    
    
    
    
    
    
    
    $
    1,450,000
    
    
    $
    1,450,0002002
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2001
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 41




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##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure. Effective May 15, 2003, Presidion Corporation f/k/a MediaBus Networks, Inc.
(Presidion) dismissed Hurley and Co. (Hurley and Co.) as its independent
certified public accountants. There were no disagreements on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedures,
which disagreements if not resolved to their satisfaction would have caused
them to make reference in connection with their opinion to the subject matter
of the disagreement. On May 15, 2003, Presidion engaged Ernst & Young as its principal accountant to
audit Presidions 2002 financial statements. Presidion did not consult Ernst &
Young on any matters described in paragraph (a)(2)(i) or (ii) of Item 304 of
Regulation S-X during the Registrants two most recent fiscal years or any
subsequent interim period prior to engaging Ernst & Young. Reference is made to Form 8-K, dated May 15, 2003. Effective December 3, 2003, Presidion dismissed Ernst & Young LLP (Ernst &
Young) as its independent certified public accountants. There were no disagreements on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedures,
which disagreements if not resolved to their satisfaction would have caused
them to make reference in connection with their opinion to the subject matter
of the disagreement. On December 3, 2003, Presidion engaged Follmer Rudzewicz PLC as its principal
accountant to audit Presidions financial statements. Presidion did not
consult Follmer Rudzewicz PLC on any matters described in paragraph (a)(2)(i)
or (ii) of Item 304 of Regulation S-X during Presidions two most recent fiscal
years or any subsequent interim period prior to engaging Follmer Rudzewicz PLC. Reference is made to Form 8-K/A dated December 3, 2003. 
 Item 9A. Controls and Procedures. As of the end of the period covered by this report, the Company carried out an
evaluation, under the supervision and with the participation of the Companys
Principal Executive Officer and Principal Financial Officer of the
effectiveness of the design and operation of the Companys disclosure controls
and procedures. The Companys disclosure controls and procedures are designed
to provide a reasonable level of assurance of achieving the Companys
disclosure control objectives. The Companys Principal Executive Officer and
Principal Accounting Officer have concluded that the Companys disclosure
controls and procedures are not effective at this reasonable assurance level as
of the of period covered. As of the end of fiscal year covered by this Annual Report, the Chief Executive
Officer and Chief Financial Officer determined that the following matters
involving disclosure controls constituted weaknesses. The deficiencies related
to the timeliness of general ledger account reconciliation and analysis, and
financial reporting expertise. More specific discussion is set forth below. General Ledger Account Reconciliation and Analysis.Certain general ledger
accounts were not reconciled on a timely basis. Following the date of the
Certifying Officers evaluation, Presidion implemented procedures to assist in
the timely preparation and review of reconciliation and analysis of these
general ledger accounts on a monthly basis. 42




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##### Table of Contents



Financial Reporting Expertise.Over the course of the last three years
Presidion has grown through acquisitions and Presidion is positioning itself
for further revenue growth. The integration of these acquisitions continues to
place significant burdens on Presidions financial reporting systems and
resources. The Certifying Officers have determined that Presidion did not have
sufficient financial expertise and appropriate systems, and consequently that
controls did not operate effectively on a continuous basis throughout the
reporting period. In connection with the evaluation of the Companys internal
controls during the Companys fourth fiscal quarter ended December 31, 2003,
the Companys Principal Executive Officer and Principal Financial Officer have
determined that the following changes are necessary to Presidions internal
controls over financial reporting. The Certifying Officers, with Companys
management, have evaluated and are modifying its systems and financial
functions as deemed appropriate in an attempt to ensure the disclosure controls
and procedures as effective in the future. In addition, in December 2003,
Presidion appointed a new Chief Financial Officer with experience in the rules
and regulations of the Securities and Exchange Commission, generally accepted
accounting principles, financial reporting practices, and internal controls, in
an effort to address this deficiency. 
 PART III 
 Item 10. Directors and Executive Officers of the Registrant. The following sets forth the name, age and positions, of Presidions executive
officers and directors as of April 28, 2004. Also set forth below is
information as to the principal occupation and background for such persons. No
family relationships exist between these individuals and they have not been a
party to any bankruptcy or receivership proceeding, any criminal proceeding, or
has been enjoined from participating in any business, including the securities
industry or otherwise during the last five years. No director or officer is a
director of any other reporting company. Name ofDirector/Executive Officer
    
    Age
    
    Position
    
    Period ServedCraig A. Vanderburg
    
    
    37
    
    
    President, Chief
Executive Officer and
Director
    
    July 2000 to PresentJohn W. Burcham II
    
    
    47
    
    
    Chairman of the Board
of Directors
    
    July 2000 to PresentJames E. Baiers
    
    
    50
    
    
    Executive Vice
President, General
Counsel and Director
    
    July 2000 to PresentBrian Jarzynski
    
    
    37
    
    
    Chief Financial Officer
    
    December 2003 to PresentAnthony Danon
    
    
    39
    
    
    Director
    
    September 2003 to Present
 Craig A. Vanderburg, Co-Founder, President and Chief Executive Officer.Mr.
Vanderburg served two terms on the Board of Directors for the National
Association of Professional Employer Organizations (NAPEO), and is a past
president of the Midwest chapter. Mr. Vanderburg has served on NAPEOs
Accounting Practices Committee for seven years and held the position of Chair
during 1996 and 1997. This committee was responsible for the creation of
current accounting standards and ratio analysis performed on the industry.
Prior to his duties at Presidion, which began in July 2000, Mr. Vanderburg was
founder and President/CEO of the Genesys Group, based in Troy, Michigan.
Genesys was started in 1992 and grew to become the second largest PEO in
Michigan and one of the states top 200 private businesses. In February 1999,
Mr. Vanderburg sold Genesys to Simplified Employment Services, one of the
nations largest PEOs, where Mr. Vanderburg served as Executive Vice-President
until July 2000. Mr. Vanderburg also holds the industry certification of
Certified Professional Employer Specialist. 43




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##### Table of Contents



John W. Burcham, II, Co-Founder and Chairman of the Board of Directors.Mr.
Burcham is responsible for strategic development and growth of Presidion and
has been involved in the PEO industry since 1986. Mr. Burcham has extensively
evaluated PEOs and has completed several mergers, acquisitions and strategic
alliances. Prior to his responsibilities at Presidion, which began in July
2000, Mr. Burcham was founder and Chairman/CEO of National Human Resource
Committee, Inc., which began operations in December 1995 and was sold to
Simplified Employment Services, a national PEO in 1999, where Mr. Burcham
served as Executive Vice President for Mergers and Acquisitions and Corporate
Development Activities until joining Presidion. James E. Baiers, Executive Vice President and General Counsel.Mr. Baiers was
a partner and litigation practice group leader for Clark Hill, PLC, a major
Detroit law firm from 1979 to 1997. Mr. Baiers had been Vice-President for
Corporate Personnel Services, Inc., a staffing services company, and counsel
for two major Michigan-based PEOs, National Human Resources Committee, Inc.,
from February 1999 to May 1999, and Simplified Employment Services, from May
1999 to July 2000, when he joined Presidion. Mr. Baiers is a member of the
Michigan State Bar and is very active in the legal community, having been a
member of the Michigan Attorney Discipline Board, the Michigan State Bar
Grievance Committee and a trustee of the Detroit Metropolitan Bar Foundation.
He is currently a director for the Florida Association of Professional Employer
Organizations Brian Jarzynski, Chief Financial Officer.Mr. Jarzynski was named Senior Vice
President and Chief Financial Officer of the Company in December 2003. Mr.
Jarzynski was Senior Vice President, Chief Financial Officer and Treasurer of
Comshare, Incorporated from January 2001 through December 2003. From August
1999 until February 2001, Mr. Jarzynski served as Comshares Controller and
Chief Accounting Officer. From 1989 until August 1999, Mr. Jarzynski held
various positions at Ernst & Young LLP. Anthony Danon, Director.Mr. Danon has held the position of Executive Vice
President of Wirestone, LLC, a provider of technology solutions since September
2000. Mr. Danon served as Chief Financial Officer of Strategic Outsourcing,
Inc., from June 1999 to August 2000. Previously, Mr. Danon was Vice President
at GevityHR, Inc., a professional employment organization from May 1995 to June
1999. Mr. Danon has been a director of Presidion since September 2003. On February 4, 2004, Richard R. Widgren resigned from Presidions Board of
Directors to allow him to spend more time on his other business interests.
Presidion expresses its appreciation to Mr. Widgren for his service as a
Director. Presidion presently has no independent audit committee. The audit committee
function is performed by the entire board of directors. Mr. Danon qualifies as
an audit committee financial expert. Section 16(a) Compliance Section 16(a) of the Securities Exchange Act of 1934 requires Presidions
executive Officers, directors and persons owning more than 10% of Presidions
common stock to file reports of initial ownership and changes of ownership with
the Securities and Exchange Commission.Based solely on its review of copies
of such forms maintained by Presidion, Presidion believes that during 2003 all
of the Section 16(a) filing requirements applicable to executive officers,
directors and 10% stockholders were complied with, except that Anthony Danon
inadvertently failed to timely file a report of initial beneficial ownership of
Presidions securities and he failed to timely file a report of changes to
beneficial ownership of Presidions securities in relation to a stock option
grant. Mr. Danon subsequently filed the required reports. Code of Ethics Presidion has adopted a code of ethics that applies to all persons employed by
Presidion including its principal executive officers, including its principal
financial and accounting officer. The code of ethics is posted on our Website.
The Internet address for our Website is http://www.presidion.com, and the code
of ethics may be found as follows: 44




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##### Table of Contents



1.
    
    From our main Web page, first click on Investor Relations.2.
    
    Next, click on Officers and Directors.3.
    
    Finally, click on Code of Ethics. A copy of the code of ethics may be obtained by contacting Presidions General
Counsel at 755 W. Big Beaver Road, Suite 1700, Troy, MI 48084. The telephone
number is 248-269-9600. Presidion intends to satisfy the disclosure requirement under Item 10 of Form
8-K regarding an amendment to, or waiver from, a provision of this code of
ethics by posting such information on Presidions Website, at the address and
location specified above. 
 Item 11. Executive Compensation The following table sets forth information regarding compensation earned by
each of Presidions executive officers for the years ended December 31, 2003
and 2002, and for the period from May 3 to December 31, 2001. SUMMARY COMPENSATION TABLE ANNUAL COMPENSATION
    
    LONG-TERM COMPENSATIONOther
    
    Restricted
    
    
    
    
    
    OtherCompensation
    
    Stock
    
    Underlying
    
    CompensName and Principal Position
    
    Year
    
    Salary
    
    Bonus
    
    (4)
    
    Awards
    
    Options
    
    ationCraig A. Vanderburg
    
    
    2003
    
    
    $
    300,000
    
    
    $
    125,000
    
    
    $
    24,000
    
    
    
    
    
    
    
    
    
    
    
    President and
    
    
    2002
    
    
    
    306,571
    
    
    
    30,000
    
    
    
    24,000
    
    
    
    
    
    
    
    
    
    
    
    Chief Executive Officer
    
    
    2001
    
    
    
    164,587
    
    
    
    
    
    
    
    16,000
    
    
    
    
    
    
    
    
    
    
    
    Chief Financial Officer (1)John W. Burcham II
    
    
    2003
    
    
    $
    300,000
    
    
    $
    125,000
    
    
    $
    24,000
    
    
    
    
    
    
    
    
    
    
    
    Chairman
    
    
    2002
    
    
    
    306,571
    
    
    
    30,000
    
    
    
    24,000
    
    
    
    
    
    
    
    
    
    
    
    2001
    
    
    
    164,587
    
    
    
    
    
    
    
    16,000
    
    
    
    
    
    
    
    
    
    
    
    James E. Baiers
    
    
    2003
    
    
    $
    250,000
    
    
    $
    40,000
    
    
    $
    24,000
    
    
    
    
    
    
    
    
    
    
    
    Executive Vice-President,
    
    
    2002
    
    
    
    203,316
    
    
    
    25,000
    
    
    
    24,000
    
    
    
    
    
    
    
    
    
    
    
    General Counsel
    
    
    2001
    
    
    
    125,010
    
    
    
    
    
    
    
    16,000
    
    
    
    
    
    
    
    
    
    
    
    Brian Jarzynski
    
    
    2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Chief Financial Officer (2)
    
    
    2002
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2001
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Andrew S. Alley
    
    
    2003
    
    
    $
    86,531
    
    
    $
    25,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Chief Financial Officer (3)
    
    
    2002
    
    
    
    136,720
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2001
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
   (1)
    
    Mr. Vanderburg also acted as Chief Financial Officer from May 2003 to
December 2003.(2)
    
    Joined Presidion in December 2003.(3)
    
    Resigned from Presidion in May 2003.(4)
    
    Includes automobile allowance and club memberships. 45




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##### Table of Contents



Long-Term Incentive Plans  Executive Officers Other than options to purchase 1,800,000 shares of common stock granted to
Anthony Danon, as described below, Presidion has not granted any stock options
since inception nor entered into any long-term incentive plan awards with its
executive officers or any other employees. Employment Agreements On February 12, 2003, Presidion entered into five-year employment agreements
with Messrs. Burcham, Vanderburg and Baiers, providing for annual base salaries
of $300,000 for Messrs. Burcham and Vanderburg and $250,000 for Mr. Baiers.
The annual base salaries may be increased on at least an annual basis.
Pursuant to these agreements, Messrs. Burcham, Vanderburg and Baiers are
entitled to certain executive perquisites encompassing car allowances and club
memberships. If the employment of Messrs. Burcham, Vanderburg and Baiers is
terminated without good cause, they will be entitled to receive the applicable
minimum base salary in effect at date of termination as well company employee
benefits and executive perquisites for the remaining term of the agreements
from the date of termination. Effective December 15, 2003, Presidion entered into a two-year employment
agreement with Mr. Jarzynski providing for an annual base salary of $165,000.
This agreement also provides Mr. Jarzynski with other executive perquisites.
Under certain circumstances, in the event of termination of Mr. Jarzynskis
employment, Mr. Jarzynski shall be entitled to 12 months of his base salary
from the date of termination. Compensation of Directors Independent members of Presidions Board of Directors are paid at the rate of
$5,000 per meeting in which they participate. Management members of Presidions
Board of Directors receive no compensation for serving as members of the Board. On September 8, 2003, Presidion granted an option to Mr. Danon for the purchase
of 1,800,000 shares of Presidions common stock at $0.31 per share, which was
the quoted market price of Presidions common stock at the date of grant. As
of April 28, 2004, options to purchase 1,125,000 shares of Presidions common
stock are exercisable. As of April 28, 2004, no exercises have occurred in
relation to this stock option. Committees of The Board Of Directors Presidion presently has no committees in association with its Board of
Directors. Participation of the Board of Directors in Determination of Executive
Compensation All executive officer members of Presidions Board of Directors participated in
all deliberations concerning executive officer compensation during 2003.
Presidion has no compensation policies outlining factors and criteria
underlying awards or payments in relation to executive officers. Stock Performance Graph No stock performance graph has been presented. There are presently no yearly
trends in the returns associated with Presidions common stock. On February
11, 2003, Presidion was a party to a reverse acquisition in which a wholly
owned subsidiary of Presidion, Presidion Solutions, Inc., was the accounting
acquiror. Prior to February 11, 2003, the legal entity of Presidion was a
publicly traded development stage company with no business operations.
Therefore, subsequent to February 11, 2003, Presidion traded for only less than
11 months through December 31, 2003 on the Over-the-Counter Bulletin Board. If $100 had been invested in Presidion common stock at the closing price of the
stock on the Over-the-Counter Bulletin Board on February 11, 2003, 92.59 shares
would have been purchased at $1.08 per share. On December 31, 2003, the 92.59
shares would have a fair value of $31.48 based upon a closing price of $0.34
per share, resulting in a negative return. 46




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##### Table of Contents



Item 12. Security Ownership of Certain Beneficial Owners and Management. The following table sets forth information with respect of the beneficial
ownership as of April 28, 2004 for any person who is known to Presidion to be
the beneficial owner of more than 5% of Presidions Common Stock, excluding
officers and directors. Name and Address of
    
    Amount and Nature ofTitle of Class
    
    Beneficial Owner
    
    Beneficial Ownership
    
    Percentage of Class (1)Common stock
    
    Mercator (2)555 South Flower St.Suite 4500Los Angeles, CA  90071
    
    
    10,761,765
    
    
    
    9.88
    %Common stock
    
    Amfinity Capital L.L.C.2215 South York St.Suite 400Oak Brook, IL  60523
    
    
    5,915,549
    
    
    
    5.43
    %
   (1)
    
    Applicable percentage of ownership is based on 96,766,439 shares of
common stock outstanding as of April 28, 2004 together with securities
exercisable or convertible into shares of common stock within 60 days of
April 28, 2004, for each stockholder. Beneficial ownership is determined
in accordance with the rules of the Securities and Exchange Commission and
generally includes voting or investment power with respect to securities.
Shares of common stock subject to securities exercisable or convertible
into shares of common stock that are currently exercisable or exercisable
within 60 days of April 28, 2004 are deemed to be beneficially owned by
the person holding such securities for the purpose of computing the
percentage of ownership of such person, but are not treated as outstanding
for the purpose of computing the percentage ownership of any other person.
Note that affiliates are subject to Rule 144 and Insider trading
regulations  percentage computation is for form purposes only.(2)
    
    Combined holdings of Mercator Momentum Fund, L.P., Mercator Momentum Fund
III, L.P., and Mercator Focus Fund, L.P. as a result of conversion of a
debenture into 9,411,765 shares and the exercise of warrants for the
aggregate purchase of 1,350,000 shares. The following table sets forth information with respect of the beneficial
ownership as of April 28, 2004 by management and directors of Presidion. Name and Address of
    
    Amount and Nature of
    
    Percentage ofTitle of Class
    
    Beneficial Owner (1)
    
    Beneficial Ownership
    
    Class (2)Common stock
    
    Craig A. Vanderburg
    
    
    35,476,341
    
    
    
    32.58
    %Common stock
    
    John W. Burcham II
    
    
    35,476,341
    
    
    
    32.58
    %Common stock
    
    James E. Baiers
    
    
    7,881,749
    
    
    
    7.23
    %Common stock
    
    Brian Jarzynski
    
    
    
    
    
    
    Common stock
    
    Anthony Danon
    
    
    1,350,000
    
    
    
    1.24
    %Total
    
    
    
    
    80,184,431
    
    
    
    73.65
    %
   (1)
    
    755 West Big Beaver Rd., Suite 1700, Troy, MI 48084(2)
    
    Applicable percentage of ownership is based on 96,766,439 shares of
common stock outstanding as of April 28, 2004, together with securities
exercisable or convertible into shares of common stock within 60 days of
April 28, 2004, for each stockholder. Beneficial ownership is determined
in accordance with the rules of the Securities and Exchange Commission and
generally includes voting or investment power with respect to securities.
Shares of common stock subject to securities exercisable or convertible
into shares of common stock that are currently exercisable or exercisable
within 60 days of April 28, 2004 are deemed to be beneficially owned by
the person holding such securities for the purpose of computing the
percentage of ownership of such person, but are not treated as outstanding
for the purpose of computing the percentage ownership of any other person.
Note that affiliates are subject to Rule 144 and Insider trading
regulations  percentage computation is for form purposes only. Presidion has been advised that each of the persons listed above has sole
voting, investment, and dispositive power over the shares indicated above. 47




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Item 13. Certain relationships and Related Transactions. VRBB is a limited liability company that leases aircraft and provides charter
airline service to consumers, primarily corporations. John Burcham, the
Chairman of Presidion, holds a 33% interest in VRBB. During 2003,
Presidion paid VRBB $467,000 for services and utilized $308,000 during the same period.
As a result, the Company has a non-interest bearing deposit of approximately
$160,000 with VRBB, which is expected to be utilized or repaid during the
current fiscal period. During 2001, Presidion loaned to Craig Vanderburg, the CEO of the Company,
$35,000 at an interest rate of 2.0% per annum. During 2003, the Company extended
the term of the note from October 2003 to October 2004. Subsequent to December
31, 2003, the balance of the note, including interest, was repaid to Presidion. During June 2002, John Burcham, the Chairman of Presidion, through a
wholly-owned entity, purchased the stock of BST, Inc., a PEO in Florida. As
part of the acquisition, BST is obligated to make debt payments to the former
shareholders of BST. In June 2002, BST entered into an agreement with
Presidion pursuant to which BST has assigned certain contracts to Presidion,
and Presidion has agreed to make certain earn-out payments to BST. While the
earn-out payments were intended to match the timing of the debt payments owed
to the former shareholders of BST, debt payments to BST were required prior
to the earned amount per the agreement from Presidion to BST. To prevent a
default by BST on its debt payment obligations, resulting in the loss of the
contracts by Presidion, BST was paid $927,000 in advance
of the scheduled earn-out payments. Through the end of the earn-out agreement,
all of the advanced debt payments shall offset the amounts owed by Presidion to BST.
In addition to funds necessary to cover debt payments, Presidion also paid third party invoices for BST in the amounts of
$163,000 in 2003 and $43,000 during the first half of 2002 to avoid default by BST on its obligations. During 2001 and the first half of 2002, Presidion made advances to the Chairman
of Presidion totaling $885,000 in the form of non-interest bearing notes, for a
total outstanding balance due, including the non debt advances paid
 to BST of $206,000, of approximately $1.1 million at December 31, 2003. In order to address concerns under the Sarbanes-Oxley Act of 2002 regarding
certain of these loans, Presidion has taken the following actions to secure repayment of the above-described
outstanding loans and advances:  1.
    
    Presidion and the Chairman have proposed a 12-month secured
promissory note with an interest rate of 4% per annum, with the
principal due in a balloon payment at the end of the term. The amount
of the note is $1.1 million and represents all amounts owed by the
Chairman to Presidion. The assets of HRG, an unaffiliated company
100% owned by Mr. Burcham, and the Companys common stock held by Mr. Burcham, subject to other liens, secure the note. The proposed note contains a confession
judgment provision enabling Presidion to obtain immediately, an
enforceable judgment against Mr. Burcham if the note is not paid when
due.2.
    
    The Chairman has agreed to cancel shares of preferred stock owned
by him in Presidion to reduce the amount of the
secured promissory note. While preferred stock was originally purchased in
July 2002 from Presidion for $1.0 million, the Chairman shall only
receive an offset to the extent of the current market value of the
preferred stock, based on an independent valuation to be obtained in
the next 30 days. Presidion employs, in various capacities, certain relatives of the Chairman of
Presidion and the President of Presidion. Aggregate compensation expense
pertaining to these employment arrangements amounted to $0.1 million in the
year ended December 31, 2003. Presidion made cash advances
to Presidion, Inc., a Company owned by the
Chairman, President, and Chief Legal Officers of Presidion, totaling
approximately $608,000 without interest for the purchase of an office
building in Miami, Florida. During 2003, Presidion, Inc. entered into an
agreement to sell the office building to an unrelated party and Presidion
collected $600,000 pertaining to the receivable from Presidion, Inc. 
 Item 14. Principal Accounting Fees and Services. Follmer Rudzewicz PLC (Follmer) served as Presidions independent auditor for
the 2003 annual audit, while Ernst & Young LLP (E&Y) served as Presidions
independent auditor for the 2002 annual audit. Fees billed to Presidion by Follmer for services rendered during 2003 and 2002
were as follows: 2003
    
    2002Audit fees
    
    $
    6,570
    
    
    
    Audit related fees
    
    
    
    
    
    
    Tax fees
    
    
    
    
    
    
    Total
    
    $
    6,570
    
    
    
    
 Fees billed to Presidion by E&Y for services rendered during 2003 and 2002 were
as follow: 2003
    
    2002Audit fees
    
    $
    664,073
    
    
    $
    260,659Audit related fees
    
    
    37,798
    
    
    
    148,007Tax fees
    
    
    56,873
    
    
    
    8,120Total
    
    $
    758,744
    
    
    $
    416,786
 48




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##### Table of Contents



Audit Fees for audit services in 2003 and 2002 include fees associated with
the annual audit, the reviews of Presidions quarterly reports on Form 10-Q and
service performed in relation to a registration statement that was ultimately
not filed with the Securities and Exchange Commission. Audit Related Fees consist of assurance and related services that are not
reasonably related to the performance of the audit or interim financial
statement review and are not reported under audit fees and are other audit
services requested by management which are in addition to the scope of the
financial statement audit. Tax fees include tax compliance, tax advice, tax return preparation and tax
planning. Presidion has no audit committee to pre-approve audit and non-audit services. 
 PART IV 
 Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.  (a)(1)
    
    Financial Statements. See Item 8. Financial Statements and
Supplementary Data of this Form 10-K.(a)(2)
    
    Financial Statement Schedules. See Item 8. Financial Statements and
Supplementary Data Schedule II  Valuation and Qualifying Accountsof this Form 10-K.(a)(3)
    
    Exhibits. See Index to Exhibits of this Form
10-K.(b)
    
    Reports on Form 8-K filed for the quarter ended December 31, 2003.A Form 8-K/A, dated December 3, 2003, was filed on December 16, 2003
regarding a change in Presidions certifying accountant to Follmer
Rudzewicz PLC from Ernst & Young LLP.A Form 8-K, dated December 12, 2003, was filed on December 12, 2003
regarding a Regulation F-D disclosure announcing that Brian Jarzynski had
been appointed Chief Financial Officer of Presidion. 49




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##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized. PRESIDION CORPORATIONBy: /S/ Craig A. VanderburgCraig A. VanderburgPresident and Chief Executive Officer
 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized. Signature
    
    Title
    
    Date/S/John W. Burcham II
    
    Chairman of the Board of DirectorsJohn W. Burcham II/S/ Craig A. Vanderburg

Craig A. Vanderburg
    
    President, Chief Executive Officer and Director
(Principal Executive Officer)/S/ Brian Jarzynski

Brian Jarzynski
    
    Chief Financial Officer
(Principal Financial and Accounting Officer)/S/ James E. Baiers

James E. Baiers
    
    Executive Vice President, General Counsel
and Director/S/ Anthony Danon
    
    DirectorAnthony Danon
 50




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INDEX TO EXHIBITS Exhibit 3.1
    
    Form of Amended and Restated Articles of Incorporation of
Presidion Corporation dated March 26,
2004.
    
    Included in this filingExhibit 3.2
    
    Form of Bylaws of Presidion Corporation
    
    Included in this filingExhibit 10.1
    
    Employment Agreement between Craig A.
Vanderburg and Presidion Solutions,
Inc., dated February 12, 2003
    
    Included in this filingExhibit 10.2
    
    Employment Agreement between John W.
Burcham II and Presidion Solutions,
Inc., dated February 12, 2003
    
    Included in this filingExhibit 10.3
    
    Employment Agreement between James E.
Baiers and Presidion Solutions, Inc.,
dated February 12, 2003
    
    Included in this filingExhibit 10.4
    
    Employment Agreement between Brian
Jarzynski and Presidion Corporation,
effective December 15, 2003
    
    Included in this filingExhibit 14.1
    
    Code of Business Conduct and Ethics
for Presidion Corporation
    
    Included in this filingExhibit 21.1
    
    List of subsidiaries
    
    Included in this filingExhibit 31.1
    
    Certification of Chief Executive
Officer pursuant to Section 302(a) of
the Sarbanes-Oxley Act of 2002
    
    Included in this filingExhibit 31.2
    
    Certification of Chief Financial
Officer pursuant to Section 302(a) of
the Sarbanes-Oxley Act of 2002
    
    Included in this filingExhibit 32.1
    
    Certification of Chief Executive
Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
    
    Included in this filingExhibit 32.2
    
    Certification of Chief Financial
Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
    
    Included in this filingExhibit 99.1
    
    Merger Agreement, dated
February 11,
2003, by and among MediaBus Networks, Inc., Presidion Acquisition Sub,
Inc., Presidion Solutions, Inc., the shareholders of Presidion
Solutions, Inc. and Kenneth O. Lipscomb.
    
    Incorporated by
Reference to Exhibit
99.1 to Form 8-K filed
on February 27, 2003Exhibit 99.2
    
    Securities Purchase Agreement, dated February 12,
2003, by and among MediaBus Networks, Inc., Presidion Solutions,
Inc., Mercator Momentum Fund LP, Mercator Momentum Fund III, LP and
Mercator Focus Fund, LP.
    
    Incorporated by
Reference to Exhibit
99.2 to Form 8-K filed
on February 27, 2003Exhibit 99.3
    
    Registration Rights Agreement, dated February 12,
2003, by and among Mercator Momentum Fund LP, Mercator Momentum Fund
III, LP Mercator Focus Fund, LP and MediaBus Network, Inc.
    
    Incorporated by
Reference to Exhibit
99.3 to Form 8-K filed
on February 27, 2003Exhibit 99.4
    
    Presidion Solutions, Inc. and
MediaBus Network, Inc. 6.5% Secured Convertible Debenture, dated
February 12,
2003 in the principal amount of $1,560,000 payable to Mercator Focus
Fund, LP.
    
    Incorporated by
Reference to Exhibit
99.4 to Form 8-K filed
on February 27, 2003Exhibit 99.5
    
    Presidion Solutions, Inc. and
MediaBus Network, Inc. 6.5% Secured Convertible Debenture, dated February 12,
2003 in the principal amount of $240,000 payable to Mercator Momentum
Fund, LP.
    
    Incorporated by
Reference to Exhibit
99.5 to Form 8-K filed
on February 27, 2003Exhibit 99.6
    
    Presidion Solutions, Inc. and
MediaBus Network, Inc. 6.5% Secured Convertible Debenture, dated February 12,
2003 in the principal amount of $200,000 payable to Mercator Momentum
Fund III, LP.
    
    Incorporated by
Reference to Exhibit
99.6 to Form 8-K filed
on February 27, 2003Exhibit 99.7
    
    Stock Purchase Warrant, dated February 12,
2003, issued to Mercator Momentum Fund, LP.
    
    Incorporated by
Reference to Exhibit
99.7 to Form 8-K filed
on February 27, 2003Exhibit 99.8
    
    Pledge Agreement, dated February 12,
2003, by John W. Burcham II.
    
    Incorporated by
Reference to Exhibit
99.8 to Form 8-K filed
on February 27, 2003Exhibit 99.9
    
    Pledge Agreement, dated February 12,
2003, by Craig A. Vanderburg
    
    Incorporated by
Reference to Exhibit
99.9 to Form 8-K filed
on February 27, 2003Exhibit 99.10
    
    Pledge Agreement, dated February 12,
2003, by James E. Baiers
    
    Incorporated by
Reference to Exhibit
99.10 to Form 8-K
filed on February 27,
2003Exhibit 99.11
    
    Payment Guaranty, dated February 11,
2003, by Presidion Solutions, Inc. in
favor of Mercator Advisory Group, LLC,
acting as agent for Mercator Momentum
Fund, LP and Mercator Focus Fund, LP
    
    Incorporated by
Reference to Exhibit
99.11 to Form 8-K
filed on February 27,
2003Exhibit 99.12
    
    Payment Guaranty, dated February 11,
2003, by John W. Burcham II in favor
of Mercator Advisory Group, LLC,
acting as agent for Mercator Momentum
Fund, LP and Mercator Focus Fund, LP
    
    Incorporated by
Reference to Exhibit
99.12 to Form 8-K
filed on February 27,
2003Exhibit 99.13
    
    Payment Guaranty, dated February 11,
2003, by Craig A. Vanderburg in favor
of Mercator Advisory Group, LLC,
acting as agent for Mercator Momentum
Fund, LP and Mercator Focus Fund, LP
    
    Incorporated by
Reference to Exhibit
99.13 to Form 8-K
filed on February 27,
2003Exhibit 99.14
    
    Payment Guaranty, dated February 11,
2003, by James E. Baiers in favor of
Mercator Advisory Group, LLC, acting
as agent for Mercator Momentum Fund,
LP and Mercator Focus Fund, LP
    
    Incorporated by
Reference to Exhibit
99.14 to Form 8-K
filed on February 27,
2003Exhibit 99.15
    
    Amendment and Waiver Agreement, by and among Presidion Solutions, Inc., Presidion Corporation
and Mercator Advisory Group, LLC, acting as agent for Mercator
Momentum Fund, L.P., Mercator Momentum Fund III, L.P. and Mercator
Focus Fund, L.P.
    
    Included in this filingExhibit 99.16
    
    Assignment agreement, dated
June 13,
2002, between BST Group, Inc and Presidion Solutions IV, Inc.
    
    Included in this filingExhibit 99.17
    
    Payment schedule, dated June 14,
2002, between BST Group, Inc and Presidion Solutions IV, Inc.
    
    Included in this filing
 51