U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

        (X)    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934.

                  For the quarterly period ended June 30, 2002.

       (  ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934.

         For the transition period from_____________ to _______________

                           Commission File No.0-31459

                                   VALESC INC.
                             ---------------------
           (Name of Small Business Issuer as specified in its Charter)

            DELAWARE                                    23-3048857
           ----------                                  ----------
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)

                  2300 COIT ROAD, SUITE 300B, PLANO, TX 75075
                           --------------------------
                    (Address of Principal Executive Offices)

Registrant's telephone number, including area code         (972) 495-3900

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

(1) Yes  X         No                   (2) Yes  X          No
         -           -----                       -            ----------

State the number of shares outstanding of each of the Registrant's classes of
common equity, as of the latest practicable date:

 10,396,048 shares of common stock issued and outstanding as of August 14, 2002

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



                                   Valesc Inc.

                                      INDEX

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements                                                Page

     Consolidated Balance Sheets ................................             2

     Consolidated Statements of Operations ......................             3

     Consolidated Statement of Shareholder's Equity (Deficiency).             4

     Consolidated Statements of Cash Flows ......................             5

     Notes to Financial Statements ..............................             6

Item 2. Management's Discussion and Analysis or
        Plan of Operation .......................................            15

PART II - OTHER INFORMATION

Item 2.  Changes in Securities and Use of Proceeds ..............            17

Item 6.  Exhibits and Reports on Form 8-K .......................            17



                                      -1-



<PAGE>



PART I - FINANCIAL INFORMATION

     ITEM 1. FINANCIAL STATEMENTS





<TABLE>
<CAPTION>



                       FINANCIAL STATEMENTS AND REPORTS OF
                    INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

                           Valesc Inc. and Subsidiary

                           CONSOLIDATED BALANCE SHEETS

                                                                June 30, 2002  December 31,
                                                                  (unaudited)     2001
                                                                -------------- -------------
ASSETS

Current Assets

<S>                                                                <C>          <C>
Cash                                                               $  47,666    $  26,311
Accounts Receivable                                                   11,674       20,560
Prepaid Expenses                                                       2,689          --
                                                                   ---------    ---------

Total Current Assets                                               $  62,029    $  46,871

Property and equipment, net of accumulated
  depreciation of $7,746 at December 31, 2001
  and $8,809 at June 30, 2002                                          6,447        6,553

Deferred financing costs, net of accumulated
  amortization of $7,514 at December 31, 2001
  and $39,780 at June 30, 2002                                             0       32,266

                                                                   ---------    ---------

Total Assets                                                       $  68,476    $  85,690
                                                                   =========    =========

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)

Current Liabilities

Accounts Payable                                                   $ 357,672    $ 336,585
Current maturities of notes payable, net of debt discount            156,748       84,008
Accrued interest payable                                              28,041       14,205
Accrued expenses and other current liabilities                       226,360      228,916
Officers' salaries payable                                           149,019      105,519
                                                                   ---------    ---------

Total current liabilities                                            917,840      769,233

Notes Payable - long term, net of debt discount                            0       31,927
                                                                   ---------    ---------
Total Liabilities                                                    917,840      801,160

Potentially refundable common stock                                   40,000            0

Commitments and contingencies

Shareholders' equity (deficiency)
Preferred stock; $.0001 par value;
  20,000,000 shares authorized,
  none issued and outstanding                                           --           --
Common stock, $.0001 par value;
  100,000,000 shares authorized;
  10,296,048 and 9,708,548 shares issued and
  outstanding as of June 30, 2002 and
  December 31, 2001, respectively                                        115           56
Additional paid-in capital                                           191,741         --
Accumulated deficit                                               (1,081,220)    (715,526)
                                                                   ---------    ---------

Total shareholders' equity (deficiency)                             (889,364)    (715,470)
                                                                   ---------    ---------

Total liabilities and shareholders' equity (deficiency)            $  68,476    $  85,690
                                                                   =========    =========

</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS





                                      -2-
<PAGE>

<TABLE>
<CAPTION>



                           Valesc Inc. and Subsidiary

                CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

                Three And Six Months Ended June 30, 2002 and 2001

                                                       Six Months Ended June 30,     Three Months Ended June 30,
                                                          2002          2001              2002             2001
                                                       -----------   ------------      -----------  ---------

<S>                                                    <C>             <C>            <C>             <C>
Commission Income                                      $    109,180    $    159,270   $     54,556    $     61,737

Selling, general and administrative expenses                418,437         105,388        253,597          55,220
                                                       ------------    ------------   ------------    ------------

Income (Loss) from Operations                              (309,257)         53,882       (199,041)          6,517

Interest Expense                                             56,437             153         27,231            --
                                                       ------------    ------------   ------------    ------------

NET INCOME (LOSS)                                      $   (365,694)   $     53,729       (226,272)          6,517
                                                       ============    ============   ============    ============

Basic income (loss) per shares                         $       (.04)   $        .01   $       (.02)   $        .00
                                                       ------------    ------------   ------------    ------------

Diluted income (loss) per share                        $       (.04)   $        .01   $       (.02)   $        .00
                                                       ============    ============   ============    ============

Weighted average shares outstanding used in
  Computing basic income (loss) per common share
  (as adjusted for stock split and effect of merger)     10,177,297       9,708,548      9,708,548       9,708,548

Weighted average shares outstanding used in
  Computing diluted income (loss) per common share
  (as adjusted for stock split and effect of merger)     10,177,297      10,364,839      9,708,548      10,511,350

</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.



NOTE: THE AMOUNTS FOR 2001 INCLUDE ONLY THE RESULTS OF OJI SURGICAL INC., THE
ACCOUNTING ACQUIROR, PURSUANT TO THE DECEMBER 17, 2001 MERGER WITH VALESC INC.



                                      -3-
<PAGE>





<TABLE>
<CAPTION>





                           Valesc Inc. and Subsidiary

           CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIENCY)

                      Year ended December 31, 2001, and six
                     months ended June 30, 2002 (unaudited)

                                --------------------------- -- ----------------- ----------------- ------------------
                                       Common Stock
                                   Number of       Value         Additional      Accumulated      Total Shareholders'
                                    Shares                    Paid-in Capital       Deficit       Equity (Deficiency)
                                ---------------- ----------- ------------------- ----------      --------------------
<S>                                    <C>     <C>               <C>            <C>           <C>
 Balance, December 31, 2000             1,000   $     1,000           --        $    (9,145)         $    (8,145)

       Net Loss - 2001                   --            --             --            (46,974)             (46,974)

Effect of merger of OJI into        9,707,548          (944)          --           (659,407)            (660,351)
         Valesc Inc.
                                  -----------   -----------    -----------      -----------          -----------

  Balance December 31, 2001         9,708,548            56           --           (715,526)            (715,470)

Issuance of shares to Century         500,000            50    $   149,950             --                150,000
     Goal Holdings, Ltd.

Issuance of shares of common
     Stock to non-related parties      87,500             9         34,991             --                 35,000

  Issuance of warrants for               --            --            6,800             --                  6,800
      services rendered

Net Loss - six months ended              --            --             --           (365,694)            (139,422)
       June 30, 2002
                                  -----------   -----------    -----------      -----------          -----------

   Balance, June 30, 2002          10,296,048   $       115    $   191,741      $(1,081,220)         $  (889,364)
                                  ===========   ===========    ===========      ===========          ===========

</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.






                                      -4-
<PAGE>

<TABLE>
<CAPTION>

                           Valesc Inc. and Subsidiary

                CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

                     Six Months Ended June 30, 2002 and 2001

                                                                      Six Months Ended June 30,
                                                                          2002         2001
                                                                      -----------   -------------
Cash flows from operating activities
<S>                                                                  <C>          <C>
     Net income (loss)                                               $(365,694)   $  53,729
     Adjustments to reconcile net income
       (loss) to net cash provided by (used in)
        operating activities
             Depreciation and amortization                              33,509        3,745
             Issuance of Warrants                                        6,800         --
             Noncash interest accretion                                 40,813         --
             Changes in assets and liabilities
                    Accounts Receivable                                  8,886       (3,258)
                    Prepaid Expenses                                    (2,689)       1,141
                    Accounts Payable                                    21,087      (22,037)
                    Accrued Expenses and other current liabilities      11,280       (1,352)
                    Accrued officers' salaries                          43,500       (3,867)
                                                                     ---------    ---------

Net cash provided by (used in) operating activities                   (202,508)      28,101

Cash flows from investing activities
     Purchase of equipment                                              (1,137)      (3,385)
                                                                     ---------    ---------

Net cash used in investing activities                                   (1,137)      (3,385)

Cash flows from financing activities
Repayment of loans                                                        --         (8,623)
Issuance of common stock                                               185,000         --
Proceeds from potentially refundable common stock                       40,000         --
                                                                     ---------    ---------

Net cash provided by (used in) financing activities                    225,000       (8,623)

Net increase in cash                                                    21,355       16,093

Cash at beginning of period                                             26,311        1,680
                                                                     ---------    ---------

Cash at end of period                                                $  47,666    $  17,773
                                                                     =========    =========

Supplemental disclosures of cash flow information:

Cash paid during the period for interest                             $    --      $    --
                                                                     =========    =========

</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

NOTE: THE AMOUNTS FOR 2001 INCLUDE ONLY THE RESULTS OF OJI SURGICAL INC., THE
ACCOUNTING ACQUIROR, PURSUANT TO THE DECEMBER 17, 2001 MERGER WITH VALESC INC.



                                      -5-
<PAGE>



                           VALESC INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  June 30, 2002

NOTE A - DESCRIPTION OF BUSINESS AND FORMATION OF COMPANY

The accompanying financial statements of Valesc Inc. and Subsidiary the
"Company" present the accounts of OJI Surgical, Inc. for the three and six
months ended June 30, 2001 and 2002 and the effect of the acquisition (for
accounting purposes -- see Note A-3) of Valesc Inc. on December 17, 2001.

The Company's Registration Statement on Form SB-2 was declared "effective" by
the Securities and Exchange Commission on August 7, 2002.

The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all the information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, such statements include all adjustments (consisting
only of normal recurring items) which are considered necessary for a fair
presentation of the consolidated financial position of the Company at June 30,
2002 and 2001 and the consolidated results of its operations for the six months
ended June 30, 2002 and 2001. These consolidated financial statements should be
read in conjunction with the consolidated financial statements and related notes
included in the Company's Form 10-KSB for the year ended December 31, 2001. The
results of operations for the six months ended June 30, 2002 are not necessarily
indicative of the operating results for a full year.

1. DESCRIPTION OF BUSINESS ENTITIES

Valesc Inc., a New Jersey corporation ("Valesc NJ") was incorporated on October
24, 2000, and at the date of inception was owned 100% by Atlas Holdings Inc.
Atlas Holdings is owned 50% by Jeremy Kraus, the Company's Chairman and Chief
Executive Officer, 25% by Samuel Cohen, the Company's President and Director
and, 12.5% by Garrett Miller, the Company's Vice President and Director. On
March 21, 2001, Valesc NJ executed a 2:1 stock split.

NetCentral Capital Fund, Inc. ("NetCentral") was incorporated in the State of
Delaware on June 2, 2000, for the specific purpose of providing a method,
through a merger or otherwise, for a foreign or domestic private company to
become a reporting company with a class of registered securities. NetCentral had
a single shareholder. It had no operating business from the date of inception
until March 22, 2001. At March 22, 2001, NetCentral had no assets. From
inception through March 22, 2001 NetCentral had no revenues, and expenses of
approximately $30,000 of professional fees relating to the formation. On March
21, 2001, NetCentral had a 1:18.04 reverse stock split, and thereafter had
277,237 shares outstanding.

Founded as an Oregon corporation in 1988, OJI Surgical, Inc. ("OJI") is a
manufacturer's representative for medical devices and health care products,
primarily in the orthopedic field. OJI serves customers in the Pacific Northwest
of the US from its Portland, Oregon base.

The accompanying consolidated financial statements include the accounts of
Valesc and OJI Surgical, Inc. from the date of the acquisition of OJI (December
17, 2001) by Valesc. All material inter-company accounts and transactions
between the Company and its subsidiary have been eliminated.

2. DESCRIPTION OF MERGER BETWEEN VALESC AND NETCENTRAL

On March 22, 2001, Valesc NJ was acquired by NetCentral (the "Merger") for
8,964,008 shares of Common Stock, which were exchanged on a 1-for-1 basis with
Valesc NJ stock. Simultaneously therewith, the Directors of NetCentral resigned,
and the Company was renamed "Valesc Inc." ("Valesc Inc."). After the Merger,
Atlas Holdings Inc. owned 8,458,548 or 90.4% of the outstanding Common Stock of
Valesc Inc.

Under generally accepted accounting principles, the Merger is considered to be a
capital transaction in substance, rather than a business combination. That is,
the acquisition is equivalent to the issuance of stock by Valesc NJ for the net
monetary assets of NetCentral, accompanied by a recapitalization, and is
accounted for as a change in capital structure. Accordingly, the accounting for
the acquisition is identical to that resulting from a reverse acquisition,
except that no goodwill is recorded. Under reverse takeover accounting, the
post-reverse-acquisition comparative historical financial statements of the
"legal acquirer" (NetCentral) are those of the "accounting acquirer" (Valesc
NJ). Earnings (loss) per share ("EPS") are calculated to reflect the Company's
change in capital structure for all periods presented. Costs associated with
merger were expensed as incurred, by Valesc NJ.



                                      -6-
<PAGE>


3. DESCRIPTION OF MERGER BETWEEN VALESC AND OJI SURGICAL

On December 17, 2001 SMT Enterprises Corporation ("SMT") sold OJI to Valesc
Inc., a Delaware corporation. Valesc Inc. received 100% of the outstanding stock
of the Company in exchange for 266,000 shares of its common stock. The Chief
Executive of Valesc Inc. is Jeremy Kraus, a board member of SMT at the time as
well as the son of SMT's President and the nephew of the Company's President. In
addition, Samuel Cohen was a member of the board of both SMT and Valesc at the
time, and serves as the President of Valesc. Several members of the Kraus family
are investors in Valesc. Valesc and its wholly-owned subsidiary, OJI Surgical,
Inc. are hereafter referred to as "the Company."

Under generally accepted accounting principles, the acquisition is considered to
be a capital transaction in substance, rather than a business combination. That
is, the acquisition is equivalent to the issuance of stock by OJI for the net
monetary assets of Valesc, accompanied by a recapitalization, and is accounted
for as a change in capital structure. Accordingly, the accounting for the
acquisition is identical to that resulting from a reverse acquisition, except
that no goodwill is recorded. Under reverse takeover accounting, the
post-reverse-acquisition comparative historical financial statements of the
"legal acquirer" (Valesc) are those of the "accounting acquirer" (OJI).

4. DESCRIPTION OF MERGER BETWEEN OJI SURGICAL AND SMT

In 1999, OJI was purchased from Harry Kraus, its current President, founder and
then sole shareholder, by SMT, a Delaware company. SMT was an inactive company
prior to this transaction. SMT received 100% of the outstanding stock of OJI in
exchange for 32% of its outstanding stock. Edward Kraus, the brother of Harry
Kraus, is the President of SMT and Robert Kraus, Harry Kraus's brother and
Jeremy Kraus, Harry Kraus's nephew were also members of the board of SMT. Jeremy
Kraus is no longer on the board of SMT.

Under generally accepted accounting principles, the acquisition is considered to
be a capital transaction in substance, rather than a business combination. That
is, the acquisition is equivalent to the issuance of stock by OJI for the net
monetary assets of SMT, accompanied by a recapitalization, and is accounted for
as a change in capital structure. Accordingly, the accounting for the
acquisition is identical to that resulting from a reverse acquisition, except
that no goodwill is recorded. Under reverse takeover accounting, the
post-reverse-acquisition comparative historical financial statements of the
"legal acquirer" (SMT) are those of the "accounting acquirer" (OJI). Costs
associated with merger were expensed as incurred.

5. Description of Merger between Atlas Holdings and Valesc Inc.

On May 20, 2002, Atlas Holdings Inc., the holder of 82.8% of our stock on such
date, which had no business or assets and served only as a holding company, was
merged into us. Pursuant to the merger (a) each issued and outstanding share of
the stock of Atlas was exchanged for 986.12568 shares of our common stock, for a
total of 8,458,000 shares of our common stock to the Atlas shareholders, and (b)
8,458,000 shares of our common stock owned by Atlas prior to the merger were
cancelled. Jeremy Kraus, our Chairman and Chief Executive Officer, Garrett
Miller, our Vice President and Director, Samuel Cohen, our President and
Director, and Harry Kraus, the President of our subsidiary, OJI Surgical, Inc.
and a Director, owned 41%, 25%, 25% and 2%, respectively, of Atlas before the
merger. As a result of the merger, they now beneficially own 34%, 21%, 21% and
2%, respectively, of our common stock. Each of the foregoing officers and Edward
Kraus, who now owns 4.6% of our common stock, executed a shareholders agreement
prohibiting transfers of shares except in certain circumstances and in limited
amounts. The agreement also provides a right of first refusal in favor of the
Company to purchase shares proposed to be transferred, which right is assignable
to the other parties to the agreement at the discretion of the Company. Since
this was a transaction which involved the merger of an inactive company, there
is no financial impact to the transaction.

NOTE B - LIQUIDITY AND GOING CONCERN

The accompanying financial statements of the Company have been prepared assuming
the Company will continue as a going concern. No adjustment has been made for
this uncertainty. The Company has invested a significant amount of its effort
and cash in the development of its business plan. As of June 30, 2002, the
Company has a stockholders' deficit of approximately $890,000. For the period
ended June 30, 2002, the Company had net losses of approximately $366,000. The
Company will be required to seek external financing to continue developing its
business plan and to consummate planned acquisitions, and to cover the overhead
costs associated with Valesc. Operating losses are expected to continue in 2002.
The Company may also be required to return $40,000 raised from investors in 2002
- See Note E-1.

During the next twelve months, the Company intends to devote its time and
resources to the growth of its medical device sales business. The Company
currently sells a variety of medical products, including replacement joints and
surgical implements and tools, for use in the orthopedic care and surgical area.
The Company intends to expand its sales of these products in three ways: (i)
increased penetration in market areas already covered, (ii) the addition of
sales personnel to expand geographic coverage and (iii) the addition of new
product lines.


                                      -7-
<PAGE>


In order for the Company's expansion to be successful, it will need to greatly
expand its administrative capabilities and its sales force. The Company intends
to invest approximately $100,000 in the purchase, customization and installation
of accounting and back-office software to enable it to manage a larger number of
transactions, customers and suppliers without substantially increasing its
administrative staff. The Company also expects to incur significant expenses for
hiring additional sales people. In addition to normal hiring costs,
manufacturers' representatives like OJI generally "sponsor" new sales people for
a period of up to one year during which the company subsidizes the employee's
wages until they have built a sufficient customer base to support themselves
solely on a commission basis. The Company cannot predict these additional costs
at this time, but they may represent a substantial increase over the Company's
current costs.

The Company will need significant new financing in order to fund these expansion
plans. Although the company expects additional costs to be offset by increased
revenues, it cannot be certain whether increases in revenues will occur and
whether any such increases will offset costs.

Management's plans with respect to its liquidity issues include the following:

o    The Company anticipates negotiating and entering into an equity line of
     credit which may provide a financing vehicle for the Company
o    The Company recently completed the registration of its common stock, and
     intends it to apply for trading of its common stock on the Over-the-counter
     Bulleting Board, generally a condition of equity line financings
o    Raise additional funding through the sale of debt and equity instruments to
     fund activities.
o    From July through August 14, 2002, the Company received proceeds from the
     issuance of common stock and notes of $14,500.

To date, the Company has supported its activities through debt and equity
investments. Management plans to continue to seek the funding required to
finance operations as the Company commences its business plan and expansion
plan. Failure to find additional financing, create a public market for its
stock, and execute its expansion plan, could negatively impact the Company's
ability to continue as a going concern.

NOTE C - PRO FORMA STATEMENT OF OPERATIONS

The following Pro Forma income statement has been prepared based upon the
historical unaudited financial statements of Valesc Inc. and OJI Surgical, Inc.
period ended June 30, 2001 and gives effect to the merger of the two companies,
showing OJI as the "accounting acquirer" as if the merger occurred on January 1,
2001. The equity accounts of the combined entities have been presented to
reflect the share structure of the legal acquirer -- Valesc Inc.

The following Pro Forma Condensed financial information is not necessarily
indicative of the actual results of operations that would have been reported if
the events described above had occurred as of January 1, 2001 nor do they
purport to indicate the results of Valesc's future operations. Furthermore, the
pro forma results do not give effect to all cost savings or incremental costs
that may occur as a result of the integration and consolidation of the
companies.

                                   (Unaudited)
                            Six Months Ended June 30,


                                             2001
                                            ------

Commission income                          $159,270
                                           --------
Operating expenses
   Merger expense                            75,000
   Equity-based compensation expense        122,080
Selling, general and administrative
        expense                             523,250
                                          ---------
Total expenses                              720,330
                                          ---------
Loss from operations                       (561,060)

   Interest expense                          10,141

   Income tax expense                            0
                                          ---------
Net loss                                  (571,201)
                                           ========
Net loss per common share - basic
    and diluted                              $(.05)

Weighted average shares outstanding     10,256,624



                                      -8-
<PAGE>



NOTE D - ACCOUNTING POLICIES

1. REVENUE RECOGNITION

In December 1999, the staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin 101, "Revenue Recognition," to provide guidance on the
recognition, presentation, and disclosure of revenue in financial statements.
Our policies on revenue recognition are consistent with this bulletin.
Commission income as a manufacturers' representative on new product sales are
recorded in the period during which the underlying product sale occurs. Product
returns by our customers are rare due to the specialized nature of the product,
and therefore, we have concluded that no material allowance for refundable
commission income on returned products is necessary at June 30, 2002 and
December 31, 2001. Our revenues from product sales and service income are
derived from the sale of new products distributed by us, and the refurbishment
of used products. Revenue is recognized as products are delivered to our
customers. As of the end of 2001 and during 2002, we were not distributing any
new or refurbished products.

2. EARNINGS (LOSS) PER SHARE

Basic income (loss) per share is computed by dividing the income (loss) for the
period by the weighted average number of common shares outstanding during the
period. Diluted income (loss) per share is computed by dividing the loss for the
period by the weighted average number of common shares adjusted for the dilutive
effect of any potential common shares issuable during the period. The amount of
options or warrants not considered in the loss per share calculation because
their effect was antidilutive was 600,000 and 2,841,500 for the three months
ended June 30, 2001 and 2002, respectively. Earnings (loss) per share are
calculated to present the change in capital structure for all periods presented.
The diluted earnings per share for the three and six months ended June 30, 2001
includes the effect of 254,730 and 187,540 potentially dilutive securities,
respectively.

3. 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 amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates and assumptions. Significant estimates that affect the financial
statements include, but are not limited to, the valuation of options and
warrants granted.

4. CONCENTRATIONS OF CREDIT RISK

Product sales from a relatively few suppliers account for a substantial portion
of the Company's revenues. During the three months ended June 30, 2002, product
sales from two suppliers accounted for 90% of net sales (48.6% and 42.4% for
each supplier). This represents an increase in concentration from the previous
quarter, when the same two vendors accounted for 86.4% of net sales. Generally,
these concentrations have increased from the same periods of previous years.

Financial instruments which subject the Company to concentrations of credit risk
consist primarily of cash, notes payable and trade accounts payable. The Company
considers the book values of these investments to be indicative of their
respective fair values.

5. CASH AND CASH EQUIVALENTS

The Company considers all highly liquid short-term investments with maturities
of 90 days or less when purchased to be cash equivalents.

6. INCOME TAXES

The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income Taxes." SFAS
No. 109 is an asset and liability approach that requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences
attributable to differences between the carrying amounts of assets and
liabilities for financial reporting purposes and their respective tax bases, and
for operating loss and tax credit carryforwards. A valuation allowance is
recorded if it is more likely than not that some portion or all of a deferred
tax asset will not be realized.



                                      -9-
<PAGE>


7. LONG-LIVED ASSETS AND IMPAIRMENT OF LONG-LIVED ASSETS

The Company records impairment losses on long-lived assets used in operations or
expected to be disposed of when events and circumstances indicate that the
assets might be impaired and the undiscounted cash flows estimated to be
generated by those assets are less than the carrying amounts of those assets. No
impairment losses were recorded during the quarter.

8. PROPERTY AND EQUIPMENT

Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method for financial reporting
purposes, and accelerated methods for tax purposes, over the following estimated
useful lives: Office Equipment 3-7 years

9. RESEARCH AND DEVELOPMENT COSTS

Research and development costs are expensed as incurred. The Company has
incurred no research and development expenses to date.

10. STOCK-BASED COMPENSATION

As permitted by the Statement of Financial Accounting Standards No. 123 (SFAS
No. 123), "Accounting for Stock-Based Compensation", the Company accounts for
stock-based employee compensation arrangements in accordance with provisions of
Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued
to Employees." Compensation expense for stock options issued to employees is
based on the difference, on the date of grant, between the fair value of the
Company's stock and the exercise price of the option. The Company accounts for
equity instruments issued to nonemployees in accordance with the provisions of
SFAS No. 123 and Emerging Issues Task Force (EITF) Issue No. 96-18, "Accounting
for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or
in Conjunction With Selling, or in Conjunction With Selling, Goods or Services."
All transactions in which goods or services are the consideration received for
the issuance of equity instruments are accounted for based on the fair value of
the consideration received or the fair value of the equity instrument issued,
whichever is more reliably measurable. The measurement date of the fair value of
the equity instrument issued is the date on which the counterparty's performance
is complete.

11. MARKETING COSTS

The Company expenses marketing costs as incurred, and amounted to approximately
$500 for the quarter ended June 30, 2002.

12. RECENT ACCOUNTING PRONOUNCEMENTS

On July 20, 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 141, "Business Combinations",
and SFAS 142 "Goodwill and Tangible Assets". SFAS 141 is effective for all
business combinations completed after June 30, 2001. SFAS 142 is effective for
fiscal years beginning after December 15, 2001; however, certain provisions of
this Statement apply to goodwill and other intangible assets acquired between
July 1, 2001 and the effective date of SFAS 142. Major provisions of these
Statements and their effective dates for the Company are as follows:

o all business combinations initiated after June 30, 2001 must use the purchase
method of accounting. The pooling of interest method of accounting is prohibited
except for transactions initiated before July 1, 2001.

o intangible assets acquired in a business combination must be recorded
separately from goodwill if they arise from contractual or other legal rights or
are separable from the acquired entity and can be sold, transferred, licensed,
rented or exchanged, either individually or as part of a related contract, asset
or liability.

o goodwill, as well as intangible assets with indefinite lives, acquired after
June 30, 2001, will not be amortized. Effective September 1, 2002, all
previously recognized goodwill and intangible assets with indefinite lives will
no longer be subject to amortization.

o effective September 1, 2002, goodwill and intangible assets with indefinite
lives will be tested for impairment annually and whenever there is an impairment
indicator.

o all acquired goodwill must be assigned to reporting units for purposes of
impairment testing and segment reporting.

In August 2001, the FASB issued Statement of Financial Accounting Standards
No.144, "Accounting for the Impairment of Disposal of Long-Lived Assets" ("SFAS
144"). This statement is effective for fiscal years beginning after December 15,
2001. This supersedes Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," while retaining many of the requirements of such statement.



                                      -10-
<PAGE>


Although it is still reviewing the provisions of these Statements, management's
preliminary assessment is that these Statements will not have a material impact
on the Company's financial position or results of operations.

In April 2002, the Financial Accounting Standards Board ("FASB") adopted
Statement of Financial Accounting Standards 145 Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections
("SFAS 145"). This Statement Rescinds FASB Statement No. 4, Reporting Gains and
Losses from Extinguishment of Debt, and an amendment of that Statement, FASB
Statement No. 64, Extinguishments of Debt made to Satisfy Sinking-Fund
Requirements. This Statement also rescinds FASB Statement No. 44, Accounting for
Intangible Assets of Motor Carriers. This Statement amends FASB Statement No.
13, Accounting for Leases, to eliminate an inconsistency between the required
accounting for sale-leaseback transactions and the required accounting for
certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. This Statement also amends other existing
authoritative pronouncements to make various technical corrections, clarify
meanings, or describe their applicability under changed conditions. Statement
No. 145 is effective for fiscal years beginning after May 15, 2002. The Company
believes that this statement will not have a significant impact on their results
of operations or financial position upon adoption.

In July 2002, The Financial Accounting Standards Board ("FASB") Issued Statement
146 Accounting for Costs Associated with Exit or Disposal Activities ("SFAS
146"). This Statement addresses financial accounting and reporting for costs
associated with exit or disposal and nullifies Emerging Issues Task Force (EITF)
Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit and Activity (Including Certain Costs Incurred in a
Restructuring)." The principal difference between this statement and Issue 94-3
relates to its requirements for recognition of a liability for a cost associated
with an exit or disposal activity. This Statement requires that a liability for
a cost associated with an exit or disposal activity be recognized when the
liability is incurred. Under Issue 94-3, a liability for an exit cost as defined
in Issue 94-3 was recognized at the date of an entity's commitment to an exit
plan. The provisions of this Statement are effective for exit or disposal
activities that are initiated after December 31, 2002. The Company believes that
this new standard will not have a material effect on the results of operations
of financial condition.

NOTE E - CAPITAL STOCK OF THE COMPANY

Valesc Inc. authorized capital stock consists of 100,000,000 shares of Common
Stock, $.0001 par value per share, and 20,000,000 shares of preferred stock,
$.0001 par value per share. Holders of Common Stock are entitled to receive such
dividends as may be declared by the Board of Directors out of funds legally
available therefore and, in the event of liquidation, to share pro rata in any
distribution of assets after payment of liabilities. The Board of Directors is
not obligated to declare a dividend and it is not anticipated that dividends
will be paid in the foreseeable future. Holders of Common Stock do not have
preemptive rights to subscribe to any of our additional shares. There are no
conversion, redemption, sinking fund or similar provisions regarding the Common
Stock. All of the outstanding shares of Common Stock are fully paid and
non-assessable and all of the shares of Common Stock offered hereby will be,
upon issuance, fully paid and non-assessable. The Company has not designated any
terms for the preferred stock.

On March 21, 2000, Valesc NJ declared a 2:1 stock split. All share and per share
references have been updated to reflect the stock split.

1. COMMON STOCK ISSUANCES BY VALESC INC.

During 2000, Valesc issued 370,000 shares (as adjusted for the stock split) of
common stock for aggregate net proceeds of $92,500. The shares were offered to
employees, directors, related party investors and non-related investors.

During 2001, Valesc issued 319,303 (as adjusted for the stock split) shares of
common stock for aggregate net proceeds of $94,445. The shares were offered to
employees, directors, related party investors and non-related investors.

During 2001, Valesc issued 266,000 shares of common stock to SMT in connection
with the merger of OJI into the Company, 277,237 shares of common stock in
connection with the merger of Valesc NJ into NetCentral and 70,000 shares of
common stock to consultants for services rendered (See Note E-5).

During January 2002, the Company received an aggregate of $150,000 for issuance
of 500,000 shares of common stock to a single non-related investor. The investor
also received an option to purchase an additional 500,000 shares of common stock
during a period of 3 years, to begin 6 months after the effectiveness of the
Company's registration statement at a price of 30% discount to the market price
of the common stock. Proceeds were used for working capital purposes.

During April and May 2002, the Company received an aggregate of $35,000 for
issuance of 87,500 shares of common stock to two non-related investors. The
investors also received options to purchase an additional 87,500 shares of
common stock during a period of 3 years, to begin 6 months after the
effectiveness of the Company's registration statement at a price of 30% discount
to the market price of the common stock. Proceeds were used for working capital
purposes.



                                      -11-
<PAGE>


During June 2002, the Company sold 62,500 shares of common stock to Brian Kraus
and 37,500 shares to Mark Walsh in sales intended to qualify for the private
placement exemption provided under Section 4(2) of the Securities Act. In
response to the due diligence requests of Mr. Kraus and Mr. Walsh prior to the
sales, the Company provided them with copies of our registration statement on
Form SB-2 currently on file with the Commission, but not yet effective, and
available publicly on the Commission's EDGAR database. By providing copies of
the Form SB-2, the Company may have engaged in a "general solicitation"
invalidating the Section 4(2) exemption from registration. Without the 4(2)
exemption, the sales of shares to Mr. Kraus and Mr. Walsh would have violated
Section 5 of the Securities Act, in which case the Company could be liable to
Mr. Kraus and Mr. Walsh under Section 12(a) (1) of the Securities Act for the
amount of the proceeds ($40,000) plus interest during the one year period
following the sales. If the Company is forced to repay these proceeds, it would
impact our cash flow and could cause us to have insufficient working capital.

2. WARRANTS

From January 1, 2001 through December 31, 2001, an aggregate of 454,000 warrants
were issued by Valesc in connection with the notes payable with a face value of
$198,000 (See Note F). Proceeds of approximately $128,000 was allocated to these
warrants. The assumptions used in determining the warrant valuation using the
Black-Scholes option pricing model are risk-free interest rate (4.72% and
2.12%), volatility factor (45%), fair value ($0.33) and term of warrants (1 -
2.5 years). Further, for purposes of this calculation the Company assumed the
maximum number of warrants would be issued or exercised at the lowest price
indicated in the terms of the warrant agreement. The terms of these warrants are
summarized as follows:

o 15,000 of these warrants are exercisable at $.25 per share through December
31, 2003.

o 50,000 of these warrants are exercisable at $.01 per share through February 1,
2004.

o 100,000 of these warrants are exercisable at $.10 per share through February
2, 2004.

o The Company also issued warrants with an exercise price of $.01 through
December 19, 2003. The number of shares permitted to be exercised under these
warrants is pre-set based upon the date the note payable is repaid - 120,000 if
repaid prior to February 2, 2002, 150,000 if repaid between February 3, 2002 and
August 1, 2002, and 200,000 if repaid after August 1, 2002.

o 64,000 warrants, with an exercise price of $.01 per share, were issued in
connection with $25,000 of the notes payable. The number of shares permitted to
be exercised under these warrants is pre-set based upon the date the note
payable is repaid - 11,500 if repaid prior to February 2, 2002, 39,000 if repaid
between February 3, 2002 and August 1, 2002, and 64,000 if repaid after August
1, 2002.

o 25,000 warrants, with an exercise price of $.33 per share were issued in
connection with $25,000 of notes payable. These warrants, which will not be
registered, vest immediately and are exercisable through October 3, 2004.

In January 2002, the Company issued 50,000 warrants to a consultant of the
Company for services rendered, exercisable at $.333 per share through Janaury 1,
2007. One half of the warrants vest upon the filing of the registration
statement, the remaining half vests 10 days after shares of Company stock begin
trading. A charge of $6,800 was recognized for the issuance of these warrants.

3. STOCK OPTION PLAN

On April 6, 2001, the Company adopted a Stock Option Plan (the "Option Plan").
The Option Plan authorized the granting of both incentive and nonqualified stock
options to employees for up to 1,500,000 shares of common or preferred stock to
officers, directors and key employees. The objectives of the Option Plan include
attracting and retaining the best personnel, providing for additional
performance incentives, and promoting the success of the Company by providing
employees with the opportunity to acquire both Common and Preferred Stock.
Options under the company's Option Plan generally vest over a four-year period,
and generally expire ten years after the grant date.

As discussed in Note H-2, on January 1, 2001, 900,000 stock options were granted
pursuant to employment contracts. 300,000 of the granted shares become
exercisable on each of December 31, 2001, 2002 and 2003. There were no options
exercised or forfeited through March 31, 2002. The exercise price of the
first-year element of the stock option grant is below the fair value of the
company's stock, therefore a 2001 compensation charge of $75,000, computed under
the intrinsic value method, was recognized over the one-year vesting period. The
second and third-year elements contain an exercise price at or above the fair
value of the company's stock at the date of grant and therefore no compensatory
charge has been recorded.

The fair value of each option grant is estimated on the date of grant using the
Black Scholes Option pricing model with the following assumptions used: dividend
yield of 0%, expected volatility of 45%, risk-free interest rate of 4.72% and
expected life of 10 years.



                                      -12-
<PAGE>


4. OTHER STOCK OPTIONS

Valesc Inc. recorded expenses of $38,000 and $218,000 in the periods ended
December 31, 2000 and 2001, respectively, for expenses incurred by several
consultants, representing the estimated fair value of the services rendered. In
March 2001 the company issued equity instruments in lieu of cash for such
expenses incurred. The company initially issued 512,700 shares to such
consultants pursuant to cashless-exercise agreements entered into to discharge
the liabilities. In September 2001, the company informed the consultants that
the agreements were invalid and required revision. All but 78,000 of the
initially issued shares were rescinded or cancelled. The company continues to
carry the costs of these services in accrued expenses for those consultants
whose shares were rescinded or cancelled. The consultants who agreed to retain
70,000 of the 78,000 shares were required to enter into a promissory note
(bearing interest at 3% per annum, commencing six months after issuance) to the
Company for the fair value ($.33) of the shares granted. The promissory note
requires payment of amounts due the Company upon sale of the underlying shares
by the holder. The consultant holding 8,000 of such shares paid the Company for
the shares in July 2001.

5. THE INVESTMENT AGREEMENT WITH SWARTZ

On June 7, 2001 as amended on August 29, 2001 and September 26, 2001 the Company
entered into an Investment Agreement with Swartz Private Equity, LLC ("Swartz")
under which the Company, from time to time, has the option to issue Swartz
shares of Common Stock up to a maximum aggregate offering amount of $20,000,000.
Under the Investment Agreement, shares are issued to Swartz, and Swartz pays for
the shares in transactions referred to as Puts. The Company has the right, at
its sole discretion, to put shares of its Common Stock, to Swartz, which Swartz
must purchase, for a dollar amount of up to $2.0 million in each Put, subject to
additional limitations on the timing of our exercise of Put rights and on the
number of shares Swartz is obligated to purchase. The Company's right to Put
shares to Swartz is for a period of three years beginning on the effective date
of the registration statement.

The purchase price to be paid for the Put Shares by Swartz is equal to the
lesser of (i) the Market Price (as defined below), minus $.09, or (ii) 91% of
the Market Price. The Market Price for each Put equals the average of the two
lowest volume weighted average trading prices of the shares of Common Stock
during the Pricing Period (as defined below) for the applicable Put. The Pricing
Period means, unless otherwise shortened under the terms of the Investment
Agreement, the period beginning on the business day immediately following the
Put Date (as defined below) and ending on and including the date which is 20
business days after such Put Date. The Put Date is the date that is specified in
a written notice delivered to Swartz (the Put Notice) in which the Company
notifies Swartz of our intention to commence a Put.

The Company has the option, on the date of notification to Swartz of a Put, to
designate a minimum price for the shares to be purchased by Swartz in the Put
which is no greater than the lesser of 80% of the closing bid price of our
Common Stock on the day preceding the notice or the closing bid price on that
day minus $.14. If the Company designates a minimum price, Swartz must pay at
least that price for our Common Stock.

As consideration for entering into the Investment Agreement, the Company granted
to Swartz a warrant to purchase 780,000 shares of our Common Stock (the
Commitment Warrants). The exercise price for the Commitment Warrants is: $1.00,
provided that on the date six months after the date of issuance of the warrants,
or October 24, 2001, and on each six month anniversary thereafter, the exercise
price is subject to adjustment based on the lowest closing price for the five
trading days preceding the adjustment.

For financial reporting purposes, the Company computed the value of the warrant
using the Black-Scholes model and assuming a $1.00 exercise price. The resultant
value is considered a deferred offering cost and will be amortized over the life
of the equity agreement. To the extent the exercise price per share is adjusted
pursuant to the formulas mentioned above, the Company will record additional
deferred offering costs.

The Put Shares have demand registration rights and the Commitment Warrants have
semi-annual reset provisions and a 5-year term. The Swartz agreement contains
certain penalties if the Company does not execute minimum financings under this
agreement.

This agreement was terminated on May 21, 2002. The Company wrote-off the balance
of the deferred offering cost in the second quarter of 2002, when the agreement
terminated.

6. TRANSACTION WITH GARRETT MILLER

In January 2001, Valesc entered into an agreement with Garrett Miller, an
officer in the Company, whereby he would exchange purchased shares and earned
(through investment commissions and equity-based compensation) shares of Valesc
Inc. for shares of Atlas Holdings. Valesc recorded a charge to operations of
approximately $84,000 related to the equity-based compensation, during 2001,
prior to the date of the Valesc/OJI merger.



                                      -13-
<PAGE>


NOTE F - NOTES PAYABLE

The principal amount of the notes payable issued by Valesc Inc. mature as
follows:

$130,000 in 2002 and
$ 68,000 in 2003

1. RELATED PARTY NOTES

During the period ended December 31, 2001, the Company received advances from
related parties aggregating $78,000. These notes included detachable warrants as
summarized in Note E-2. These loans bear interest at a rate of 14% per annum,
none of which has been paid to date. Each of the notes are guaranteed by the
company's officers and directors. Of the total proceeds of this financing,
approximately $49,200 was allocated to warrants (Note E).

2. NON-RELATED PARTY NOTES

During the year ended December 30, 2001, the Company issued notes to non-related
parties aggregating $120,000. One loan ($5,000) bears interest at a rate of 10%
per annum, and the second loan ($100,000) and third loans ($15,000) bear
interest at a rate of 14% per annum, none of which has been paid to date.
$100,000 of these notes are due in December 2002, $5000 due in September 2001,
and $15,000 due May 23, 2003. Payment of these notes are guaranteed by the
company's officers and directors. These notes included detachable warrants. Of
the total proceeds of this financing, approximately $78,500 was allocated to
warrants (Note E).

The note due in September 2001, has not been extended, however, the Company has
received a verbal agreement from the noteholder that it will not attempt to
enforce payment.

NOTE G - INCOME TAXES

At December 31, 2001, Valesc Inc. has deferred organizational costs and net
operating loss carryforward of approximately $1,200,000. Deferred tax assets
arise from these net operating loss carryforwards, organization costs and
certain accruals are approximately $660,000. The Company has fully reserved all
deferred tax assets due to the uncertainty of realization.

Changes in ownership resulting from transactions among our stockholders and
sales of common stock by us, may limit annual realization of the tax net
operating loss carryforwards that could become available under Section 382 of
the Internal Revenue Code.

NOTE H - COMMITMENTS AND CONTINGENCIES

1. LEASES

Valesc leased office space under an operating lease that expired in June 2001.
OJI leased office space under a lease which expired in March 2001. The Company
did not lease any office space at December 31, 2001. The Company's OJI
subsidiary has entered into a lease agreement beginning March 1, 2002 which will
result in a monthly rent expense of $880 beginning in April 2002.

2. EMPLOYMENT AGREEMENTS

Effective January 1, 2001, the Company entered into employment agreements with
each of the three executive officers containing identical terms. The agreements
are summarized as follows: (A) initial term of three years, with automatic
one-year renewal terms thereafter; (B) during each year of the first three
years, each executive shall receive: (i) during the first year, an annual base
salary equal to the greater of (a) $50,000 or (b) 2.5% of the total revenue of
the Company and its subsidiaries for such year, up to a maximum of $150,000;
(ii) during the second year, an annual base salary equal to the greater of (a)
$55,000 or (b) 2.5% of the total revenue of the Company and its subsidiaries for
such year, up to a maximum of $165,000; and (iii) during the third year, an
annual base salary equal to the greater of (a) $60,500 or (b) 2.5% of the total
revenue of the Company and its subsidiaries for such year, up to a maximum of
$181,500; (C) the Board of Directors may consider one or more increases in the
salary payable to the executive in respect of any renewal term; (D) in the event
the Company is not in a position, due to our then-current financial situation,
to make any salary payment(s) to the executives, the unpaid salary shall accrue
without interest; (E) all accrued and unpaid salary shall be immediately due and
payable upon the occurrence of any change of control, defined as the sale of a
controlling interest in the Company's capital stock to one or more buyers acting
in concert, the sale of all or substantially all of our assets, or any corporate
merger or consolidation resulting in one or more parties, who did not previously
hold a controlling interest in our capital stock, owning a controlling interest
in our capital stock or our successor company; (F) the executives shall be
eligible to participate in bonuses awarded to senior management to the extent
that such bonuses are awarded or authorized by the Board of Directors from time
to time.

In addition to the foregoing, each executive will be granted the option to
purchase a total of 300,000 shares of Common Stock in equal installments of
100,000 shares at the end of each year of employment. The options shall be
exercisable for a period of three years following the date of vesting, and the
exercise price shall be as follows: (i) $.25 per share for the 100,000 shares
that vest after the first year; (ii) $.50 per share for the 100,000 shares that
vest after the second year; and (iii) $.75 per share for the 100,000 shares that
vest after the third year. In the event the executive is terminated without
cause by Company or the executive terminates his employment for good reason, any
options then outstanding that have neither vested nor been terminated as of such
date shall vest and become subject to purchase by the executive.



                                      -14-
<PAGE>


Effective January 1, 2002 and in connection with our acquisition of OJI
Surgical, Inc., OJI entered into an employment agreement with its President,
Harry Kraus. The agreement provides as follows: (A) an initial term of one year,
with automatic one-year renewal terms thereafter; (B) a monthly salary of
$10,800; (C) all accrued and unpaid salary shall be immediately due and payable
upon the occurrence of any "change of control", defined as the sale of a
controlling interest in OJI's capital stock to one or more buyers acting in
concert, the sale of all or substantially all of our assets, or any corporate
merger or consolidation resulting in one or more parties, who did not previously
hold a controlling interest in OJI's capital stock, owning a controlling
interest in OJI's capital stock; and (D) the executive shall be eligible to
participate in bonuses awarded to senior management to the extent that such
bonuses are awarded or authorized by the Board of Directors of OJI from time to
time.

3. LITIGATION

A shareholder of a predecessor of Atlas Holdings filed a suit against the
predecessor company seeking additional stock ownership of Atlas Holdings. The
case was dismissed for failure to prosecute. Management of Atlas believes there
are valid and meritorious defenses to such claim, if the suit is re-filed.

NOTE I - SUBSEQUENT EVENTS

On July 30, the Company issued two notes totaling $12,000, bearing interest of
40% per year with a due date of January 31, 2003. These notes were guaranteed by
the management of the company.

On August 8, the Company sold 6,250 shares of common stock for $2,500.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

We acquired OJI Surgical, Inc. on December 17, 2001. Prior to the acquisition,
we were not yet an operating company and therefore had financial performance
driven by our expenses associated with becoming operational and completing the
acquisition. OJI Surgical was an operating company for more than 10 years prior
to the acquisition.

COMBINED OPERATING RESULTS OF THE COMPANY

OJI Surgical, Inc. is considered the "accounting acquiror" in the OJI/Valesc
merger, and accordingly the financial statements of OJI are presented through
December 17, 2001, and thereafter includes the consolidated accounts of Valesc
and OJI.

REVENUE

Revenues declined from $61,737 for the quarter ended June 30, 2001 to $54,556
for the quarter ended June 30, 2002. The decline can largely be attributed to
the Company's change of lines it is representing. The company's new lines,
Ascension and Hand Innovations, have not yet generated the level of revenues the
Company previously garnered from the Megadyne product line it is no longer
selling. The more significant decline during the six month comparative periods
from $159,270 during the period ending June 30, 2001 to $109,180 during the
current period are attributable to this change of product lines, as well as
other factors. Approximately one-half of the decline was the result of less
commission income, principally due to our sales force having been reduced to one
person, thus resulting in lesser marketing, solicitation of customers and
potential customers and less sales of all of the products we represent.
Approximately one-half of the decline in revenues resulted primarily from our
decision to cease providing complimentary reconditioning and repair service for
our products and the products of our competitors, and the attendant reduction in
sales staff associated with this elimination of services. These services became
less attractive because of increased competition that resulted in an increasing
administrative burden associated with processing transactions for a broader
range of products. We may re-enter this complementary service offering in the
future, but currently have no plans to do so. We did not separately track
revenues and costs relating to this service offering to our customers.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Our operating expenses increased from $55,220 for the quarter ended June 30,
2001 to $253,597 for the quarter ended June 30, 2002. Similarly, operating
expenses increase from $105,388 during the six months ended June 30, 2001 to
$418,437 in the current period. These increases were primarily a result of the
additional burden of the activities of Valesc Inc. after the merger as well as
the commencement of our expansion plan. Selling, General and Administrative
expenses for the OJI business remained relatively consistent for both quarters.
Costs relating to the OJI operations have been reduced to the lowest sustainable
levels, as there was only one employee (Harry Kraus) serving in a
sales/executive capacity at a fixed salary in both periods, until such time as
we can hire additional sales people and create a fixed and variable-cost
compensation plan for such sales people. These Valesc Inc. and expansion plan
activities included: expenses associated with our reporting obligations under
the Securities Exchange Act of 1934, filings with the Securities and Exchange
Commission pursuant to the Registration Statement declared effective on August,
8, 2002, OJI's rental of new office space and hiring of a new administrative
staff person, and OJI's travel and other costs associated with seeking
additional product lines to represent.



                                      -15-
<PAGE>



INTEREST EXPENSE

Interest on the notes payable are reflected in the financial statements of the
"accounting acquiror" since December 17, 2001.

NET INCOME (LOSS)

Our reported net income of $6,517 for the quarter ended June 30, 2001 as
compared to net loss of ($226,272) for the quarter ended June 30, 2002, OJI
reported a net income of $53,729 for the six months ended June 30, 2001 as
compared to a net loss of ($365,694) for the current period, primarily as a
result of the inclusion of Valesc Inc.'s net losses in the current periods and
the commencement of our expansion plan.

SIGNIFICANT COMMITMENTS OF THE COMBINED ENTITY

We have no significant financial commitments beyond customary payables and
employment contracts. $156,748 of our debt is categorized as short-term as of
June 30, 2002, however, we plan to request extensions of the maturity dates for
much of this debt and believe that our requests will be granted.

CRITICAL ACCOUNTING POLICIES

REVENUE RECOGNITION

In December 1999, the staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin 101, "Revenue Recognition," to provide guidance on the
recognition, presentation, and disclosure of revenue in financial statements.
Our policies on revenue recognition are consistent with this bulletin.
Commission income as a manufacturers' representative on new product sales are
recorded in the period during which the underlying product sale occurs. Product
returns by our customers are rare due to the specialized nature of the product,
and therefore, we have concluded that no material allowance for refundable
commission income on returned products is necessary at March 31, 2002 and
December 31, 2001. Our revenues from product sales and service income are
derived from the sale of new products distributed by us, and the refurbishment
of used products. Revenue is recognized as products are delivered to our
customers. As of the end of 2001 and during 2002, we were not distributing any
new or refurbished products.

STOCK-BASED COMPENSATION

As permitted by the Statement of Financial Accounting Standards No. 123 (SFAS
No. 123), Accounting for Stock-Based Compensation, the Company accounts for
stock-based employee compensation arrangements in accordance with provisions of
Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued
to Employees." Compensation expense for stock options issued to employees is
based on the difference, on the date of grant, between the fair value of the
Company's stock and the exercise price of the option. The Company accounts for
equity instruments issued to non-employees in accordance with the provisions of
SFAS No. 123 and Emerging Issues Task Force (EITF) Issue No. 96-18, "Accounting
for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or
in Conjunction With Selling, or in Conjunction With Selling, Goods or Services."
All transactions in which goods or services are the consideration received for
the issuance of equity instruments are accounted for based on the fair value of
the consideration received or the fair value of the equity instrument issued,
whichever is more reliably measurable. The measurement date of the fair value of
the equity instrument issued is the date on which the counter-party's
performance is complete.

LIQUIDITY AND CAPITAL RESOURCES OF THE COMBINED ENTITY

As of June 30, 2002, we had cash and cash equivalents of $48,000, negative
working capital of ($856,000) and a stockholder's equity (deficiency) of
($889,000). We have no credit or financing facility in place at the present
time. Valesc Inc. received approximately $225,000 during the six months ended
June 30, 2002 from private placements of equity. Cash used in operating
activities of Valesc Inc. was approximately $(200,000) during the period ended
June 30, 2002. The consolidated financial statements indicate that the
profitability and operating contribution of OJI have not been sufficient to
offset the developmental and expansion expenses reflected in the Valesc
financial statements. Until we can significantly expand the business of OJI we
will be unlikely to achieve profitability. As of June 30, 2002, our current
assets are less than the cash requirements of the Company for three months
activities. As a result of our lack of profitability, our accountants, in their



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report on the our financial statements for the period ended December 31, 2001,
included an explanatory paragraph indicating there is substantial doubt about
our ability to continue as a going concern. The time and money required before
we can complete our expansion plan and implement our growth strategy cannot be
estimated with precision. We expect significant expenditures associated with
entering into the expansion plan, including the cost of hiring and "sponsoring"
new salespeople and the cost of the upgraded software and administrative
infrastructure necessary to manage them, as well as travel and other expenses
associated with acquiring new product lines and territories. Our anticipated
cash requirements for the next twelve months are approximately $550,000, which
includes $250,000 to fund the expansion plan and an expected cash-flow deficit
from regular operations of $300,000. Because we do not expect the expansion plan
to begin contributing significantly to revenue during the next twelve months, we
anticipate a negative cash-flow from regular operations similar to the previous
year. The Company has commitments under employment agreements with each of its
three executive officers. Additionally, the Company has lease commitments
totaling approximately $32,000 through March 31, 2005.

SUBSEQUENT EVENTS

On July 30, the Company issued two notes totaling $12,000, bearing interest of
40% per year with a due date of January 31, 2003. These notes were guaranteed by
the management of the company.

On August 8, the Company sold 6,250 shares of common stock for $2,500.


PART II -- OTHER INFORMATION

   ITEM 2(c). CHANGES IN SECURITIES.

           On April 29, 2002, we sold 75,000 shares of our common stock to Tim
Kain, an unrelated investor for $30,000, or $.40 per share, with options for the
purchase of 75,000 additional shares. The options are not exercisable until six
months after August 8, 2002, which was the date our registration statement on
Form SB-2 was declared effective, and expire on May 1, 2005. The options are
exercisable at a price equal to 70% of the average closing price of our common
stock in the ten trading days prior to the exercise date. The sale of the shares
and options was accomplished in reliance upon Section 4(2) of the Securities
Act. The facts relied upon for exemption are that Tim Kain is an accredited
investor, a sophisticated purchaser and had full access to the information on
the company necessary to make an informed investment decision by virtue of the
due diligence conducted by the purchaser or available to the purchaser prior to
the transaction.

           On May 8, 2002, we sold 12,500 shares of our common stock to Matt
Williams, an unrelated investor, for $5,000, or $.40 per share, with options for
the purchase of 12,500 additional shares. The options are not exercisable until
six months after August 8, 2002, which was the date our registration statement
on Form SB-2 was declared effective, and expire on May 1, 2005. The options are
exercisable at a price equal to 70% of the average closing price of our common
stock in the ten trading days prior to the exercise date. The sale of the shares
and options was accomplished in reliance upon Section 4(2) of the Securities
Act. The facts relied upon for exemption are that Matt Williams is an accredited
investor, a sophisticated purchaser and had full access to the information on
the company necessary to make an informed investment decision by virtue of the
due diligence conducted by the purchaser or available to the purchaser prior to
the transaction.

           On May 20, 2002, Atlas Holdings Inc., the holder of 82.8% of our
stock on such date, which had no business or assets and served only as a holding
company, was merged into us. Pursuant to the merger (a) each issued and
outstanding share of the stock of Atlas was exchanged for 986.12568 shares of
our common stock, for a total of 8,458,000 shares of our common stock to the
Atlas shareholders, and (b) 8,458,000 shares of our common stock owned by Atlas
prior to the merger were cancelled. Jeremy Kraus, our Chairman and Chief
Executive Officer, Garrett Miller, our Vice President and Director, Samuel
Cohen, our President and Director, and Harry Kraus, the President of our
subsidiary, OJI Surgical, Inc. and a Director, owned 41%, 25%, 25% and 2%,
respectively, of Atlas before the merger. As a result of the merger, they
beneficially owned 34%, 21%, 21% and 2%, respectively, of our common stock. The
exchange of shares was accomplished in reliance upon Section 4(2) of the
Securities Act. The facts relied upon for exemption are that each of the Atlas
shareholders is an accredited investor, a sophisticated purchaser and had full
access to the information on us necessary to make an informed investment
decision by virtue of the due diligence conducted by the shareholder or
available to the shareholder prior to the transaction.


           On April 24, 2001, as consideration for making a financing commitment
to us, Swartz Private Equity was issued the Commitment Warrants, subsequently
amended with an issue date of May 21, 2002, to purchase 780,000 shares of our
common stock. The exercise price for the Commitment Warrants is $1.00 per share,
provided that on each six month anniversary of the issue date of May 21, 2002,
if the shares are trading at that time, the exercise price is subject to
adjustment based on the lowest closing price for the five trading days preceding
the adjustment. The issuance of the warrants was accomplished in reliance upon
Section 4(2) of the Securities Act. The facts relied upon for exemption are that
Swartz is an accredited investor, a sophisticated purchaser and had full access
to the information on us necessary to make an informed investment decision by
virtue of the due diligence conducted by the purchaser or available to the
purchaser prior to the transaction.


           On June 14, 2002, we sold 37,500 shares of our common stock to Mark
Walsh, an unrelated investor, for $15,000, or $.40 per share, with options for
the purchase of 37,500 additional shares. The options are not exercisable until
six months after August 8, 2002, which was the date our registration statement
on Form SB-2 was declared effective, and expire on June 1, 2005. The options are
exercisable at a price equal to 70% of the average closing price of our common
stock in the ten trading days prior to the exercise date. The sale of the shares
and options was intended to be accomplished in reliance upon Section 4(2) of the
Securities Act. However, because we provided the investor with a copy of our
registration statement on Form SB-2 that was on file with the Commission, but
not yet effective, and available publicly on the Commission's EDGAR database, in
response to a due diligence request by the investor prior to the sale, we may
have engaged in a "general solicitation" invalidating the Section 4(2) exemption
from registration. The facts relied upon for exemption are that Mark Walsh is an
accredited investor, a sophisticated purchaser and had full access to the
information on us necessary to make an informed investment decision by virtue of
the due diligence conducted by the purchaser or available to the purchaser prior
to the transaction.

           On June 21, 2002, we sold 62,500 shares of our common stock to Brian
Kraus for $25,000, or $.40 per share, with options for the purchase of 62,500
additional shares. The options are not exercisable until six months after August
8, 2002, which was the date our registration on Form SB-2 was declared
effective, and expire on June 1, 2005. The options are exercisable at a price
equal to 70% of the average closing price of our common stock in the ten trading
days prior to the exercise date. The sale of the shares and options was intended
to be accomplished in reliance upon Section 4(2) of the Securities Act. However,
because we provided the investor with a copy of our registration statement on
Form SB-2 on file with the Commission, but not yet effective, and available
publicly on the Commission's EDGAR database, in response to a due diligence
request by the investor prior to the sale, we may have engaged in a "general
solicitation" invalidating the Section 4(2) exemption from registration. The
facts relied upon for exemption are that Brian Kraus is an accredited investor,
a sophisticated purchaser and had full access to the information on us necessary
to make an informed investment decision by virtue of the due diligence conducted
by the purchaser or available to the purchaser prior to the transaction.

ITEM 2(d). USE OF PROCEEDS.


           The Company's Registration Statement on Form SB-2 (the "Registration
Statement"), file number 333-89002, was declared effective by the Commission on
August 8, 2002. The Registration Statement covers only resales of outstanding
shares of the Company's common stock from time to time by certain stockholders
and warrant holders. The Company will not receive any of the proceeds from sales
of shares registered under the Registration Statement.


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits: See Exhibit Index on page 19.

     (b) Reports on Form 8-K: The Company filed a report on Form 8-K on
May 22, 2002 reporting Items 1 and 2 pertaining to the merger of Atlas Holdings
Inc. into the Company.


                                      -17-


<PAGE>


                                   SIGNATURES

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

Valesc Inc.
(Company)

By: /s/ JEREMY KRAUS
    ----------------
Jeremy Kraus
Chairman and Chief Executive Officer

August 14, 2002

/S/ SAMUEL COHEN
----------------
Samuel Cohen
Director and President
(chief financial and accounting officer)

August 14, 2002

/S/ GARRETT MILLER
-------------------
Garrett Miller
Director and Vice President

August 14, 2002


                                      -18-


<PAGE>


EXHIBITS AND FINANCIAL STATEMENT SCHEDULES


           Index of exhibits required by Item 601 of Regulation S-B:

           2.1    Merger Agreement dated as of March 21, 2001 between Valesc
                  Inc. and NetCentral Capital Fund, Inc. (filed as part of our
                  Form 8-K filed on March 23, 2001 and incorporated herein by
                  reference);

           2.2    Share Purchase Agreement dated December 3, 2001 between Valesc
                  Inc., SMT Enterprises Corporation and OJI Surgical, Inc. for
                  the acquisition of OJI by Valesc (filed as part of our Form
                  8-K filed on December 21, 2001 and incorporated herein by
                  reference);

           2.3    Merger Agreement dated May 20, 2002 between Valesc Inc. and
                  Atlas Holdings Inc. (filed as part of our Form 8-K filed on
                  May 22, 2002 and incorporated herein by reference);

           3.1    Amended and Restated Certificate of Incorporation (filed as
                  part of our Form 8-K filed on March 23, 2001 and incorporated
                  herein by reference);

           3.2    Amended and Restated By-Laws (filed as part of our Form 8-K
                  filed on March 23, 2001 and incorporated herein by reference);

           4.1    Specimen Certificate for Common Stock (filed as part of our
                  Form SB-2 filed on June 27, 2002 and incorporated herein by
                  reference);

           10.1   2001 Stock Option Plan (filed as part of our Form S-8 filed
                  April 6, 2001 and incorporated herein by reference);

           10.2   Amended and Restated Employment Agreement between Valesc Inc.
                  and Jeremy Kraus dated January 1, 2002(filed as part of our
                  Form SB-2 filed on June 27, 2002 and incorporated herein by
                  reference);


           10.3   Amended and Restated Employment Agreement between Valesc Inc.
                  and Samuel Cohen dated January 1, 2002 (filed as part of our
                  Form SB-2 filed on June 27, 2002 and incorporated herein by
                  reference);


           10.4   Amended and Restated Employment Agreement between Valesc Inc.
                  and Garrett Miller dated January 1, 2002(filed as
                  part of our Form SB-2 filed on June 27, 2002 and incorporated
                  herein by reference);


           10.5   Amended and Restated Employment Agreement between OJI
                  Surgical, Inc. and Harry Kraus dated January 1, 2002 (filed as
                  part of our Form SB-2 filed on June 27, 2002 and incorporated
                  herein by reference);


           10.6   Manufacturer's Representative Agreement dated June 1, 1996, as
                  amended, between OJI Surgical, Inc., and Acumed, Inc. (filed
                  as part of our Form SB-2 filed on June 27, 2002 and
                  incorporated herein by reference);


           10.7   Sales Representative Agreement dated July 1, 2000, between
                  Harry Kraus, as representative, and Smith & Nephew, Inc.
                  (filed as part of our Form SB-2 filed on June 27, 2002 and
                  incorporated herein by reference);

           10.8   Sales Representative Agreement dated July 2, 2000, between
                  Harry Kraus, as representative, and Smith & Nephew
                  Orthopaedics; (filed as part of our Form SB-2 filed on June
                  27, 2002 and incorporated herein by reference);

           10.9   Sales Representation Agreement dated March 1, 2002 between OJI
                  Surgical, Inc./Harry Kraus and Hand Innovations, Inc. (filed
                  as part of our Form 10-QSB filed on May 15, 2002 and
                  incorporated herein by reference);

           10.10  Lease dated as of February 13, 2002 between Harry Kraus and
                  OJI Surgical, Inc., and American Property Management Corp.
                  (filed as part of our Form 10-QSB filed on May 15, 2002 and
                  incorporated herein by reference);

           10.11  Second Amended Commitment Warrant to Purchase Common Stock
                  between Valesc Inc. and Swartz Private Equity, L.L.C. with an
                  issue date of May 21, 2002 (filed as
                  part of our Form SB-2 filed on May 24, 2002 and incorporated
                  herein by reference);

           10.12  Shareholders Agreement dated May 21, 2002 by and among Valesc
                  Inc., Harry Kraus, Edward Kraus, Jeremy Kraus, Garrett Miller
                  and Samuel Cohen (filed as
                  part of our Form SB-2 filed on May 24, 2002 and incorporated
                  herein by reference);

           10.13  Termination Agreement dated May 21, 2002 by and between Valesc
                  Inc. and Swartz Private Equity, LLC (filed as
                  part of our Form SB-2 filed on May 24, 2002 and incorporated
                  herein by reference);

           99.1   Certification of Chief Executive Officer and Chief Financial
                  Officer regarding periodic report.


                                      -19-


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