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UNITED STATES



SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-KSB


(Mark One)


|      |                                                                                     
|----- | ------------------------------------------------------------------------------------
|[ X ] | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

For the fiscal year ending December 31, 2002

OR

| |                                                                                                        
| | -------------------------------------------------------------------------------------------------------
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
               EXCHANGE ACT OF 1934



Commission file number 000-25485



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


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|                                                                              |                                           |                                           
|----------------------------------------------------------------------------- | ----------------------------------------- | ------------------------------------------
|                                                                              |                                           |                                           
|Nevada                                                                        |                                           | 88-0380544                                
|(State or other jurisdiction of
      incorporation or organization)          |                                           | (I.R.S. Employer
      Identification No.)
|                                                                              |                                           |                                           
|3220 Westleigh Ave.; Las Vegas, NV        
                   89102          
|(Address of principal executive offices)     
            Zip Code           
|                                                                              |                                           |                                           
|Registrant's telephone
      number, including area code:      (702) 210-1881
|                                                                              |                                           |                                           
|                                                                              |                                           |                                           
|Title of each class                                                           | Name of Each Exchange on Which Registered
|None                                                                          | _________________                        
|                                                                              |                                          
|Securities to be registered under Section 12(g) of
        the Act:          
|Common Stock, $0.001par value
        (Title of Class)                       

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 [ ] No [ X]

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

State issuer's revenue for its most recent fiscal year: $0

The aggregate market value of the common stock held by non-affiliates based
  upon the closing price of such stock as of May 15, 2003 was $211,991.

ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS

Check weather the issuer has filed all documents and reports required to be
  filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
  of securities under a plan confirmed by a court. Yes [ ] No [ ]

APPLICABLE ONLY TO CORPORATE REGISTRANTS

The number of shares outstanding of the issuer's common stock as of December
  31, 2002 was 22,058,626 shares

DOCUMENTS INCORPORATED BY REFERENCE:

None

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PART I

ITEM 1. DESCRIPTION OF BUSINESS

Development of the Company.

The company was incorporated in the state of Nevada on November 5, 1996 under
  the name Med Mark, Inc. In 1998, Elast Technologies Corporation, a Delaware
  corportion, ("Elast Delaware") merged with and into Elast Merger,
  Inc., a Nevada corporation, which was a wholly owned subsidiary of Med Mark,
  Inc. On or about June 29, 1998, the company filed a Certificate of Amendment
  to its articles of incorporation changing its name to Elast Technologies, Inc.
  Pursuant to an acquisition agreement entered into on June 11, 2001, Elast Technologies,
  Inc. acquired one hundred percent of the issued and outstanding shares of common
  stock of PTS, Inc. ("PTS"), a Nevada corporation, from the shareholders
  of PTS, in exchange for a total of 450,000 shares of common stock. Subsequent
  to this acquisition, the company's name was changed to PTS, Inc. The executive
  offices of the company are located 3220 Westleigh Ave., Las Vegas, Nevada 89102.
  The company's telephone number is (702) 210-1881

On or about June 30, 1998, the company acquired all of the issued and outstanding
  capital stock of Elast Delaware and, as specified above, changed the company's
  name from Med Mark, Inc. to Elast Technologies, Inc. The company entered into
  a licensing agreement with Dr. Robert D. Milne and acquired the rights to develop,
  test, manufacture, and market Dr. Milne's patented allergy-testing device ("ELAST
  Device", U.S. Patent No. 5413113, issued on or about May 9, 1995). Dr.
  Milne is a board-certified family practice physician with extensive experience
  in allergy testing and preventative medicine. The company has not spent significant
  amounts of time or expense during its last two fiscal years on research and
  development activities relating to the ELAST Device or any other products.
  Effective June 2001, the company issued 450,000 shares of common stock to acquire
  all of the issued and outstanding common shares of PTS. PTS was inactive until
  June 2001. PTS' only asset was a note receivable in the amount of $1,000,000,
  with a present value of $950,000, which was received by PTS as consideration
  for the issuance of 150,000 shares of its common stock. The outstanding balance
  of the note receivable is shown in the consolidated financial statements as
  a reduction of stockholders' equity.

Effective July, 2001 the company issued 20,000,000 shares of common stock,
  valued at $2,000,000, to acquire 70% of the issued and outstanding common shares
  of PTS Hong Kong Ltd. ("PTS HK"). The principal assets of PTS HK consists
  of an agreement with Shanghai Information Investment Technology Development,
  Inc, a subsidiary of Shanghai Information Investment, Inc., to do business,
  participate with, acquire, and/or Joint Venture with various business in Mainland
  China. The license had a fair market value of $2,000,000 at the date of issuance
  and has been fully impaired at December 31, 2001, due to the uncertainty of
  the ultimate realization of the carrying amount of the asset.

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Business of the Company.

The company was engaged in the development of two separate diagnostic tools:
  Its allergy testing device and its chiropractic outcome-measuring instrument.
  These instruments stem from the company's identification of commercial applications
  for worldwide patents secured by Robert D. Milne, M.D. A primary application
  is the innovative Electronic Allergo Sensitivity Test ("ELAST Device").
  The ELAST Device is a non-invasive medical tool designed to accurately diagnose
  allergies, as well as food and chemical sensitivities. The company holds the
  patents, trademarks and legal rights to manufacture and sell and lease its electronic
  allergy-testing device and is continually striving to achieve refinement of
  its prototype.

A second and more readily available commercial application of the company's
  technologies is the Bio-Potential Instrument. While working towards the perfection
  of the ELAST Device, the company's engineer realized a chiropractic application
  of its technology. Specifically, they discovered that the measurement of the
  body's electrical responses could be applied to measuring chiropractic outcome.
  The Bio-Potential Instrument can provide doctors of chiropractic with the means
  to measure the damage of vertebral subluxations, small misalignments of the
  vertebrae, which interfere with the normal nerve flow, as well as the normalizing
  effect of chiropractic adjustments. In its present stage of development, management
  believes that the instrument is capable of providing such assessments. With
  functional input from a chiropractic perspective, it is being tailored into
  an objective outcome-measuring instrument for use by the chiropractic profession.

Operating and Manufacturing

The company has presently put the research of the non-invasive allergy testing
  on hold due to the test results in 2000 indicating that this application is
  not feasible without extensive additional research. However, the testing indicated
  that the basic technology might have an application in chiropractic medical
  procedures.

The initial testing of The Life Force Analyzer chiropractic device was satisfactory
  and the company had 25 units of the device manufactured; however, with further
  trial testing, the company found that certain parts of the device need to be
  replaced and further testing will be needed before delivery to a select group
  of chiropractic medical practitioners. The operating plan was to develop the
  production device as a stand-alone unit, which is user-friendly and fully self-contained.
  Research on the chiropractic device has also been suspended.

Separation and Distribution Agreement

On June 25, 2002 the company and its wholly owned subsidiary, Elast Delaware
  entered into a Separation and Distribution Agreement, subject to finalization
  of debt allocations and mutual Board of Directors approval, through which PTS
  intends to spin off Elast Delaware by distributing to its shareholders one share
  of Elast Delaware common stock for every twenty shares of PTS common stock owned
  by shareholders of record on June 25, 2002. After the spin off Elast Delaware
  will be a separate company, no longer owned by PTS.

On August 30, 2002 PTS and Elast amended the original agreement to clarify
  the distribution date to occur on or about December 31, 2002. According to the
  amended agreement. The distribution date may be delayed by mutual consent of
  the parties. The distribution date has in fact been delayed by mutual consent
  of the parties until further notice.

As a result of this agreement, upon consummation PTS would no longer be involved
  in the development of its current products. It would then concentrate on its
  real estate development activities and potential investments in companies located
  in China which develop and market information and technology based software
  and hardware applications, along with other merger or business opportunities.

Employees.

PTS currently has 1 employee. Management has and is using consultants for business,
  accounting, engineering and legal services until anticipated revenues become
  realized. Further, the company plans to make extensive use of licensing and
  manufacturing agreements with third parties.

Compliance with Environmental Laws.

The company's management believes that no toxic or hazardous materials will
  be byproducts of the manufacturing processes of the ELAST Device; accordingly,
  management of the company believes that the company will not incur unforeseen
  material expenditures related to the cost of compliance with applicable environmental
  laws, rules or regulations. The company believes that it is presently in compliance
  with all applicable federal, state, and local environmental laws, rules and
  regulations. Furthermore, in the event the company licenses the manufacturing
  rights of the ELAST Device to third parties, the company will not become subject
  to any such restrictions. However, at some time in the future, the research,
  development, manufacturing and production processes of the company may involve
  the controlled use of hazardous materials. The company may be subject to various
  laws and regulations governing the use, manufacture, storage, handling, and
  disposal of such materials and certain waste products. The risk of accidental
  contamination or injury from hazardous materials cannot be completely eliminated.

In the event of such an accident, the company could be held liable for any
  damages that result and any such liability could exceed the financial resources
  of the company. In addition, there can be no assurance that in the future the
  company will not be required to incur significant costs to comply with environmental
  laws and regulations relating to hazardous materials. The company cannot estimate
  the potential costs of complying with local, state, and federal environmental
  laws.

ITEM 2. DESCRIPTION OF PROPERTY.

The Company neither owns nor leases any real property.

ITEM 3. LEGAL PROCEEDINGS

The company is not a party to any pending legal proceedings and, to the best
  of its knowledge, no such action by or against it has been threatened. Additionally,
  to the best of our knowledge, none of our officers, directors or beneficial
  owners of 5% or more of our outstanding securities is a party to proceedings
  adverse to the company nor do any of the foregoing individuals have a material
  interest adverse to the company.

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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No such matters were submitted during the fourth quarter of the Company's fiscal
  year ending December 31, 2002.

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Reports to Security Holders.

The company is a reporting company with the Securities and Exchange Commission
  ("SEC"). The public may read and copy any materials filed with the
  SEC at the SEC's Public Reference Room at 450 Fifth Street N.W., Washington,
  D.C. 20549. The public may also obtain information on the operation of the Public
  Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet
  site that contains reports, proxy and information statements, and other information
  regarding issuers that file electronically with the SEC. The address of that
  site is http://www.sec.gov.

Price Range of Common Stock

Our common stock trades on the OTC Bulletin Board under thesymbol [ENSG]. The
  following table sets forth the range of the high and low sales prices per shareof
  our common stock for the fiscal quarters indicated, as reported by OTC.

Quarter Ended                   High*         Low*

March 31, 2001                1.03         
  0.13 
  June 30, 2001                   0.31         
  0.05
  September 30, 2001          2.80        
  0.50

Quarter Ended                   High*        
  Low*

December 31, 2001          0.63         
  0.08
  March 31, 2002                0.25         
  0.08 
  June 30, 2002                   0.20         
  0.05
  September 30, 2002          0.09
          0.02
  December 31, 2002          0.05
           0.01

Source: Yahoo

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* Over the counter market quotations reflect inter-dealer prices, without retail
  mark-up, markdown or commission, and may not represent actual transactions.

As of May 15, 2003 there were approximately 245 holders of record of common
  stock.

The company participates in the OTC Bulletin Board, an electronic quotation
  medium for securities traded outside the Nasdaq Stock Market. The company's
  common stock trades on the OTC Bulletin Board under the trading symbol "PTSO".
  This market is extremely limited and the prices for the company's common stock
  quoted by brokers is not necessarily a reliable indication of the value of the
  company's common stock. The company was listed with Standard & Poor's Corporation
  Records by publication on or about December 3, 1998.

There have been no cash dividends declared on the company's common stock since
  the company's inception. Dividends will be declared at the sole discretion of
  the company's Board of Directors.

Penny Stock Regulation.

Shares of our common stock are subject to rules adopted by the Securities and
  Exchange Commission that regulate broker-dealer practicesin connection with
  transactions in "penny stocks". Penny stocks are generally equity
  securities with a price of less than $5.00 (other than securities registered
  on certain national securities exchanges or quoted on the Nasdaq system, provided
  that current price and volume information with respect to transactions in those
  securities is provided by the exchange or system). The penny stock rules require
  a broker-dealer, prior to a transaction in a penny stock not otherwise exempt
  from those rules, deliver a standardized risk disclosure document prepared by
  the Securities and Exchange Commission, which contains the following:

- a description of the nature and level of risk in the market for penny stocks
    in both public offerings and secondary trading;
- a description of the broker's or dealer's duties to the customer and of
    the rights and remedies available to the customer with respect to violation
    to such duties or other requirements of securities' laws;
- a brief, clear, narrative description of a dealer market, including "bid"
    and "ask" prices for penny stocks and the significance of the spread
    between the "bid" and "ask" price;
- a toll-free telephone number for inquiries on disciplinary actions;
- definitions of significant terms in the disclosure document or in the conduct
    of trading in penny stocks; and
- such other information and is in such form (including language, type, size
    and format), as the Securities and Exchange Commission shall require by rule
    or regulation.

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Prior to effecting any transaction in penny stock, the broker-dealer also must
  provide the customer the following:

- the bid and offer quotations for the penny stock;
- the compensation of the broker-dealer and its salesperson in the transaction;
- the number of shares to which such bid and ask prices apply, or other comparable
    information relating to the depth and liquidity of the market for such stock;
    and
- monthly account statements showing the market value of each penny stock
    held in the customer's account.

In addition, the penny stock rules require that prior to a transaction in a
  penny stock not otherwise exempt from those rules, the broker-dealer must make
  a special written determination that the penny stock is a suitable investment
  for the purchaser and receive the purchaser's written acknowledgment of the
  receipt of a risk disclosure statement, a written agreement to transactions
  involving penny stocks, and a signed and dated copy of a written suitably statement.
  These disclosure requirements may have the effect of reducing the trading activity
  in the secondary market for a stock that becomes subject to the penny stock
  rules. Holders of shares of our common stock may have difficulty selling those
  shares because our common stock will probably be subject to the penny stock
  rules.

The company's Board of Directors has approved and adopted a stock option plan
  ("Stock Option Plan"), pursuant to which 500,000 shares of the company's
  $.001 par value common stock will be reserved for issuance to satisfy the exercise
  of options. The Stock Option Plan will be designed to retain qualified and competent
  officers, employees, and directors of the company. The company's Board of Directors,
  or a committee thereof, shall administer the Stock Option Plan and will be authorized,
  in its sole and absolute discretion, to grant options thereunder to all eligible
  employees of the company, including officers, and to the company's directors,
  whether or not those directors are also employees of the company. Options will
  be granted pursuant to the provisions of the Stock Option Plan on such terms,
  subject to such conditions and at such exercise prices as shall be determined
  by the company's Board of Directors. Options granted pursuant to the Stock Option
  Plan shall not be exercisable after the expiration of ten years from the date
  of grant.

ITEM 6. MANAGEMENT'S PLAN OF OPERATION

Management's Discussion And Plan Of Operation

Forward-looking statements are statements that estimate the happening of future
  events and are not based on historical facts. Forward-looking statements may
  be identified by the use of forward-looking terminology, such as "could",
  "may", "expect", "shall", "estimate",
  "anticipate", "probable", "possible", "should",
  "continue", "intend" or similar terms, variations of those
  terms or the negative of those terms. The forward-looking statements specified
  in this prospectus have been compiled by management of the company on the basis
  of assumptions made by management and considered by management to be reasonable.
  Future operating results of the company, however, are impossible to predict
  and no representation, guaranty, or warranty is to be inferred from those forward-looking
  statements.

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The assumptions used for purposes of the forward-looking statements represent
  estimates of future events and are subject to uncertainty as to possible changes
  in economic, legislative, industry, and other circumstances. As a result, the
  identification and interpretation of data and other information and their use
  in developing and selecting assumptions from and among reasonable alternatives
  require the exercise of judgment. To the extent that the assumed events do not
  occur, the outcome may vary substantially from anticipated or projected results,
  and, accordingly, no opinion is expressed on the achievability of those forward-looking
  statements. No assurance can be given that any of the assumptions relating to
  the forward-looking statements specified in this report are accurate, and we
  assume no obligation to update any such forward-looking statements.

Critical Accounting Policy and Estimates.

Our management's discussion and analysis of financial condition and results
  of operations section discusses our consolidated financial statements, which
  have been prepared in accordance with accounting principles generally accepted
  in the United States of America. The preparation of these financial statements
  requires management to make estimates and assumptions that affect the reported
  amounts of assets and liabilities at the date of the financial statements and
  the reported amounts of revenues and expenses during the reporting period. On
  an on-going basis, management evaluates its estimates and judgments, including
  those related to revenue recognition, accrued expenses, financing operations,
  and contingencies and litigation. Management bases its estimates and judgments
  on historical experience and on various other factors that are believed to be
  reasonable under the circumstances, the results of which form the basis for
  making judgments about the carrying value of assets and liabilities that are
  not readily apparent from other sources. Actual results may differ from these
  estimates under different assumptions or conditions. The most significant accounting
  estimates inherent in the preparation of our financial statements include estimates
  as to the appropriate carrying value of certain assets and liabilities which
  are not readily apparent from other sources. These accounting policies are described
  at relevant sections in this discussion and analysis and in the notes to them
  consolidated financial statements included in our Annual Report on Form 10-KSB
  for the fiscal year ended December 31, 2002.

Recent Accounting Pronouncements

In April 2002, the Financial Accounting Standards Board ("FASB")
  issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64,
  amendment of FASB Statement No. 13, and Technical Corrections". SFAS No.
  145 rescinds Statement No. 4, which required gains and losses from extinguishments
  of debt to be classified as an extraordinary item, net of tax. SFAS 145, when
  adopted, will require applying the criteria of Accounting Principles Board Opinion
  No. 30, "Reporting the Results of Operations - Reporting Effects of Disposal
  of a Segment of a Business and Extraordinary, Unusual and Infrequently Occurring
  Events and Transactions" in determining how to classify gains and/or losses
  resulting from extinguishments of debt. The effective date of adoption of SFAS
  No. 145 is for fiscal years beginning after May 15, 2002. The company does not
  expect the adoption of SFAS No. 145 to have a material effect on its financial
  position or results of operations.

In July 2002, FASB issued SFAS No. 146, "Accounting for Costs Associated
  With Exit or Disposal Activities". This Statement requires the recognition
  of costs related to exit or disposal activities at the time they are incurred,
  rather than the previously accepted method of recognizing such costs at the
  commitment date of such activities. SFAS 146 is effective for such activities
  entered into or modified after December 31, 2002. The provisions of this statement
  for assets held for sale or other disposal generally are required to be applied
  prospectively after the adoption date to newly initiated disposal activities
  and, therefore, will depend on future actions initiated by management. As a
  result, the company cannot determine the potential effects that adoption of
  SFAS 146 will have on the financial statements with respect to future disposal
  decisions, if any.

In December 2002, FASB issued SFAS No. 148, "Accounting for Stock Based
  Compensation - Transition and Disclosure", which amended Statement No.
  123. "Accounting for Stock Based Compensation". SFAS No. 148 provides
  for the use of alternative methods of transition for voluntary change to the
  fair value based method of accounting for stock based compensation. It also
  amends the disclosure requirements of Statement No. 123 to require prominent
  disclosure of the company's method of accounting for such compensation and the
  effect of the method used on reported results in annual and interim financial
  statements. SFAS No. 148 is effective for annual periods ending after December
  15, 2002 and interim period beginnings after December 15, 2002. The company
  does not expect the adoption of SFAS No. 148 to have a material effect on its
  financial position or results of operations.

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General Overview

The company was engaged in the development of two separate diagnostic tools:
  its allergy testing device and its chiropractic outcome-measuring instrument.
  Research and development of the company's products has been suspended, and the
  company is currently exploring the possibility of entering the real estate development
  business.

As a development stage company, we have incurred net losses since inception
  through December 31, 2002 of approximately $ 11,450,124. To date the company
  has not generated revenues from the commercialization of any products.

The company does not anticipate significant expenditures on acquisition or development
  of other products during this year.

It will be necessary to raise funds to resume the development of the company's
  products chiropractic device. The company may not able to raise the necessary
  funds to complete development of its products.

On June 25, 2002 the company and its wholly owned subsidiary, Elast Delaware
  entered into a Separation and Distribution Agreement, subject to finalization
  of debt allocations and mutual Board of Directors Approval, through which PTS
  intends to spin off Elast Delaware. As a result of this agreement, upon consummation
  PTS would no longer be involved in the development of its current products.
  All assets related to the development of its medical devices will be transferred
  to or retained by Elast Delaware.

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The company is continuing its efforts to acquire certain companies in China,
  the acquisition of which the company believes will be accretive and complimentary
  to the company's existing business efforts. The company is also pursuing potential
  reverse merger opportunities as well as other potential business opportunities
  that may become available through related parties. As no formal agreements have
  been completed, there exists the possibility that the contemplated opportunities
  will not be consummated.

Going Concern

The accompanying financial statements have been prepared in conformity with
  generally accepted accounting principles, which contemplate continuation of
  the company as a going concern. However, the company has no established source
  of revenue, has experienced net operating losses of $11,450,124 since inception,
  and a current net loss from operations of $474,699, a working capital deficiency
  of $743,531 and has a negative cash flow from operations of $1,255. These factors
  raise substantial doubt about the company's ability to continue as a going concern.
  Without realization of additional capital, it would be unlikely for the company
  to continue as a going concern.

The company has suspended development and testing of its principal products.
  The company does not anticipate significant expenditures on acquisition or development
  of other products during this year. The company is continuing its efforts to
  acquire certain companies in China, the acquisition of which the company believes
  will be accretive and complimentary to the company's existing business efforts.
  The company is also pursuing potential reverse merger opportunities as well
  as other potential business opportunities that may become available through
  related parties. As no formal agreements have been completed, there exists the
  possibility that the contemplated opportunities will not be concluded. Additionally,
  the company intends to implement a real estate development business plan.

It will be necessary to raise funds to consummate potential acquisitions and
  implement its real estate development plan. The company may not be able to raise
  the necessary funds to accomplish either of these plans.

Results of Operations

Comparison of the Year Ended December 31, 2002 with the Year Ended December
  31, 2001.

Overall expenses decreased by $5,211,354 to $474,699 in 2002 from $5,686,053
  in 2001. Research and development activities were suspended in 2001. Research
  and development decreased by $80,027 to $0 in 2002. Changes in items included
  in General and Administrative expenses are as follows: Officers' compensation
  increased by $89,475 to $144,000 in 2002 from $54,525 in 2001; there was no
  expense for consulting services in 2002, compared to $2,664,762 of consulting
  expense in 2001; professional fees increased by $58,631 to $147,654 in 2002
  from $89,023 in 2001; other expenses, including investor relations, travel,
  entertainment and other, decreased by $663,279 to $134,437 in 2002 from $797,716
  in 2001.

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Non-cash expenses consisted of asset impairments of $ 48,608 in 2002 and $2,000,000
  in 2001, stock compensation expense of $2,172.493 in 2001 as compared to a recovery
  due to cancellation of $6,000 in 2002 and depreciation of $21,235 in 2001 and
  $15,900 in 2002.

Liquidity and Capital Resources.

At December 31, 2002, the company had no cash and equivalents. Our only external
  source of liquidity has been from the sale of our capital stock. There were
  no sales of capital stock in 2002, compared to $412,257 in 2001.

Over the past three years, the company incurred significant operating losses
  and utilized significant amounts of cash to fund operations. The company is
  in a critical stage in its transition from the development of its medical related
  products to the real estate development business, or the acquisition of operating
  businesses. The company will continue to seek sources of financing to facilitate
  this transition.

ITEM 7. FINANCIAL STATEMENTS.



















PTS, INC.

(A Development Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2002 AND 2001









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PTS, INC.
  (A Development Stage Company)

INDEX



|                                                                                                                                                                        | PAGE 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----
|Independent Auditor's Report                                                                                                                                            | 1    
|Independent Auditor's Report                                                                                                                                            | 2    
|Consolidated Balance Sheets as of December 31, 2002 and 2001                                                                                                            | 3    
|Consolidated Statements of Operations for the Years ended
      December 31, 2002 and 2001 and for the Period from June 12, 1996
      (inception) to December 31, 2002 | 4    
|                                                                                                                                                                        |      
|Consolidated Statement of Stockholders' Deficiency for the
      Period
      from June 12, 1996 (inception) to December 31, 2002                                       | 5-12 
|                                                                                                                                                                        |      
|Consolidated Statements of Cash Flows for the Years ended
      December 31, 2002 and 2001 and for the Period from June 12, 1996
      (inception) to December 31, 2002 | 13-14
|                                                                                                                                                                        |      
|Notes to the Consolidated Financial Statements 
      as of December 31, 2002 and 2001                                                                                  | 15-25



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INDEPENDENT AUDITORS' REPORT

To the Board of Directors of
  PTS, Inc. (A Development Stage Company)

We have audited the accompanying consolidated balance sheet of PTS, Inc. (A
  Development Stage Company) as of December 31, 2002 and the related consolidated
  statements of operations, stockholders' deficiency and cash flows for the year
  ended December 31, 2002. These consolidated financial statements are the responsibility
  of the Company's management. Our responsibility is to express an opinion on
  these consolidated financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present
  fairly, in all material respects, the consolidated financial position of PTS,
  Inc. (A Development Stage Company) as of December 31, 2002, and the results
  of its operations and its cash flows for the year ended December 31, 2002 in
  conformity with accounting principles generally accepted in the United States
  of America.

The accompanying financial statements have been prepared assuming that the
  Company will continue as a going concern. As discussed in Note 1 to the financial
  statements, the Company has a net loss from operations of $474,699, negative
  cash flow from operations of $1,255 and has a working capital deficiency of
  $743,531 and a net stockholders' deficiency of $743,531 as of December 31, 2002
  that raise substantial doubt about its ability to continue as a going concern.
  Management's plans in regard to these matters are also described in Note 1.
  The financial statements do not include any adjustments that might result from
  the outcome of this uncertainty.

/s/Weinberg & Company, P.A.

Weinberg & Company, P.A.
  Los Angeles, California
  May 19, 2003

1

---



INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF DIRECTORS OF PTS, INC.
  (FORMERLY ELAST TECHNOLOGIES, INC.)

We have audited the accompanying balance sheet of PTS, Inc. (formerly Elast
  Technologies, Inc.) (A Development Stage Company) as of December 31, 2001, and
  the related statements of operations, stockholders' deficit and cash flows for
  the year then ended. These financial statements are the responsibility of the
  Company's management. Our responsibility is to express an opinion on these financial
  statements based on our audit. The balance sheet of PTS, Inc. as of December
  31, 2000, and the related statements of operations, stockholders' equity and
  cash flows for the period from March 12, 1996 (inception) to December 31, 2000,
  were audited by other auditors whose report thereon, dated March 31, 2001, expressed
  an unqualified opinion on those statements. The financial statements for the
  period March 12, 1996 (inception) through December 31, 2000, reflect total revenue
  and a net loss of $-0- and $5,312,445, respectively, of the related totals.
  The other auditors' report has been furnished to us, and our opinion insofar
  as it related to the amounts included for such prior period, is based solely
  on the report of such other auditors.

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

In our opinion, based on our audit and the report of the other auditors, the
  financial statements referred to above present fairly, in all material respects,
  the financial position of PTS, Inc. as of December 31, 2001 and 2000, the results
  of its operations and its cash flows for the years then ended, and for the period
  from March 12, 1996 (inception) to December 31, 2001, in conformity with accounting
  principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
  Company will continue as a going concern. As discussed in Notes 1 and 13 to
  the financial statements, the Company has suffered losses since inception during
  its developmental operations, has negative working capital, and the implementation
  of its business plan has been limited by its ability to raise necessary operating
  capital through the sale of its common stock. The Company's future operations
  is are dependent, in part, upon its ability to raise sufficient capital to pay
  its obligations as they come due, complete development and testing of its prototype
  chiropractic units, finalize the commercial device, establish commercial production,
  and then successfully market its product. These matters raise substantial doubt
  about the Company's ability to continue as a going concern. Management's plan
  in regard to these matters is partially described in Note 13. The accompanying
  financial statements do not include any adjustments that might result from the
  outcome of these uncertainties.

MERDINGER, FRUCHTER, ROSEN & COMPANY, P.C.
  Certified Public Accountants
  New York, New York
  May 10, 2002



2

---



PTS, INC.
        (A Development Stage Company)
        CONSOLIDATED BALANCE SHEETS
        DECEMBER 31, 2002 AND 2001December 31,2002
      
      2001ASSETSCURRENT ASSETSCash
      $ -
      
      $ 1,255Total current assets
      -
      
      1,255Equipment, net of accumulated depreciationof $35,257 in 2001
      -
      
      64,508Other assets
      -
      
      2,922TOTAL ASSETS
      $ -
      
      68,685LIABILITIES AND STOCKHOLDERS'
          DEFICIENCYCURRENT LIABILITIESAccounts payable - trade
      $ 364,422
      
      $ 146,379Accrued payroll taxes
      88,638
      
      88,638Due to related parties
      253,499
      
      74,500Short-term notes payable
      22,000
      
      22,000Deposit payable
      14,972
      
      -Total current liabilities
      743,531
      
      331,517STOCKHOLDERS' DEFICIENCYCommon stock, $0.001 par value; 25,000,000
          sharesauthorized; 22,058,626 and 22,250,626 shares
          issued and outstanding
      22,059
      
      22,259in 2002 and 2001, respectivelyAdditional paid-in-capital
      11,030,914
      
      11,036,714Additional paid-in-capital for warrants
      205,000
      
      205,000Deficit accumulated during the development
          stage
      (11,450,124)
      
      (10,975,425)(192,151)
      
      288,548Stock subscription receivable
      (551,380)
      
      (551,380)Total stockholders' deficiency
      (743,531)
      
      (262,832)TOTAL LIABILITIES AND STOCKHOLDERS'
          DEFICIENCY
      $ -
      
      $ 68,685The accompanying notes are
          an integral part of the consolidated financial statements The accompanying notes are an integral part of
    the consolidated financial statements 3


---





PTS, INC.(A Development Stage Company)CONSOLIDATED STATEMENT OF OPERATIONSPeriod fromJune 12, 1996For the Year Ended
      
      (Inception) toDecember 31,
      
      December 31,2002
      
      2001
      
      2002Revenue
      
      $ -
      
      $ -
      
      $ -Operating costs and expensesGeneral and operating expenses
      
      426,091
      
      3,606,026
      
      8,376,114Research and development
      
      -
      
      80,027
      
      949,011Debt conversion expense
      
      -
      
      -
      
      115,284Impairment of assets
      
      48,608
      
      2,000,000
      
      2,048,608Total operating costs and expenses
      
      474,699
      
      5,686,053
      
      11,489,017Other Income (Expense)Interest income
      
      -
      
      23,073
      
      63,344Interest expense
      
      -
      
      -
      
      (24,451)Total other income
      
      -
      
      23,073
      
      38,893Net loss
      
      $ (474,699)
      
      $ (5,662,980)
      
      $ (11,450,124)Loss per common share - basic and diluted
      
      $ (0.03)
      
      $ (0.41)Weighted average shares outstanding,basic and diluted
      
      22,225,293
      
      13,905,273The accompanying notes are an integral
          part of the consolidated financial statements. 4
 PTS, INC. (A Development
    Stage Company) Consolidated
    STATEMENT OF STOCKHOLDERS' DEFICIENCY FOR THE
    PERIOD FROM JUNE 12, 1996 (INCEPTION) TO DECEMBER 31, 2002  Deficit
      
      Less:Detachable
      
      Accumulated
      
      CommonCommon Stock
      
      Additional
      
      Stock
      
      During the
      
      StockPrice per
      
      Paid-in
      
      Purchase
      
      Development
      
      SubscriptionShares
      
      Amount
      
      share
      
      Capital
      
      Warrants
      
      Stage
      
      Receivable
      
      TotalBalance, June 12, 1996 (inception)
      -
      
      $ -
      
      -
      
      $ -
      
      -
      
      $ -
      
      $ -
      
      $ -Shares issued for medical
          device license
      320,019
      
      320
      
      -
      
      480
      
      -
      
      -
      
      -
      
      800Shares issued for legal services
      2,133
      
      2
      
      3.15
      
      6,717
      
      -
      
      -
      
      -
      
      6,719Expenses paid by shareholder
      -
      
      -
      
      -
      
      4,167
      
      -
      
      -
      
      -
      
      4,167Shares issued in private
          placement
      54,667
      
      55
      
      3.78
      
      204,945
      
      -
      
      -
      
      (10,000)
      
      195,000Net loss
      -
      
      -
      
      -
      
      -
      
      -
      
      (38,309)
      
      -
      
      (38,309)Balance, December 31, 1996
      376,819
      
      377
      
      -
      
      216,309
      
      -
      
      (38,309)
      
      (10,000)
      
      168,377Expenses paid by shareholder
      -
      
      -
      
      -
      
      1,500
      
      -
      
      -
      
      -
      
      1,500Net loss
      -
      
      -
      
      -
      
      -
      
      -
      
      (62,722)
      
      -
      
      (62,722)Balance, December 31, 1997
      376,819
      
      377
      
      -
      
      217,809
      
      -
      
      (101,031)
      
      (10,000)
      
      107,155Shares issued in reorganization
      122,000
      
      122
      
      -
      
      30,604
      
      -
      
      -
      
      -
      
      30,726Shares sold in private placement
      39,400
      
      39
      
      5.00
      
      196,961
      
      -
      
      -
      
      -
      
      197,000Payment of subscription receivable
      -
      
      -
      
      -
      
      -
      
      -
      
      -
      
      10,000
      
      10,000Shares issued in exercise
          of warrants
      50,664
      
      51
      
      3.75
      
      189,939
      
      -
      
      -
      
      -
      
      189,990Shares issued to consultant
      100,747
      
      101
      
      3.75
      
      377,697
      
      -
      
      -
      
      -
      
      377,798Shares issued for services
      27,000
      
      27
      
      15.09
      
      407,338
      
      -
      
      -
      
      -
      
      407,365 The accompanying notes are an integral part of the consolidated
    financial statements. 5 
 PTS, INC. (A Development Stage Company) Consolidated STATEMENT OF STOCKHOLDERS'
    DEFICIENCY FOR THE
    PERIOD FROM JUNE 12, 1996 (INCEPTION) TO DECEMBER 31, 2002 Deficit
      
      Less:Detachable
      
      Accumulated
      
      CommonCommon Stock
      
      Additional
      
      Stock
      
      During the
      
      StockPrice per
      
      Paid-in
      
      Purchase
      
      Development
      
      SubscriptionShares
      
      Amount
      
      share
      
      Capital
      
      Warrants
      
      Stage
      
      Receivable
      
      TotalShares issued to shareholder
          to correct issuance error
      1,334
      
      $ 1
      
      -
      
      $ (1)
      
      $ -
      
      $ -
      
      $ -
      
      $ -Net loss
      -
      
      -
      
      -
      
      -
      
      -
      
      (1,102,374)
      
      -
      
      (1,102,374)Balance, December 31, 1998
      717,964
      
      718
      
      -
      
      1,420,347
      
      -
      
      (1,203,405)
      
      -
      
      217,660Shares sold in private placement
      20,590
      
      21
      
      14.97
      
      308,229
      
      -
      
      -
      
      -
      
      308,250Shares sold in private placement
      50,000
      
      50
      
      10.00
      
      294,932
      
      205,000
      
      -
      
      -
      
      499,982Shares issued for consulting
          services
      2,613
      
      2
      
      15.36
      
      40,150
      
      -
      
      -
      
      -
      
      40,152Shares issued research and
          development activities
      5,000
      
      5
      
      14.80
      
      73,995
      
      -
      
      -
      
      -
      
      74,000Net loss
      -
      
      -
      
      -
      
      -
      
      -
      
      (976,928)
      
      -
      
      (976,928)Balance, December 31, 1999
      796,167
      
      796
      
      -
      
      2,137,653
      
      205,000
      
      (2,180,333)
      
      -
      
      163,116Shares sold in registered
          offering
      18,333
      
      18
      
      14.00
      
      256,650
      
      -
      
      -
      
      -
      
      256,668Shares sold in a registered
          offering
      9,000
      
      9
      
      11.11
      
      99,991
      
      -
      
      -
      
      -
      
      100,000Shares issued in investor
          relation services
      5,000
      
      5
      
      17.69
      
      88,445
      
      -
      
      -
      
      -
      
      88,450Shares issued in investor
          relation services
      5,000
      
      5
      
      23.13
      
      115,620
      
      -
      
      -
      
      -
      
      115,625Shares issued in investor
          relation services
      640
      
      1
      
      24.38
      
      15,600
      
      -
      
      -
      
      -
      
      15,601Shares issued to officer
          for compensation
      12,500
      
      13
      
      21.25
      
      265,613
      
      -
      
      -
      
      -
      
      265,626 The accompanying notes are an integral part of the consolidated
    financial statements. 6 
 PTS, INC. (A Development Stage Company) Consolidated STATEMENT OF STOCKHOLDERS'
    DEFICIENCY FOR THE PERIOD FROM JUNE 12, 1996
    (INCEPTION) TO DECEMBER 31, 2002 Deficit
      
      Less:Detachable
      
      Accumulated
      
      CommonCommon Stock
      
      Additional
      
      Stock
      
      During the
      
      StockPrice per
      
      Paid-in
      
      Purchase
      
      Development
      
      SubscriptionShares
      
      Amount
      
      share
      
      Capital
      
      Warrants
      
      Stage
      
      Receivable
      
      TotalShares issued to officer
          for compensation
      1,900
      
      $ 2
      
      $ 12.65
      
      $ 24,033
      
      $ -
      
      $ -
      
      $ -
      
      $ 24,035Shares subject to litigation
      26,600
      
      27
      
      
      
      (27)
      
      -
      
      -
      
      -
      
      -Shares issued in settlement
          of a dispute
      4,000
      
      4
      
      7.10
      
      28,396
      
      -
      
      -
      
      -
      
      28,400Shares issued in investor
          relation services
      13,800
      
      14
      
      7.17
      
      98,986
      
      -
      
      -
      
      -
      
      99,000Shares issued in investor
          relation services
      30,000
      
      30
      
      7.23
      
      216,870
      
      -
      
      -
      
      -
      
      126,900Shares sold in private placement
      5,000
      
      5
      
      10.00
      
      49,995
      
      -
      
      -
      
      -
      
      50,000Shares issued for research
          and development consulting
      10,000
      
      10
      
      5.00
      
      49,990
      
      -
      
      -
      
      -
      
      50,000Shares issued in investor
          relation services
      15,000
      
      15
      
      9.00
      
      134,985
      
      -
      
      -
      
      -
      
      135,000Shares issued for legal services
      10,000
      
      10
      
      9.00
      
      89,990
      
      -
      
      -
      
      -
      
      90,000Shares issued for debt conversion
      50,000
      
      50
      
      11.77
      
      588,552
      
      -
      
      -
      
      -
      
      588,602Shares sold in a registered
          offering
      5,000
      
      5
      
      5.00
      
      24,995
      
      -
      
      -
      
      -
      
      25,000Shares issued in investor
          relation services
      40,000
      
      40
      
      4.20
      
      167,960
      
      -
      
      -
      
      -
      
      168,000Shares issued in investor
          relation services
      34,000
      
      34
      
      8.75
      
      297,465
      
      -
      
      -
      
      -
      
      297,499Shares sold in a registered
          offering
      5,000
      
      5
      
      5.00
      
      24,995
      
      -
      
      -
      
      -
      
      25,000Shares issued in investor
          relation services
      2,500
      
      3
      
      7.81
      
      19,522
      
      -
      
      -
      
      -
      
      19,525Shares sold in a registered
          offering
      6,429
      
      6
      
      3.50
      
      22,494
      
      -
      
      -
      
      -
      
      22,500 The accompanying notes are an integral part of the consolidated
    financial statements. 7 
 PTS, INC. (A Development Stage Company) Consolidated STATEMENT OF STOCKHOLDERS'
    DEFICIENCY FOR THE PERIOD FROM JUNE 12, 1996
    (INCEPTION) TO DECEMBER 31, 2002 Deficit
      
      Less:Detachable
      
      Accumulated
      
      CommonCommon Stock
      
      Additional
      
      Stock
      
      During the
      
      StockPrice per
      
      Paid-in
      
      Purchase
      
      Development
      
      SubscriptionShares
      
      Amount
      
      Share
      
      Capital
      
      Warrants
      
      Stage
      
      Receivable
      
      TotalShares sold in a registered
          offering
      6,061
      
      $                    6
      
      $           3.30
      
      $           19,994
      
      $                    
          -
      
      $                    
          -
      
      $                    
          -
      
      $           20,000Shares sold in a registered
          offering, net of $10,080 commission
      21,938
      
      22
      
      2.74
      
      60,098
      
      -
      
      -
      
      -
      
      60,120Shares sold in a registered
          offering, net of $1,500 commission
      4,762
      
      5
      
      1.78
      
      8,495
      
      -
      
      -
      
      -
      
      8,500Shares sold in a registered
          offering, net of $3,000 commission
      11,111
      
      11
      
      1.53
      
      16,988
      
      -
      
      -
      
      -
      
      16,999Shares sold in a registered
          offering, net of $300 commission
      1,081
      
      1
      
      1.57
      
      1,699
      
      -
      
      -
      
      -
      
      1,700Shares sold in a registered
          offering, net of $1,500 commission
      5,333
      
      5
      
      1.59
      
      8,495
      
      -
      
      -
      
      -
      
      8,500Shares issued in investor
          relation services
      7,500
      
      8
      
      2.50
      
      18,742
      
      -
      
      -
      
      -
      
      18,750Shares sold in a registered
          offering, net of $2,250 commission
      12,000
      
      12
      
      1.06
      
      12,738
      
      -
      
      -
      
      -
      
      12,750Shares sold in a registered
          offering, net of $3,150 commission
      15,000
      
      15
      
      1.19
      
      17,835
      
      -
      
      -
      
      -
      
      17,850Shares sold in a registered
          offering for notes receivable
      260,000
      
      260
      
      0.35
      
      90,740
      
      -
      
      -
      
      (91,000
      )
      -Shares sold in a registered
          offering
      10,000
      
      10
      
      0.68
      
      6,740
      
      -
      
      -
      
      -
      
      6,750Shares sold in a registered
          offering
      10,000
      
      10
      
      0.70
      
      6,990
      
      -
      
      -
      
      -
      
      7,000Shares sold in a registered
          offering
      5,000
      
      5
      
      0.75
      
      3,745
      
      -
      
      -
      
      -
      
      3,750Shares sold in a registered
          offering
      26,000
      
      26
      
      0.70
      
      18,149
      
      -
      
      -
      
      -
      
      18,175Shares sold in a registered
          offering
      10,000
      
      10
      
      0.65
      
      6,490
      
      -
      
      -
      
      -
      
      6,500Shares issued for legal services
      100,000
      
      100
      
      0.56
      
      55,900
      
      -
      
      -
      
      -
      
      56,000Net loss
      -
      
      -
      
      
      
      -
      
      -
      
      (3,132,112)
      
      -
      
      (3,132,112)Balance, December 31, 2000
      1,611,655
      
      1612
      
      
      
      5,172,611
      
      205,000
      
      (5,312,445)
      
      (91,000)
      
      (24,222) The accompanying notes are an integral part of the consolidated
    financial statements. 8 
 PTS, INC. (A Development Stage Company) Consolidated STATEMENT OF STOCKHOLDERS'
    DEFICIENCY FOR THE
    PERIOD FROM JUNE 12, 1996 (INCEPTION) TO DECEMBER 31, 2002 Deficit
      
      Less:Detachable
      
      Accumulated
      
      CommonCommon Stock
      
      Additional
      
      Stock
      
      During the
      
      StockPrice per
      
      Paid-in
      
      Purchase
      
      Development
      
      SubscriptionShares
      
      Amount
      
      share
      
      Capital
      
      Warrants
      
      Stage
      
      Receivable
      
      TotalBalance, December 31, 2000
      1,611,655
      
      $ 1,612
      
      
      
      $ 5,172,611
      
      $ 205,000
      
      $ (5,312,445)
      
      $ (91,000)
      
      $ (24,222)Shares sold in a registered
          offering during the three months ended March 31, 2001
      10,000
      
      10
      
      1.00
      
      9,990
      
      
      
      
      
      
      
      10,000Shares sold in a registered
          offering during the three months ended March 31, 2001
      278,000
      
      278
      
      0.50
      
      138,722
      
      
      
      
      
      
      
      139,000Shares sold in a registered
          offering during the three months ended March 31, 2001
      122,500
      
      123
      
      0.40
      
      48,877
      
      
      
      
      
      
      
      49,000Shares sold in a registered
          offering during the three months ended March 31, 2001
      128,158
      
      128
      
      0.35
      
      44,727
      
      
      
      
      
      
      
      44,855Shares sold in a registered
          offering during the three months ended March 31, 2001
      66,875
      
      67
      
      0.32
      
      21,333
      
      
      
      
      
      
      
      21,400Shares sold in a registered
          offering during the three months ended March 31, 2001
      16,667
      
      17
      
      0.30
      
      4,983
      
      
      
      
      
      
      
      5,000Shares sold in a registered
          offering during the three months ended March 31, 2001
      20,000
      
      20
      
      0.25
      
      4,980
      
      
      
      
      
      
      
      5,000Shares sold in a registered
          offering during the three months ended March 31, 2001
      60,000
      
      60
      
      0.17
      
      9,942
      
      
      
      
      
      
      
      10,002Shares sold in a registered
          offering during the three months ended March 31, 2001
      62,500
      
      63
      
      0.16
      
      9,937
      
      
      
      
      
      
      
      10,000Shares issued for services
          during the three months ended March 31, 2001
      41,666
      
      42
      
      0.53
      
      22,091
      
      
      
      
      
      
      
      22,133Shares issued for services
          during the three months ended March 31, 2001
      269,285
      
      269
      
      0.48
      
      109,083
      
      
      
      
      
      
      
      109,352Shares issued for services
          during the three months ended March 31, 2001
      50,000
      
      50
      
      0.44
      
      21,825
      
      
      
      
      
      
      
      21,875Shares issued for services
          during the three months ended March 31, 2001
      160,715
      
      161
      
      0.28
      
      45,032
      
      
      
      
      
      
      
      45,193Shares issued for services
          during the three months ended March 31, 2001
      121,500
      
      122
      
      0.25
      
      30,253
      
      
      
      
      
      
      
      30,375Shares issued for services
          during the three months ended March 31, 2001
      159,375
      
      159
      
      0.19
      
      29,724
      
      
      
      
      
      
      
      29,883 The accompanying notes are an integral part of the consolidated
    financial statements. 9 
 PTS, INC. (A Development Stage Company) Consolidated STATEMENT OF STOCKHOLDERS'
    DEFICIENCY FOR THE PERIOD FROM
      JUNE 12, 1996 (INCEPTION) TO DECEMBER 31, 2002
 Deficit
      
      Less:Detachable
      
      Accumulated
      
      CommonCommon Stock
      
      Additional
      
      Stock
      
      During the
      
      StockPrice per
      
      Paid-in
      
      Purchase
      
      Development
      
      SubscriptionShares
      
      Amount
      
      share
      
      Capital
      
      Warrants
      
      Stage
      
      Receivable
      
      TotalShares subscribed during
          the three months ended March 31, 2001
      750,000
      
      $ 750
      
      $ 0.47
      
      $ 349,250
      
      $
      
      
      
      (350,000)
      
      $ -Shares sold in a registered
          offering during the three months ended June 30, 2001
      66,667
      
      67
      
      0.15
      
      9,933
      
      
      
      
      
      
      
      10,000Shares sold in a registered
          offering during the three months ended June 30, 2001
      100,000
      
      100
      
      0.10
      
      9,900
      
      
      
      
      
      
      
      10,000Shares sold in a registered
          offering during the three months ended June 30, 2001
      150,000
      
      150
      
      0.08
      
      11,850
      
      
      
      
      
      
      
      12,000Shares sold in a registered
          offering during the three months ended June 30, 2001
      83,333
      
      83
      
      0.06
      
      4,917
      
      
      
      
      
      
      
      5,000Shares sold in a registered
          offering during the three months ended June 30, 2001
      100,000
      
      100
      
      0.05
      
      4,900
      
      
      
      
      
      
      
      5,000Shares sold in a registered
          offering during the three months ended June 30, 2001
      200,000
      
      200
      
      0.03
      
      5,800
      
      
      
      
      
      
      
      6,000Shares issued for services
          during the three months ended June 30, 2001
      61,000
      
      61
      
      0.66
      
      40,199
      
      
      
      
      
      
      
      40,260Shares issued for services
          during the three months ended June 30, 2001
      270,000
      
      270
      
      0.38
      
      100,980
      
      
      
      
      
      
      
      101,250Shares issued for services
          during the three months ended June 30, 2001
      100,000
      
      100
      
      0.31
      
      30,900
      
      
      
      
      
      
      
      31,000Shares issued for services
          during the three months ended June 30, 2001
      575,500
      
      576
      
      0.21
      
      120,279
      
      
      
      
      
      
      
      120,855Shares issued for services
          during the three months ended June 30, 2001
      775,000
      
      775
      
      0.18
      
      138,725
      
      
      
      
      
      
      
      139,500Shares issued for services
          during the three months ended June 30, 2001
      125,000
      
      125
      
      0.12
      
      14,875
      
      
      
      
      
      
      
      15,000Shares issued for services
          during the three months ended June 30, 2001
      325,000
      
      325
      
      0.08
      
      25,675
      
      
      
      
      
      
      
      26,000Shares issued for services
          during the three months ended June 30, 2001
      600,000
      
      600
      
      0.06
      
      35,400
      
      
      
      
      
      
      
      36,000 The accompanying notes are an integral part of the consolidated
    financial statements. 10 
 PTS, INC. (A Development Stage Company) Consolidated STATEMENT OF STOCKHOLDERS'
    DEFICIENCY FOR THE
    PERIOD FROM JUNE 12, 1996 (INCEPTION) TO DECEMBER 31, 2002 Deficit
      
      Less:Detachable
      
      Accumulated
      
      CommonCommon Stock
      
      Additional
      
      Stock
      
      During the
      
      StockPrice per
      
      Paid-in
      
      Purchase
      
      Development
      
      SubscriptionShares
      
      Amount
      
      share
      
      Capital
      
      Warrants
      
      Stage
      
      Receivable
      
      TotalShares issued for services
          during the three months ended June 30, 2001
      225,000
      
      225
      
      0.10
      
      22,275
      
      
      
      
      
      
      
      22,500Reverse Stock Split 1:20
          on June 30, 2001
      (7,301,126)
      
      (7,304)
      
      
      
      7,304
      
      
      
      
      
      
      
      -Balance,
      June 30, 2001 (Post stock-split)
      384,270
      
      384
      
      
      
      6,657,272
      
      205,000
      
      (5,312,445)
      
      (441,000)
      
      1,109,211Shares sold in a registered
          offering during the three months ended Sept 30, 2001
      60,000
      
      60
      
      0.83
      
      49,940
      
      
      
      
      
      
      
      50,000Shares sold in a registered
          offering during the three months ended Sept 30, 2001
      24,096
      
      24
      
      0.83
      
      19,976
      
      
      
      
      
      
      
      20,000PTS - Hong Kong asset purchase
          acquisition
      20,000,000
      
      20,000
      
      0.10
      
      1,980,000
      
      
      
      
      
      
      
      2,000,000Shares issued for services
          during the three months ended September 30, 2001
      246,725
      
      247
      
      2.45
      
      604,229
      
      
      
      
      
      
      
      604,476Stock subscription
      450,000
      
      450
      
      2.11
      
      949,550
      
      
      
      
      
      (950,000)
      
      -Shares issued for services
          during the three months ended September 30, 2001
      50,000
      
      50
      
      1.01
      
      50,450
      
      
      
      
      
      
      
      50,500Shares issued for services
          during the three months ended September 30, 2001
      205,333
      
      205
      
      0.95
      
      194,861
      
      
      
      
      
      
      
      195,066Shares issued for services
          during the three months ended September 30, 2001
      25,000
      
      25
      
      0.85
      
      21,225
      
      
      
      
      
      
      
      21,250Shares issued for services
          during the three months ended September 30, 2001
      375,000
      
      375
      
      0.80
      
      299,625
      
      
      
      
      
      
      
      300,000Shares issued for services
          during the three months ended September 30, 2001
      10,000
      
      10
      
      0.72
      
      7,190
      
      
      
      
      
      
      
      7,200Shares issued for services
          during the three months ended September 30, 2001
      95,000
      
      95
      
      0.67
      
      63,555
      
      
      
      
      
      
      
      63,650Shares issued for services
          during the three months ended September 30, 2001
      60,000
      
      60
      
      0.55
      
      32,940
      
      
      
      
      
      
      
      33,000 The accompanying notes are an integral part of the consolidated
    financial statements. 11 
 PTS, INC. (A Development Stage Company) Consolidated
    STATEMENT OF STOCKHOLDERS' DEFICIENCY FOR THE PERIOD FROM JUNE 12, 1996
    (INCEPTION) TO DECEMBER 31, 2002 Deficit
      
      Less:Detachable
      
      Accumulated
      
      CommonCommon Stock
      
      Additional
      
      Stock
      
      During the
      
      StockPrice per
      
      Paid-in
      
      Purchase
      
      Development
      
      SubscriptionShares
      
      Amount
      
      share
      
      Capital
      
      Warrants
      
      Stage
      
      Receivable
      
      TotalShares issued for services
          during the three months ended December 31, 2001
      20,000
      
      20
      
      0.45
      
      8,980
      
      
      
      
      
      
      
      9,000Shares issued for services
          during the three months ended December 31, 2001
      50,000
      
      50
      
      0.43
      
      21,450
      
      
      
      
      
      
      
      21,500Shares issued for services
          during the three months ended December 31, 2001
      220,000
      
      220
      
      0.40
      
      87,780
      
      
      
      
      
      
      
      88,000Cancelled share issuances
          - various
      (16,798)
      
      (16)
      
      0.70
      
      (12,309)
      
      
      
      
      
      
      
      ( 12,325)Net loss
      
      
      
      -
      
      
      
      -
      
      
      
      (5,662,980)
      
      
      
      (5,662,980)Payments made to subscription
          receivable
      
      
      -
      
      
      
      -
      
      
      
      
      
      398,620
      
      398,620Subscription receivable written-off
      
      
      -
      
      
      
      -
      
      
      
      
      
      91,000
      
      91,000Subscription receivable settled
          with services
      
      
      -
      
      
      
      
      
      
      
      
      
      350,000
      
      350,000Balance,
      December 31, 2001
      22,258,626
      
      22,259
      
      
      
      11,036,714
      
      205,000
      
      (10,975,425)
      
      (551,380)
      
      ( 262,832)Cancellation of shares October
          2002
      
      (200.000)
      
      (200)
      
      
      
      (5,800)
      
      
      
      
      
      
      
      (6,000)Net Loss
      
      
      
      
      
      
      
      
      
      
      
      (474,699)
      
      
      
      (474,699)Balance December 31, 2002
      
      22,058,626
      
      $ 22,059
      
      
      
      $11,030,914
      
      $ 205,000
      
      $ (11,450,124)
      
      $ (551,380)
      
      $ (743,531) The accompanying notes are an integral part of the consolidated
    financial statements. 12  PTS (A Development
    Stage Company) CONSOLIDATED
    STATEMENT OF CASH FLOWS


Period fromJune 12, 1996For the Year Ended
      
      (Inception) toDecember 31,
      
      December 31,2002
      
      2001
      
      2002Cash flows from operating activities:Net loss
      $ (474,699)
      
      $ (5,662,980)
      
      $ (11,450,124)Adjustments to reconcile net loss to netcash used in operating activities:Depreciation and amortization
      15,900
      
      21,235
      
      52,649Issuance of shares for services
      (6,000)
      
      2,172,493
      
      4,760,935Impairment of assets
      48,608
      
      2,000,000
      
      2,048,608Bad debt expense
      -
      
      104,425
      
      104,425Expenses paid by officer
      34,999
      
      4,500
      
      39,499Subscription receivable settled with services
      -
      
      350,000
      
      350,000Loss on sale of asset
      -
      
      -
      
      2,608Debt conversion expense
      -
      
      -
      
      115,284Decrease (increase) in assets:Advances to officer
      -
      
      -
      
      (26,893)Other assets
      2,922
      
      -
      
      -Increase (decrease) in liabilities:Accounts payable - trade
      218,043
      
      121,626
      
      394,422Due to related parties
      144,000
      
      36,000
      
      184,000Accrued payroll taxes
      -
      
      9,000
      
      111,125Deposit payable
      14,972
      
      -
      
      14,972Cash used in operating activities
      (1,255)
      
      (843,701)
      
      (3,298,490)Cash flows from investing activities:Purchase of equipment
      -
      
      (7,115)
      
      (85,866)Sale of property and equipment
      -
      
      -
      
      5,000Cash used in investing activities
      -
      
      (7,115)
      
      (80,866)-Cash flows from financing activities:Proceeds from issuance of convertible debt
      -
      
      -
      
      450,832Payments on capital lease obligations
      -
      
      -
      
      (8,732)Acquisition of MedMark, Inc.
      -
      
      -
      
      30,726Proceeds from the exercise of warrants
      -
      
      -
      
      189,990Payment of common stock subscription receivable
      -
      
      398,620
      
      408,620Proceeds from issuance of common stock
      -
      
      412,257
      
      2,280,253Proceeds from issuance of note
      -
      
      25,000
      
      25,000Payments on note
      -
      
      (3,000)
      
      (3,000)Contribution to additional paid-in capital
      -
      
      -
      
      5,667Cash provided by financing activities
      -
      
      832,877
      
      3,379,356Net decrease in cash
      (1,255)
      
      (17,939)
      
      -Cash at beginning of period
      1,255
      
      19,194
      
      -Cash at end of period
      $ -
      
      $ 1,255
      
      $ -The accompanying notes are an integral
          part of the consolidated financial statements 13


PTS, INC.(A Development Stage Company)CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)Period fromJune 12, 1996For the Year Ended
      
      (Inception) toDecember 31,
      
      December 31,2002
      
      2001
      
      2002SUPPLEMENTAL SCHEDULE OF CASH FLOWINFORMATION:Interest paid
      $ -
      
      $ -
      
      $ 1,375Income taxes paid
      $ -
      
      $ -
      
      $ 1,973NON-CASH INVESTING AND FINANCINGACTIVITIES:Assets acquired in non-cash transactions
      -
      
      2,000,000Issuance of common stock for notes receivable
      -
      
      1,300,000Liabilities assumed by officer
      -
      
      13,468The accompanying notes are an integral
          part of the consolidated financial statements. 14


---

PTS, INC. (A Development Stage Company) NOTES TO CONSOLIDATED
    FINANCIAL STATEMENTS DECEMBER 31, 2002 AND
    2001 NOTE 1      
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Development Stage Operations PTS, Inc. (a company in the development
    stage since its formation on June 12, 1996) (the "Company") has a limited
    operating history with no revenues and no products or operable technology
    ready for the market. The Company was engaged in the ongoing development of
    its first marketable product, a non-invasive medical device to test for human
    bio-voltage measurement with real time, quantifiable, visually displayed results.
    Management's efforts to date have focused primarily on the raising of equity
    capital through the sale of its common stock and the development of the medical
    device. As such, the Company is subject to the risks and uncertainties associated
    with a new business. The success of the Company's future operations is dependent,
    in part, upon the Company's ability to raise sufficient capital to complete
    development and testing of its prototype chiropractic units, finalize the
    commercial device, establish commercial production, and then successfully
    market its product, or alternatively, to develop a new business plan. This
    new plan would involve real estate development. Development of the medical
    device has been suspended at this time. Management's plans are discussed further
    in the Going Concern portion of Note 1. On June 25, 2002 the Company and its
    wholly owned subsidiary, Elast Technologies Corporation (a Delaware corporation)
    ("Elast Delaware") entered into a Separation and Distribution Agreement through
    which PTS intends to spin off Elast Delaware by distributing to its stockholders
    one share of Elast Delaware common stock for every twenty shares of PTS common
    stock owned by stockholders of record on June 25, 2002. After the spin off
    Elast Delaware will be a separate company, no longer owned by PTS. On August
    30, 2002 PTS and Elast amended the original agreement to clarify the distribution
    date to occur on or about December 31, 2002. Pursuant to the amended agreement,
    the distribution date has been delayed by mutual consent of the parties, subject
    to finalization of debt allocations and mutual Board of Directors approval. As a result of this agreement, upon
    consummation PTS would no longer be involved in the development of its current
    products. It would then concentrate on its real estate development activities
    and potential investments in companies located in China, which develop and
    market information and technology based software and hardware applications, 15
 PTS, INC. (A Development Stage Company) NOTES TO CONSOLIDATED
    FINANCIAL STATEMENTS DECEMBER 31, 2002 AND
    2001 along with other merger or business
    opportunities. Pursuant to the agreement, Elast Delaware will assume certain
    liabilities, the amount of which has yet to be finalized, which are included
    in the December 31, 2002 balance sheet. Going Concern The accompanying financial statements
    have been prepared in conformity with generally accepted accounting principles,
    which contemplate continuation of the Company as a going concern. However,
    the Company has no established source of revenue, has experienced net operating
    losses of $11,450,124 since inception, had a net loss of $474,699 and a negative
    cash flow from operations of $1,255 for the year ended December 31, 2002,
    and has a working capital deficiency and stockholders deficiency of $743,531
    as of December 31, 2002. These factors raise substantial doubt about the Company's
    ability to continue as a going concern. Without realization of additional
    capital, it would be unlikely for the Company to continue as a going concern.
    These financial statements do not include any adjustments relating to the
    recoverability and classification of recorded asset amounts, or amounts and
    classification of liabilities that might result from this uncertainty. The Company has suspended development
    and testing of its principal products. The Company does not anticipate significant
    expenditures on acquisition or development of other products during this year.
    The Company is continuing its efforts to acquire certain companies in China,
    the acquisition of which the Company believes will be accretive and complimentary
    to the Company's existing business efforts. The Company is also pursuing potential
    reverse merger opportunities as well as other potential business opportunities
    that may become available through related parties. As no formal agreements
    have been completed, there exists the possibility that the contemplated opportunities
    will not be concluded. Additionally, the Company intends to implement a real
    estate development business plan. It will be necessary to raise funds
    to consummate potential acquisitions and implement its real estate development
    plan. The Company may not be able to raise the necessary funds to accomplish
    either of these plans. Principles of Consolidation The accompanying consolidated
    financial statements include the accounts of PTS and its subsidiaries Elast
    Delaware and PTS Hong Kong Ltd. ("PTS PTS, INC. 16   PTS, INC. (A Development Stage Company) NOTES TO CONSOLIDATED
    FINANCIAL STATEMENTS DECEMBER 31, 2002 AND
    2001 HK"). All significant intercompany
    transactions have been eliminated. Elast Delaware and PTS HK were inactive
    in 2002. Equipment Equipment was recorded at cost and
    depreciated using the straight-line method over the expected useful lives.
    Expenditures for normal maintenance and repairs are charged to operations.
    The cost and related accumulated depreciation of assets are removed from the
    accounts upon retirement or other disposition, and the resulting profit or
    reflected in the statement of operations. Renewals and betterments that materially
    extend the life of the assets are capitalized. The Company's property and
    equipment consists of equipment, computers and software with expected useful
    lives of 3 - 5 years. Research and Development Costs Research and development costs are
    charged to operations are they are incurred. Impairment of Long-Lived Assets Long-lived assets are reviewed for
    impairment whenever events or changes in circumstances indicate that the related
    carrying amount may not be recoverable. Recovery of assets to be held and
    used is measured by a comparison of the carrying amount of the assets to the
    future net cash flows expected to be generated by the asset. If such assets
    are considered to be impaired, the impairment to be recognized is measured
    by the amount of which the carrying amount of the assets exceeds the fair
    value of the assets. Assets to be disposed of are reported at the lower of
    the carrying amount or fair value less the cost to sell (see Note 2). Income Taxes The Company accounts for income taxes
    using the liability method. Under the liability method, deferred income taxes
    are determined based on differences between the financial reporting and tax
    bases of assets and liabilities. They are measured using the enacted tax rates
    and laws that will be in effect when the differences are expected to reverse.
    The Company is required to adjust its deferred tax liabilities in the period
    when tax rates or the provisions of the income tax laws change. Valuation
    allowances are established to reduce deferred tax assets to the amounts expected
    to be realized. 17 
 PTS, INC. (A Development Stage Company) NOTES TO CONSOLIDATED
    FINANCIAL STATEMENTS DECEMBER 31, 2002 AND
    2001 Disclosures about Fair Value of
    Financial Instruments The carrying amount of the Company's
    financial instruments, which include cash, account payable-trade, due to related
    parties, notes payable and deposits payable approximate their fair values
    at December 31, 2002 and 2001. The stock subscription receivable included
    in the statement of stockholders' equity is not considered to be a financial
    instrument. Stock-Based Compensation Statement on Accounting Financial Standards
    ("SFAS") No. 123, "Accounting for Stock-Based Compensation", encourages, but
    does not require companies to record compensation costs for stock-based employee
    compensation plans at fair value. The Company has chosen to account for stock-based
    compensation using the intrinsic value method prescribed in Accounting Principles
    Board Opinion No. 25, "Accounting for Stock Issued to Employees", and related
    interpretations. Accordingly, compensation costs for stock options is measured
    as the excess, if any, of the quoted market price of the Company's stock at
    the date of the grant over the amount an employee must pay to acquire the
    stock. Earnings (Loss) per Common Share SFAS No. 128, "Earnings Per Share"
    requires presentation of basic loss per share ("Basic LPS") and diluted loss
    per share ("Diluted LPS"). The computation of basic loss per share is computed
    by dividing loss available to common stockholders by the weighted average
    number of outstanding common shares during the period. Diluted loss per share
    gives effect to all dilutive potential common shares outstanding during the
    period. These potentially dilutive securities were not included in the calculation
    of loss per share for the years ended December 31, 2002 and 2001 because the
    Company incurred a loss during such periods and thus their effect would have
    been anti-dilutive. Accordingly, basic and diluted loss per share are the
    same for the years ended December 31, 2002 and 2001. As December 31, 2002
    and 2001, potentially dilutive securities consisted of outstanding common
    stock purchase warrants and stock options to acquire 3,000 shares and 3,250
    shares, respectively. Management Estimates The presentation of financial statements
    in conformity with generally accepted accounting principles requires management
    to make estimates and assumptions that affect the reported amounts of assets
    and liabilities and disclosure of contingent assets and liabilities at the
    date of the financial 18
 PTS, INC. (A Development Stage Company) NOTES TO CONSOLIDATED
    FINANCIAL STATEMENTS DECEMBER 31, 2002 AND
    2001 statements and the reported amounts
    of revenues and expenses during the reporting period. Actual results could
    differ from those estimates. Reclassification Certain reclassifications have been
    made to the 2001 financial statements in order to conform to the 2002 financial
    statement presentation. Comprehensive Income The Company has no items of other comprehensive
    income (loss) for the years ended December 31, 2002 and 2001. Recent Accounting Pronouncements In April 2002, the Financial Accounting
    Standards Board ("FASB") issued SFAS No. 145, "Rescission of FASB Statements
    No. 4, 44, and 64, amendment of FASB Statement No. 13, and Technical Corrections".
    SFAS No. 145 rescinds Statement No. 4, which required gains and losses from
    extinguishments of debt to be classified as an extraordinary item, net of
    tax. SFAS 145, when adopted, will require applying the criteria of Accounting
    Principles Board Opinion No. 30, "Reporting the Results of Operations - Reporting
    Effects of Disposal of a Segment of a Business and Extraordinary, Unusual
    and Infrequently Occurring Events and Transactions" in determining how to
    classify gains and/or losses resulting from extinguishments of debt. The effective
    date of adoption of SFAS No. 145 is for fiscal years beginning after May 15,
    2002. The Company does not expect the adoption of SFAS No. 145 to have a material
    effect on its financial position or results of operations. In July 2002, FASB issued SFAS No.
    146, "Accounting for Costs Associated With Exit or Disposal Activities".
    This Statement requires the recognition of costs related to exit or disposal
    activities at the time they are incurred, rather than the previously accepted
    method of recognizing such costs at the commitment date of such activities.
    SFAS 146 is effective for such activities entered into or modified after December
    31, 2002. The provisions of this statement for assets held for sale or other
    disposal generally are required to be applied prospectively after the adoption
    date to newly initiated disposal activities and, therefore, will depend on
    future actions initiated by management. As a result, the Company cannot determine
    the potential effects that adoption of SFAS 146 will have on the financial
    statements with respect to future disposal decisions, if any. 19 
 PTS, INC. (A Development Stage Company) NOTES TO CONSOLIDATED
    FINANCIAL STATEMENTS DECEMBER 31, 2002 AND
    2001 In December 2002, FASB issued SFAS
    No. 148, "Accounting for Stock Based Compensation - Transition and Disclosure",
    which amended Statement No. 123. "Accounting for Stock Based Compensation".
    SFAS No. 148 provides for the use of alternative methods of transition for
    voluntary change to the fair value based method of accounting for stock based
    compensation. It also amends the disclosure requirements of Statement No.
    123 to require prominent disclosure of the Company's method of accounting
    for such compensation and the effect of the method used on reported results
    in annual and interim financial statements. SFAS No. 148 is effective for
    annual periods ending after December 15, 2002 and interim period beginnings
    after December 15, 2002. The Company does not expect the adoption of SFAS
    No. 148 to have a material effect on its financial position or results of
    operations. NOTE 2 -     EQUIPMENT Equipment at December 31, 2002 and
    2001 consists of the following: 2002
      2001Test Equipment
      $ -
      $61,028Computers
      $ -
      $27,963Computer Software
      $ -
      $10,774$99,765Less: accumulated deprectiation
      
      (35,257)Total property and equipment, net
      $-
      $64,508 Depreciation expense for the years
    ended December 31, 2002 and 2001 was $15,900 and $23,459, respectively. During
    the year ended December 31, 2002, the Company recorded an impairment loss
    on its remaining equipment of $48.608. NOTE 3 -     INCOME
    TAXES Significant components of the Company's
    deferred income tax assets at December 31, 2002 and 2001 are as follows: 20 
 PTS, INC. (A Development Stage Company) NOTES TO CONSOLIDATED
    FINANCIAL STATEMENTS DECEMBER 31, 2002 AND
    2001 2002
      
      2001Deferred income tax asset:Net operating loss carry forward
      $ 3,222,000
      
      $ 3,056,000Impairment expense
      561,000
      
      629,000Total deferred income tax asset
      3,783,000
      
      3,685,000valuation allowance
      (3,783,000)
      
      (3,685,000)Net deferred income tax asset
      $ -
      
      $ - The Company, based upon its history
    of losses during its development stage and management's assessment of when
    operations are anticipated to generate taxable income, has concluded that
    it is more likely than not that none of the net deferred income tax assets
    will be realized through future taxable earnings and has established a valuation
    allowance for them. Reconciliation of the effective income
    tax rate to the U. S. statutory rate is as follows: 2001
      
      2000Tax expense at the U.S. statutoryincome tax rate
      (34.0)
      %
      (34.0)
      %Increase in the valuation allowance
      34.0
      
      34.0Effective income tax rate
      -
      %
      -
      % The Company has determined that there
    will be significant limitations on the future utilization of the net operating
    loss carry forward due to the ownership changes in the Company. NOTE 4 -     RELATED
    PARTY TRANSACTIONS Licensing Agreement In 1996 the Company entered into a
    licensing agreement with an individual who was an officer and major shareholder
    through which the Company received the exclusive right to develop, manufacture,
    and market an allergy detection, non-invasive, medical device. The licensing
    agreement does not require any royalty payments. The licensing agreement was
    for a term of five years, with the Company holding options to extend the agreement
    for two additional five-year terms at no additional cost. The option has been
    extended by oral agreement. 21
 PTS, INC. (A Development Stage Company) NOTES TO CONSOLIDATED
    FINANCIAL STATEMENTS DECEMBER 31, 2002 AND
    2001 Due to Related Party In 2002 and 2001, an officer and shareholder
    of the Company paid $34,999 and $4,500, respectively, of operating expenses
    on behalf of the Company. At December 31, 2002 and 2001, the
    Company had accrued $214,000 and $70,000, respectively, of compensation expense
    due to two officers and stockholders. NOTE 5 -     COMMITMENTS
    AND CONTINGENCIES Employment Taxes The Company, in its fiduciary capacity
    as an employer, has the primary responsibility for deducting and remitting
    both the employer and employee portions or payroll related taxes to the appropriate
    governmental agencies. Since inception, the Company paid $1,052,893 in compensation
    to three of its officers upon which taxes were not withheld nor remitted to
    the appropriate governmental authorities. If, as a result of not withholding
    employment taxes, the employees incur an income tax liability that ultimately
    results in a deficiency, the Company becomes contingently responsible, if
    the employees cannot or do not satisfy that liability. Since inception, the
    Company is contingently liable for these taxes, penalties, and interest, which
    approximate $393,000. The employer portion of the payroll-related taxes, $88,638,
    has been recorded as a liability by the Company as December 31, 2002 and 2001. Operating Leases The Company is not currently obligated
    under any operating leases. Rent expense for operating leases for the two
    years ended December 31, 2002 and 2001 was $1,440 and $32,063, respectively. NOTE 6 -     STOCK-BASED
    COMPENSATION During 1999, the Company's Board of
    Directors adopted a Stock Option Plan and granted options to purchase 750
    shares of the Company's common stock to two members of the Board of Directors.
    The maximum number of shares issuable under the plan may not exceed 500,000
    shares. The options were issued with an exercise price of $300 with 250 expiring
    in July 2002 and 500 expiring in March 2003. As the directors are employees
    of the Company, the options were accounted for under APB No. 25. The exercise
    price of the options equaled or exceeded the fair value of the Company's 22 
 PTS, INC. (A Development Stage Company) NOTES TO CONSOLIDATED
    FINANCIAL STATEMENTS DECEMBER 31, 2002 AND
    2001 common stock at the date of grant.
    Consequently, no compensation expense was recognized in connection with the
    issuance of these options. The following summarizes information
    about stock options of the Company granted and outstanding at December 31,
    2002: ExerciseOptions
      
      PriceOutstanding at beginning of year
      750
      
      $ 300Granted
      -
      
      -Exercised
      -
      
      -Expired
      (250)
      
      -Outstanding at end of year
      500
      
      $ 300 Summary information about the Company's
    options outstanding at December 31, 2002: Exercise price
      $ 300Options outstanding, December
          31, 2002
      500Weighted average remaining contractual
          life
      .25 yearsWeighted average exercise price
      $ 300Options exercisable, December
          31, 2002
      500Weighted average exercise price
      $ 300 NOTE 7 -     STOCK
    PURCHASE WARRANTS The Company's private placement offering
    of stock in 1999 was accomplished with the sale of 2,500 units comprised of
    one share of common stock and one stock purchase warrants. The stock purchase
    warrants were immediately exercisable. The stock purchase warrants provide
    for an exercise price of $480 and expire in July 2004. To date, none of the
    stock purchase warrants have been exercised. At December 31, 2002 and 2001,
    2,500 shares of common stock were reserved for this purpose. NOTE 8 -     STOCK
    TRANSACTIONS Stock Split On December 12, 2000, the Company's
    Board of Directors authorized a one-for-ten reverse stock split to stockholders
    of record on December 22, 2000. 23 
 PTS, INC. (A Development Stage Company) NOTES TO CONSOLIDATED
    FINANCIAL STATEMENTS DECEMBER 31, 2002 AND
    2001 On June 1, 2001, the Company's Board
    of Directors authorized a one-for-twenty reverse stock split to stockholders
    of record on June 30, 2001. All references in the notes to financial statements
    to number of shares, weighted average shares, per share amounts, and market
    prices of the Company's common stock have been adjusted to give retroactive
    effect for the reverse stock splits. Shares Issued for Acquisitions Effective June 2001, the Company issued
    450,000 shares of common stock to acquire all of the issued and outstanding
    common shares of PTS, Inc. ("PTS"). PTS was inactive until June 2001. PTS'
    only asset was a note receivable in the amount of $1,000,000, with a present
    value of $950,000, which was received by PTS as consideration for the issuance
    of 150,000 shares of common stock. The balance of the note receivable is shown
    in the consolidated financial statements as a reduction of stockholders' equity. Effective July 2001, the Company issued
    20,000,000 shares of common stock, valued at $2,000,000, to acquire 70% of
    the issued and outstanding common shares of PTS Hong Kong Ltd. ("PTS HK"),
    a Company controlled by a stockholder. The principle asset of PTS HK consists
    of an agreement with Shanghai Information Technology Department ("SIIT"),
    a subsidiary of Shanghai Information Investment, Inc. to do business, participate
    with, acquire, and/or Joint Venture with various business in Mainland China.
    The license had a fair market value of $2,000,000 at the date of issuance
    and has been fully impaired at December 31, 2001, due to the uncertainty of
    the ultimate realization of the carrying amount of the asset. Shares Issued for Notes and Services During the period from January 1, 2001
    through December 31, 2001, the Company issued 2,020,712 additional shares
    of common stock for notes and services received. Shares were issued for the
    following: 24 
 PTS, INC. (A Development Stage Company) NOTES TO CONSOLIDATED
    FINANCIAL STATEMENTS DECEMBER 31, 2002 AND
    2001 Number ofShares
      
      ValueNotes acquired
      450,000
      
      $ 950,000Services:Investor Relations
      1,556,129
      
      2,457,870Research and development
      8,333
      
      50,850Lawsuit settlement
      5,000
      
      8,000Director compensation
      1,250
      
      6,275Total
      1,570,712
      
      2,552,995Total common stock issued
      2,020,712
      
      $ 3,502,995 During 2001, the Company, in private
    placement offerings, sold an aggregate of 157,331 shares of common stock for
    proceeds of $412,257. On December 29, 2000, the Company sold
    13,000 common shares for unsecured promissory notes issued by four individuals.
    The promissory notes and the related interest earned were payable on or before
    December 29, 2002. The notes were classified as a reduction of stockholders'
    deficit. As of December 31, 2001, the Company deemed the promissory notes
    uncollectible and wrote-off the amount as bad debt in the amount of $91,000. On January 24, 2001, the Company sold
    900,000 common shares for an unsecured promissory note. The promissory note
    and the related interest earned was payable on or before January 23, 2003.
    The note was classified as a reduction of stockholders' deficit. As of December
    31, 2001, the Company settled the note receivable through professional services
    rendered by the stockholder for the value of $350,000. 25


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ITEM 8.CHANGES IN AND DISAGREEMENTS
    WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREEffective May 12, 2003, PTS, Inc. (the "Company")
    dismissed Merdinger, Fruchter, Rosen & Co., P.C. ("MFRC") and
    replaced it with Weinberg & Company, P.A. ("Weinberg") as the
    Company's independent accountants engaged to audit its financial statements
    for the fiscal year ending December 31, 2002. The decision to change accountants
    was approved by the Company's Board of Directors. MFRC's reports on the Company's financial statements for the past two fiscal
    years did not contain an adverse opinion or a disclaimer of opinion, and were
    not qualified or modified as to uncertainty, audit scope, or accounting principles,
    however the reports did contain a going concern explanatory paragraph. During the Company's two most recent fiscal years, and any subsequent interim
    period preceding such change in accountants, there were no disagreements with
    MFRC on any matter of accounting principles or practices, financial statement
    disclosure, or auditing scope of procedure (within the meaning of Item 304(a)(1)(iv)
    of Regulation S-K), and there were no reportable events (as defined in Item
    304(a)(1)(v) of Regulation S-K). During the Company's two most recent fiscal years, and any subsequent interim
    period preceding such change in accountants, neither the Company nor anyone
    on its behalf consulted Weinberg regarding (i) either the application of accounting
    principles to a specified transaction, either completed or proposed, or the
    type of audit opinion that might be rendered on the Company's financial statements,
    or (ii) any matter that was either the subject of a disagreement or a reportable
    event (as described in the preceding paragraph). The Company has requested that MFRC
    review the above disclosure and furnish the Company with a letter addressed
    to the Commission attesting to its agreement with the disclosure or containing
    any new information, clarification of the Company's expression of its views,
    or the respect in which it does not agree with the statements made by the
    Company herein. 26
 PART III ITEM 9.DIRECTORS, EXECUTIVE OFFICERS,
    PROMOTERS, AND CONTROL PERSONS The members of the Board of Directors
    of PTS serve until the next annual meeting of the stockholders, or until their
    successors have been elected. The officers serve at the pleasure of the Board
    of Directors. Name
      Age
      PositionPeter Chin
      55
      President/TreasurerDirector Peter Chin is the President, Treasurer
    and a director of the Company. From 1966 through present, Mr. Chin
    has been involved in various forms of the entertainment industry including
    film production, and stage entertainment production development and distribution.
    Concurrent with his entertainment activities, Mr. Chin has been involved in
    the hospitality industry with investments in hotels and various restaurants.
    Mr. Chin is a member of seceral boards of directors including Fatchoy, Inc.,
    Global Herbs, Inc., SWI consulting and is the chairman of his own personal
    holding company. Audit Committee and Code of Ethics The Company's Board of Directors has not yet appointed an audit committee.
    The Company is in the process of taking steps to establish a written code
    of ethics. ITEM 10.EXECUTIVE COMPENSATION Any compensation received by officers,
    directors, and management personnel of the company will be determined from
    time to time by the Board of Directors of the company. Officers, directors,
    and management personnel of the company will be reimbursed for any out-of-pocket
    expenses incurred on behalf of the company. Officers' compensation, in the
    aggregate, increased to $144,000 during the year ended 2002 from $54,525 during
    the year ended 2001. Compensation to the company's officers is specified on
    the following chart: Cash
      TotalStock
      Compensation
      Compensation--------
      ------------
      ------------Peter Chin
      
      120,000Philip Flaherty
      
      24,000Totals
      
      144,000 27   ITEM 11.SECURITY OWNERSHIP OF CERTAIN
    BENEFICIAL OWNERS AND MANAGEMENT. The following table sets
    forth each person known to the company, as of May 17, 2002, to be a beneficial
    owner of five percent (5%) or more of the company's common stock, by the company's
    directors individually, and by all of the company's directors and executive
    officers as a group. Ownership of Officers and Directors: Common Stock
      Peter Chin (1)
      859,500
      3.9%Common Stock
      All directors and officers
          as a group(1 person)
      859,500
      3.9% ---------------------------------------- * Denotes less than one percent (1) Shares of the Company's common
    stock are held by (i) Peter Chin; and (ii) Peter Chin's spouse, Sandy Chin. ITEM 12.CERTAIN RELATIONSHIPS AND
    RELATED TRANSACTIONS Related Party Transactions. Licensing Agreement In 1996 the Company entered into a
    licensing agreement with an individual who was an officer and major shareholder
    through which the company received the exclusive right to develop, manufacture,
    and market an allergy detection, non-invasive, medical device (Electronic
    Allergo-Sensitivity Test Device, U.S. Patent No. 5413113). The licensing agreement
    does not require any royalty payments. The licensing agreement was for a term
    of five years, with the Company holding options to extend the agreement for
    two additional five-year terms at no additional cost. There is an oral agreement
    extending the license. Due to Related Parties In 2001, an officer and shareholder
    of the Company paid $4,500 of operating expenses on behalf of the Company. In 2002, an officer and shareholder
    of the Company paid $34,999 of operating expenses on behalf of the Company. At December 31, 2002, the Company had
    accrued $214,000 compensation expense to two officers and shareholders. The
    amount accrued at December 31, 2001 was $70,000. 28   ITEM 13.EXHIBITS. 2.1      
    Acquisition Agreement (Incorporated by reference to the Company's Current
    Report filed on Form 8-K, filed on June 26, 2001.) 3.1      
    The exhibit consisting of the Company's Articles of Incorporation is attached
    to the Company's amended Form 10-SB, filed on August 2, 1999. This exhibit
    is incorporated by reference to that Form. 3.1a     Articles
    of Exchange (Incorporated by reference to the Company's Current Report filed
    on Form 8-K, filed on June 26, 2001.) 3.1b     Certificate
    of Amendment (Incorporated by reference to the Company's Current Report filed
    on Form 8-K, filed on June 26, 2001.) 3.2      
    The exhibit consisting of the Company's Bylaws is attached to the Company's
    amended Form 10-SB, filed on August 2, 1999. This exhibit is incorporated
    by reference to that Form. 23.1     Merdinger,
    Fruchter, Rosen & Company,. Inc. Independent's Auditors' Consent. Filed
    herewith. 99.1     Separation
    and Distribution Agreement (incorporated by reference to Exhibit 99.1 to the
    Company's Form 10-QSB filed on November 18, 2002). 99.2     Amendment
    to Separation and Distribution Agreement (incorporated by reference to Exhibit
    99.1 to the Company's Form 10-QSB filed on November 18, 2002). ITEM 14. CONTROLS AND PROCEDURES. (a) Evaluation of disclosure controls
    and procedures. We maintain controls and procedures designed to ensure that
    information required to be disclosed in the reports that we file or submit
    under the Securities Exchange Act of 1934 is recorded, processed, summarized
    and reported within the time periods specified in the rules and forms of the
    Securities and Exchange Commission. Based upon their evaluation of those controls
    and procedures performed within 90 days of the filing date of this report,
    our chief executive officer and the principal financial officer concluded
    that our disclosure controls and procedures were adequate. (b) Changes in internal controls. There
    were no significant changes in our internal controls or in other factors that
    could significantly affect these controls subsequent to the date of the evaluation
    of those controls by the chief executive officer and principal financial officer. 29 
 SIGNATURES In accordance with Section 13 or 15(d)
    of the Securities Exchange Act, the Registrant caused this report to be signed
    on its behalf by the undersigned, thereunto duly authorized. PTS, Inc. By: /s/ Peter Chin
    Peter Chin, President, Chief Executive and Accounting Officer Date: May 21, 2003 In accordance with the Exchange Act,
    this report has been signed below by the following persons on behalf of the
    registrant and in capacities and on dates indicated. By: /s/ Peter Chin
    Peter Chin, Director Date: May 21, 2003 30   CERTIFICATION In connection with the accompanying Annual Report of PTS, Inc. (the "Registrant")
    on Form 10-KSB for the fiscal year ending December 31, 2002, as filed with
    the Securities and Exchange Commission on the date hereof (the "Annual
    Report"), I, Peter Chin, Chief Executive and Accounting Officer of the
    Registrant, certify that: 1.         I have reviewed this Annual
    Report; 2.        
    Based on my knowledge, this Annual Report does not contain any untrue statement
    of 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 Annual Report; 3.         Based on my knowledge, the
    financial statements, and other financial information included in this Annual
    Report, fairly present in all material respects the financial condition, results
    of operations and cash flows of the registrant as, and for the periods presented
    in this Annual Report; 4.         I am responsible for establishing
    and maintaining disclosure controls and procedures (as defined in Exchange
    Act Rules 13a-14 and 15d-14) for the Registrant and have: a)        
    designed such disclosure controls and procedures to ensure that material information
    relating to the Registrant, including its consolidated subsidiaries, to the
    extent applicable, is made known to me by others within those entities, particularly
    during the period in which this Annual 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 Annual Report (the "Evaluation
    Date"); and c)         presented in this Annual Report
    my conclusions about the effectiveness of the disclosure controls and procedures
    based on my evaluation as of the Evaluation Date; 5.           
    I have disclosed, based on my most recent evaluation, to the Registrant's
    auditors and the audit committee of Registrant's board of directors (or persons
    performing the equivalent functions): 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.           
    I have indicated in this Annual 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 my most recent evaluation,
    including any corrective actions with regard to significant deficiencies and
    material weaknesses. Date: May 22, 2003                                     
    
    By:Name: Peter Chin Title: President, Chief Executive and Accounting Officer






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