<PAGE>

                                  UNITED STATES
                       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 September 30, 2002

[ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

             For the transition period from __________ to __________

                         Commission file number 0-31459

                                   Valesc Inc.
        -----------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)


          Delaware                                       23-3048857
-------------------------------                ---------------------------------
(State or other jurisdiction of                (IRS Employer Identification No.)
 incorporation or organization)


                   2300 Coit Road, Suite 300B, Plano, TX 75075
        -----------------------------------------------------------------
                    (Address of principal executive offices)


                                 (972) 495-3900
        -----------------------------------------------------------------
                           (Issuer's telephone number)

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.

Yes [X] No [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

    State the number of shares outstanding of each of the issuer's classes of
     common equity, as of the latest practicable date: 10,948,301 shares of
          common stock issued and outstanding as of November 19, 2002.

         Transitional Small Business Disclosure Format (check one);
         Yes [ ]  No  [X]


<PAGE>

                                   Valesc Inc.

                                      INDEX

PART I - FINANCIAL INFORMATION

  Item 1. Financial Statements                                             Page

            Consolidated Balance Sheet                                       3

            Consolidated Statements of Operations                            4

            Consolidated Statement of Stockholders' Deficit                  5

            Consolidated Statements of Cash Flows                            6

            Notes to Consolidated Financial Statements                       7

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

  Item 3. Controls and Procedures                                           16


PART II - OTHER INFORMATION

  Item 2.  Changes in Securities                                            17

  Item 6.  Exhibits and Reports on Form 8-K                                 19

             Signatures                                                     20

             Certifications under Section 302 of the Sarbanes-Oxley
               Act of 2002                                                  21





                                      -2-
<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                           Valesc Inc. and Subsidiary

                     CONSOLIDATED BALANCE SHEET (unaudited)

                               September 30, 2002


ASSETS

Current Assets

Cash                                                               $  27,090
Accounts Receivable                                                   13,001
Prepaid Expenses                                                       2,688
                                                                   ---------

Total Current Assets                                               $  42,779

Property and equipment - net                                           5,428
                                                                   ---------

Total Assets                                                       $  48,207
                                                                   =========

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities

Accounts Payable                                                   $ 397,135
Current maturities of notes payable, net of debt discount
  of $10,461                                                         132,039
Accrued interest payable                                              23,906
Accrued expenses and other current liabilities                       232,945
Officers' salaries payable                                           176,805
                                                                   ---------

Total Current Liabilities                                            962,830

Notes Payable - long term, net of debt discount of $4,520             10,480
                                                                   ---------
Total Liabilities                                                    973,310

Potentially refundable common stock                                   40,000

Commitments and contingencies                                           --

Stockholders' Deficit
Preferred stock; $.0001 par value;
  20,000,000 shares authorized,
  none issued and outstanding                                           --
Common stock, $.0001 par value;
  100,000,000 shares authorized;
  10,864,705 shares issued and outstanding
  as of September 30, 2002                                               171
Additional paid-in capital                                           341,249
Accumulated deficit                                               (1,306,523)
                                                                   ---------

Total Stockholders' Deficit                                         (965,103)
                                                                   ---------

Total liabilities and stockholders' deficit                        $  48,207
                                                                   =========


SEE NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS.


                                      -3-

<PAGE>



                           Valesc Inc. and Subsidiary

                CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>

                                                     Nine Months Ended September 30,  Three Months Ended September 30,
                                                          2002          2001              2002             2001
                                                       -----------   ------------      -----------      ---------
<S>                                                  <C>             <C>              <C>             <C>
Commission Income                                      $    169,134    $    202,665   $     59,954    $     43,395

Selling, general and administrative expenses                667,486         177,467        249,049          72,079
                                                       ------------    ------------   ------------    ------------

Income (Loss) from Operations                              (498,352)         25,198       (189,095)        (28,684)

Interest Expense                                             92,646           5,380         36,209           5,227
                                                       ------------    ------------   ------------    ------------

NET INCOME (LOSS)                                      $   (590,997)   $     19,818       (225,303)        (33,911)
                                                       ============    ============   ============    ============

Basic income (loss) per shares                         $       (.06)   $        .00   $       (.02)   $        .00
                                                       ------------    ------------   ------------    ------------

Diluted income (loss) per share                        $       (.06)   $        .00   $       (.02)   $        .00
                                                       ============    ============   ============    ============

Weighted average shares outstanding used in
  Computing basic income (loss) per common share
  (as adjusted for stock split and effect of merger)     10,266,165       9,708,548     10,477,619       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)     10,266,165      10,364,839     10,477,619      10,511,350

</TABLE>

SEE NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL 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.




                                      -4-

<PAGE>


<TABLE>
<CAPTION>


                                                         Valesc Inc. and Subsidiary

                                          CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT (UNAUDITED)

                                                For the nine months ended September 30, 2002

                                --------------------------- -- ----------------- ----------------- ------------------
                                       Common Stock
                                   Number of       Value         Additional      Accumulated      Total Shareholders'
                                    Shares                    Paid-in Capital       Deficit        Equity (Deficit)
                                ---------------- ----------- ------------------- ----------      --------------------
<S>                             <C>               <C>         <C>               <C>             <C>
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                            193,750            19           37,481             --               37,500

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

Issuance of shares of Common
     Stock for services rendered      100,000            10           49,990             --               50,000

Issuance of shares of Common
     Stock for the cancellation
     of notes payable and interest    362,407            36           97,028             --               97,064

Net Loss - Nine Months Ended
      September 30, 2002                   --            --               --       (590,997)            (590,997)
                                   ----------   -----------      -----------    -----------           ----------
Balance September 30, 2002         10,864,705         $ 171      $   341,249    $(1,306,523)          $ (965,103)
                                  ===========   ===========      ===========    ============          ===========
</TABLE>



SEE NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS.




                                      -5-


<PAGE>




                                     Valesc Inc. and Subsidiary

                           CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

                                   Nine Months Ended September 30
<TABLE>
<CAPTION>

                                                                        2002                2001
<S>                                                                  <C>                 <C>
Cash flows from operating activities
     Net income (loss)                                               $(590,997)           $19,818
     Adjustments to reconcile net income
       (loss) to net cash provided by (used in)
        operating activities
             Depreciation and amortization                              34,528              5,618
             Issuance of warrants                                        6,800                 --
             Stock based compensation                                   50,000                 --
             Noncash interest accretion                                 67,084                 --
             Changes in assets and liabilities
                    Accounts receivable                                  7,559              6,778
                    Prepaid expenses                                    (2,688)             1,141
                    Accounts payable                                    60,550             (7,976)
                    Accrued expenses and other current liabilities       4,029                 --
                    Accrued officers' salaries                          71,287                 --
                    Accrued interest payable                            23,764                 --
                                                                     ---------           --------

Net cash provided by (used in) operating activities                   (268,084)            25,379

Cash flows from investing activities
     Purchase of equipment                                              (1,137)            (3,386)
                                                                     ---------           --------

Net cash used in investing activities                                   (1,137)            (3,386)

Cash flows from financing activities
Issuance of common stock                                               187,500                 --
Issuance of notes payable                                               42,500             (8,623)
Proceeds from potentially refundable common stock                       40,000                 --
                                                                     ---------            -------

Net cash provided by (used in) financing activities                    270,000             (8,623)

Net increase in cash                                                       779             13,370

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

Cash at end of period                                                $  27,090             15,050
                                                                     =========            =======

Supplemental disclosures of cash flow information:

Cash paid during the period for interest                             $    --              $   168
                                                                     =========            =======
</TABLE>


SEE NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS.

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

DURING THE NINE MONTHS ENDED SEPTEMBER 30, 2002 THE COMPANY CONVERTED CERTAIN
NOTES PAYABLE ($83,000 IN PRINCIPAL) TO COMMON STOCK.



                                      -6-

<PAGE>


                           VALESC INC. AND SUBSIDIARY

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                 Three and Nine Months Ended September 30, 2002

NOTE A - DESCRIPTION OF BUSINESS AND FORMATION OF COMPANY

The accompanying consolidated financial statements of Valesc Inc. and
Subsidiary the "Company" present the accounts of OJI Surgical, Inc. for the
three and nine months ended September 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 consolidated 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 to make the financial statements not misleading. 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 nine months
ended September 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 was 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
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.

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 OJI 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

                                      -7-
<PAGE>
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 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 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 September 30, 2002, the
Company has a stockholders' deficit of approximately $965,000. For the period
ended September 30, 2002, the Company had net losses of approximately $591,000.
These factors raise substantial doubt about the Company's ability to continue as
a going concern. 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.

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:

                                      -8-
<PAGE>


o  The Company recently began trading on the Over-the-Counter Bulletin Board, a
   change that management believes will increase investor interest in the
   Company
o  Raise additional funding through the sale of debt and equity instruments to
   fund activities.
o  From October 1 through November 14, 2002, the Company received proceeds from
   the issuance of common stock and notes of $12,500.

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. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

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 September 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)
                         Nine Months Ended September 30,

                                                         2001
                                                        ------

            Commission income                          $202,665
                                                       --------
            Operating expenses
               Merger expense                            75,000
               Equity-based compensation expense        140,830
            Selling, general and administrative
                    expense                             789,641
                                                      ---------
            Total expenses                            1,005,474
                                                      ---------
            Loss from operations                       (802,806)

               Interest expense                          32,728

               Income tax expense                         5,380
                                                      ---------
            Net loss                                   (840,914)
                                                       ========
            Net loss per common share - basic
                and diluted                               $(.09)

            Weighted average shares outstanding       9,356,599


NOTE D - SUMMARY OF SIGNIFICANT 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 September 30, 2002 and
September 30, 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 the nine months ended

                                      -9-
<PAGE>


September 30, 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 1,619,000 for the three months
ended September 30, 2001 and 2002, respectively. The diluted earnings per share
for the nine months ended September 30, 2002 does not include the effect of
1,619,000 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. 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 each of the operating periods being
reported thereon.

5. 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.

6. 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, 2001, all
previously recognized goodwill and intangible assets with indefinite lives will
no longer be subject to amortization.

o effective September 1, 2001, 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 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.

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



                                      -11-
<PAGE>

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 Section
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.

During the third quarter of 2002, the Company sold 6,250 shares of common stock
to Norman Slackman for $2,500. Proceeds were used for working capital purposes.

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. Proceeds of approximately $128,000 were 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.

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

                                      -12-
<PAGE>


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.

NOTE F - NOTES PAYABLE

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

$142,500 in 2003 and
$ 15,000 in 2004

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

                                      -13-
<PAGE>


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.
The Company did not lease any office space at December 31, 2001. The Company's
OJI subsidiary entered into a lease agreement beginning March 1, 2002 which has
a monthly rent expense of $880.

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.

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.

                                      -14-
<PAGE>

NOTE I - SUBSEQUENT EVENTS

On October 20, 2002 the Company sold 20,000 shares of common stock for $10,000.

On October 22, 2002 an investor converted his convertible debenture of $15,000
plus accrued interest into 25,418 shares of common stock

On November 1, 2002 an investor converted his convertible debenture of $15,000
plus accrued interest into 38,178 shares of common stock.

On November 7, 2002 the company announced a letter of intent to acquire Morris
Medical for 650,000 shares of Valesc common stock. Morris Medical is also in the
field of medical device sales and generates revenues of approximately $500,000
per year from sales territories primarily in Texas.

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

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 generated amounted to $43,395 for the quarter ended September 30, 2001
and $59,954 for the quarter ended September 30, 2002. The increase can largely
be attributed to the Company's change of product lines it is representing, as
well as an increase in sales personnel. The Company's new lines, Ascension and
Hand Innovations, have begun to generate revenues for the Company. In addition,
the Company added a second sales person during the period. The decline during
the nine month comparative periods from $202,665 during the period ending
September 30, 2001 to $169,134 during the current period are attributable to the
building of new 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 for most of the current nine month
period and the time required to build our new product lines, thus resulting in
lesser marketing, solicitation of customers and potential customers and reduced
sales of the products we represent. Approximately one-half of the decline in
revenues resulted primarily from our decision to cease providing complementary
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 $72,079 for the quarter ended September
30, 2001 to $249,049 for the quarter ended September 30, 2002. Similarly,
operating expenses increased from $177,467 during the nine months ended
September 30, 2001 to $667,486 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 periods. 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 and sales people.

INTEREST EXPENSE

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

NET INCOME (LOSS)

Our reported net loss of ($33,911) for the quarter ended September 30, 2001 as
compared to net loss of ($225,303) for the quarter ended September 30, 2002, is
primarily as a result of the inclusion of Valesc Inc.'s net losses in the
current periods and the commencement of our expansion plan. Our reported loss
of ($590,997) compared to a net income of $19,818 is attributed to the same
factors.

SIGNIFICANT COMMITMENTS OF THE COMBINED ENTITY


                                      -15-
<PAGE>


We have no significant financial commitments beyond customary payables and
employment contracts. $132,039 of our debt is categorized as short-term as of
September 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.

VALUATION OF OPTIONS AND WARRANTS

The Company has issued substantial amounts of warrants to purchase common stock
in connection with financing activities and as payment for services and other
items. We recorded the cost attributable to those issues on the basis of the
Black-Scholes option valuation model. The use of this model requires some
highly subjective assumptions including expected stock price volatility. The
lack of comparable companies in the public markets and our limited market
experience tend to make those assumptions even more subjective.

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 September 30, 2002, we had cash and cash equivalents of approximately
$27,000, negative working capital of approximately $920,000 and a stockholder's
deficit of approximately $965,000. We have no credit or financing facility in
place at the present time. Valesc Inc. received approximately $270,000 during
the nine months ended September 30, 2002 from private placements of equity and
debt. Cash used in operating activities of Valesc Inc. was approximately
$268,000 during the period ended September 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
September 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 report on 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.

   ITEM 3.  CONTROLS AND PROCEDURES.

We maintain a system of controls and procedures designed to provide reasonable
assurance as to the reliability of the financial statements and other
disclosures included in this report, as well as to safeguard assets from
unauthorized use or disposition. Within 90 days prior to the filing of this
report, our Chief Executive Officer and principal financial officer have
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures with the assistance and participation of other members
of management. Based upon that evaluation, our Chief Executive Officer and
principal financial officer concluded that our disclosure controls and
procedures are effective for gathering, analyzing and disclosing the information
the Company is required to disclose in the reports it files under the Securities
Exchange Act of 1934 within the time periods specified in the SEC's rules and
forms. There have been no significant changes in the Company's internal controls
or in other factors which could significantly affect internal controls
subsequent to the date the Company carried out its evaluation.

                                      -16-
<PAGE>

PART II -- OTHER INFORMATION


   ITEM 2. CHANGES IN SECURITIES.

       On August 1, 2002, we sold 6,250 shares of common stock to a qualified
investor, namely Norman Slackman, at $.40 per share, or an aggregate of $2,500,
and issued him an option expiring on July 1, 2005 to purchase up to 6,250 shares
of common stock. 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 Norman Slackman 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 September 4, 2002, we sold a convertible debenture in the principal
amount of $15,000 to a qualified investor, namely David Baskin, pursuant to the
terms of a Debenture Purchase Agreement. The convertible debenture will pay
interest at the rate of 10% per annum, with principal and interest due on August
31, 2003, and is convertible into shares of our common stock at $.40 per share,
and is personally guaranteed by each of the Company's executive officers, namely
Jeremy Kraus, Samuel Cohen and Garrett Miller. The sale of the debenture was
accomplished in reliance upon Section 4(2) of the Securities Act. The facts
relied upon for exemption are that David Baskin 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 September 9, 2002, we sold a convertible debenture in the principal
amount of $15,000 to a qualified investor, namely Robert Scheinberg, pursuant to
the terms of a Debenture Purchase Agreement. The convertible debenture will pay
interest at the rate of 10% per annum, with principal and interest due on
September 30, 2003, and is convertible into shares of our common stock at $.60
per share. The sale of the debenture was accomplished in reliance upon Section
4(2) of the Securities Act. The facts relied upon for exemption are that Robert
Scheinberg 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 September 18, 2002, we sold 35,298 shares of common stock to a
qualified investor, namely Edward Kraus, at $.50 per share, or an aggregate of
$17,649.15, in connection with the cancellation of a previous loan from the
investor to the Company. The sale of the shares was accomplished in reliance
upon Section 4(2) of the Securities Act. The facts relied upon for exemption are
that the investor 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 September 18, 2002, we sold 62,508 shares of common stock to a
qualified investor, namely Harry Kraus, at $.50 per share, or an aggregate of
$31,254.25, in connection with the cancellation of previous loans from the
investor to the Company. The sale of the shares was accomplished in reliance
upon Section 4(2) of the Securities Act. The facts relied upon for exemption are
that the investor 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.


                                      -17-
<PAGE>


       On September 18, 2002, we sold 46,656 shares of common stock to a
qualified investor, namely Milton and Golda Toorans, at $.50 per share, or an
aggregate of $23,827.95, in connection with the cancellation of a previous loan
from the investor to the Company. The sale of the shares was accomplished in
reliance upon Section 4(2) of the Securities Act. The facts relied upon for
exemption are that the investor 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 September 18, 2002, we sold 3,944 shares of common stock to a
qualified investor, namely Wetlands Mitigation Services, LLC, at $.50 per share,
or an aggregate of $1,971.92, in connection with the cancellation of a previous
loan from the investor to the Company. The sale of the shares was accomplished
in reliance upon Section 4(2) of the Securities Act. The facts relied upon for
exemption are that the investor 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 September 23, 2002, we issued an aggregate of 100,000 shares of common
stock to the qualified designees of Vfinance Investments, Inc., a financial
services company that provides investment banking and brokerage services, as
compensation for financial services to be provided by Vfinance to us. At the
direction of Vfinance, we issued common stock directly to each of the following
qualified investors: Joyce and Marc Siegel - 5,000 shares; Ilene Mirman 45,000
shares; Phil Smolowitz - 7,500 shares; David Rich - 1,500 shares; Matt Tugwell -
3,500 shares; and Jonathan Rich - 12,500 shares (together, the "Qualified
Investors"). The issuance of the shares to the Qualified Investors was
accomplished in reliance upon Section 4(2) of the Securities Act. The facts
relied upon for exemption are that each of the Qualified Investors 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 investor or available to the
investor prior to the transaction.




                                      -18-
<PAGE>



   ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits: See Exhibit Index on page 23.

     (b) Reports on Form 8-K: The Company filed a report on Form 8-K dated
September 24, 2002 reporting Item 5.



                                      -19-
<PAGE>


                                   SIGNATURES

     In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Date: November 20, 2002

                                  Valesc Inc.
                                  (Registrant)

                                   By: /s/ Samuel Cohen
                                       -----------------------------
                                       Samuel Cohen
                                       President





                                      -20-

<PAGE>


                                  CERTIFICATION

I, Jeremy Kraus, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Valesc Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 20, 2002                 /s/ Jeremy Kraus
                                        ------------------------
                                        Jeremy Kraus
                                        Chief Executive Officer




                                      -21-

<PAGE>
                                  CERTIFICATION

I, Samuel Cohen, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Valesc Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 20, 2002              /s/ Samuel Cohen
                                     ------------------------
                                     Samuel Cohen
                                     President and Principal Financial Officer



                                      -22-
<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);

10.14  Shareholders Agreement dated September 18, 2002 by and among Valesc Inc.,
       Harry Kraus, Edward Kraus and Milton and Golda Toorans;

10.15  Addendum to Shareholders Agreement dated September 18, 2002 amending
       Shareholders Agreement dated May 21, 2002 by and among Valesc Inc.,
       Harry Kraus, Edward Kraus, Jeremy Kraus, Garrett Miller and Samuel Cohen;

99.1   Certification of Chief Executive Officer regarding periodic report.

99.2   Certification of Principal Financial Officer regarding periodic report.

                                      -23-