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                                   FORM 10-KSB

                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION


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                                MASTER FILE COPY

         Signatures of Officers and Directors

|_|       Douglas G. Hastings
|_|       Michael T. Montgomery
|_|       Rulon J. Tolman
|_|       Gary C. Clayton
|_|       David R. Stewart
|_|       William E. Browand


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

                                   Form 10-KSB

     [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
              OF 1934 For the fiscal year ended December 31, 2001

   [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 For the transition period from _______________________ to

                 _____________ Commission file number: 0-30463

                               R-TEC HOLDING, INC.
                 (Name of small business issuer in its charter)

                     IDAHO                          82-0515707
       (State or other jurisdiction of           (I.R.S. Employer
        incorporation or organization)          Identification No.)

                 1471 E. Commercial Ave., Meridian, Idaho           83642
                   (Address of principal executive offices)       (Zip Code)

         Issuer's telephone number: (208) 887-0953     FAX: (208) 888-1757

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Securities registered under Section 12(b) of the Exchange Act:

       Title of each class           Name of each exchange on which registered

________________________________     _________________________________________


________________________________     _________________________________________

Securities registered under Section 12(g) of the Exchange Act:

                          Common Stock $1.00 par 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. [X ] Yes
[ ] No

Check if there is no disclosure of delinquent  filers in response to Item 405
of  Regulation  S-B is not contained in this form, and no disclosure will be
contained, to the  best of  registrant's


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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.[ ]

Registrants revenues for the fiscal year ended December 31, 2001 were
$2,209,826. As of December 31, 2001, there were 19,009,205 shares of the
registrant's no par value common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

As referenced in the Exhibit List attached hereto.

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS
R-Tec Holding, Inc. (the "Company")

R-Tec Holding, Inc., through its subsidiaries (collectively "the Company")
develops custom automation solutions to the high-tech industry through its
consulting services, prototype development, tooling and manufacturing. The
Company also designs and manufactures high performance test sockets; burn-in
sockets and IC interconnect devices for the IC chip industry.

R-Tec Holding, Inc. was initially formed as a wholly owned subsidiary of Biogan
International, Inc. (Biogan) on August 18, 1999. Biogan, at the time, was a
development stage company which was publicly held and traded in the over the
counter market. Biogan transferred its 50 % ownership in IntorCorp, Inc.
(IntorCorp) to R-Tec Holding, Inc. IntorCorp was formed in 1998 for the purpose
of completing the research and design on motor technology. The technology was
developed within Biogan and all rights to the technology were transferred to
IntorCorp. There have been no operations or activities in IntorCorp since its
formation. Biogan paid a stock dividend to shareholders on September 15, 1999,
consisting of one share of R-Tec Holding, Inc. stock for 20 each shares of
Biogan stock. The dividend resulted in the shareholders of Biogan receiving
4,266,797 shares of R-Tec Holding, Inc. common stock.

R-Tec Corporation (R-Tec) has been in existence since 1995. On September 27,
1999, R-Tec Holding, Inc. and R-Tec Corporation entered into a definitive
agreement under which the shareholders of R-Tec transferred 80% of their common
stock holdings of R-Tec Corporation in exchange for 4,266,797 shares of R-Tec
Holding, Inc. R-Tec Holding also agreed to contribute its investment of
IntorCorp to R-Tec Corporation. The transaction closed on November 3, 1999. On
November 4, 1999, R-Tec Corporation redeemed the remaining 20% ownership from
the shareholders. The redemption resulted in recording a $100,000 note payable
to the former shareholders. The stock redemption resulted in R-Tec Corporation
being a wholly owned subsidiary of R-Tec Holding, Inc.

The financial statements for the Company have been prepared in accordance with
reverse


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purchase accounting. The newly formed holding company, R-Tec Holding, Inc. had
no activity prior to the acquisition, and accordingly, is considered to be the
acquired entity. R-Tec Holding was formed to posture itself to effect a business
combination. R-Tec Holding had no tangible assets, liabilities, or earnings
process prior to the combination. The only assets of R-Tec Holding at the date
of the combination were the in-process research and development assets.

On December 1, 1999,  the Company  formed a new,  wholly owned  subsidiary,
R-Tec Interconnect, Inc. (hereinafter referred to as "Interconnect") to focus on
its IC Testing  Interface  products.  The  Company has been  developing  testing
interface  products since 1998 believing that product  development  and maturity
were at a stage to  justify a  separate  divisional  focus.  However,  effective
September 1, 2001,  Interconnect was merged into R-Tec Corporation to create one
operational  company  under the umbrella  ownership of R-Tec  Holding,  Inc. The
merger was also effected to reduce common overhead  expenses;  both Interconnect
and R-Tec Corp are located in the same facilities and receive managerial support
from the same individuals.

R-Tec Corporation, a subsidiary of the Company.

R-Tec Corporation was initially organized in 1995 as a small individually
operated company in a modified garage for the purpose of developing and
fabricating High-Tech custom manufacturing equipment, primarily for a single
customer. Most of the contracts during the first 18 months were for the
duplication of High-Tech manufacturing tools going overseas for Hewlett Packard.
Presently R-Tec Corporation, under contracts with various customers, develops,
engineers and fabricates High-Tech custom manufacturing equipment and parts to
be incorporated into customer owned and operated manufacturing equipment and
manufactured products. R-Tec Corporation's expertise includes engineering,
development of controls, machine design and tooling, consulting services,
prototype development, tooling and manufacturing. Typical production includes:
mechanical fixtures; "mech-op stations" (devices for testing mechanical
operations and performance of equipment); "servo-writers" and "transfer
stations"(devices that write code instructions for reading disc drives in
manufacturing stations); "sub-assemblies" (an assembly of electrical components
as a unit to be integrated with other units to complete a device or product);
"automatic robot work stations" (a machine that automatically constructs part of
a manufactured product); and electronic testing devices. Essentially all of the
products and services incorporate one or more complete disciplines of
mechanical, electrical, software, machine visions (a vision camera that
digitizes information for testing purposes) and controls.

Developed technology currently includes CAD-based software (computer aided
design software), electro-mechanical devices, tool design, PC Board Layout
(printed circuit board layout technology from concept to manufactured product),
International CE-Marked products (a quality designation in China similar to "UL"
marked products in the US) Machine Vision, Specialty Tooling, Engineering
Design, Motion Control, Robotics, Software Development, PLC Programming
(programmable logic controller which is a low level computer for controlling
functions).


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Significant clients of R-Tec Corporation include Iomega Corporation, Hewlett
Packard, Pro- Precision Machining, Steelhead Metals, SCP Global Technologies,
System Integration (Division of Micron), Intel, TECHNIT Interconnection
Products, 3Com Corporation, Preco, Inc., Motorola, Micron Communications, Inc.,
Ford Microelectronics, Inc., MSL (Salt Lake Division), and Anadigics.

From 1998 through July 16, 2001, distribution of products and services was
primarily made through Browand, LaMeire & Associates (B.L.& A.), a
Manufacturer's Representative firm who maintained sales representative agents in
the US, Europe and Asia. B.L.& A. had four representative firms in the U.S. with
twelve sales persons, three European agents for Germany, France and England, and
five Asian agents for Singapore, Malaysia, Taiwan and Japan. In December of
2000, the principals of B.L.& A. were hired as management employees to oversee
the internal development of marketing efforts. Effective July 17, 2001, the
Company acquired certain assets of B.L.&A. , primarily customers contact lists,
in exchange for 380,000 shares of R-Tec Holding, Inc. stock valued at $1.00 per
share, and continued to solidify its position of bringing the marketing and
distribution expertise of B.L.&A. in-house.

See additional discussion in the following section, "R-Tec Interconnect Inc., a
subsidiary of the Company."

Prior to July 3, 2001, certain functions of some projects were, when needed,
contracted to R-Tec Machine Tools, Inc., an Idaho corporation, in which Doug
Hastings and Gary Clayton owned a combined 50% interest. R-Tec Machine Tools,
Inc. conducted business as a machine shop in the same building as R-Tec
Corporation (See "Certain Relationships and Related Transactions "). However,
some machine work was also contracted with other machine shops depending on time
of delivery constraints. R- Tec Machine Tools, Inc. exclusively machined raw
metal into custom parts on contract with its customers, one of which was R-Tec
Corporation. Effective July 3, 2001, R-Tec Machine Tools, Inc. was acquired by
R-Tec Corporation in a stock for stock acquisition. Joe Hawkins, Walter Hinkle,
Gary Clayton, and Doug Hastings, each 25% owners of R-Tec Machine Tools, Inc.,
received an aggregate 291,248 shares of R-Tec Holding, Inc. stock valued at
$1.00 per share.

The custom-parts manufacturing industry is vast with many major competitors who
are larger and financially stronger than R-Tec Corporation, such as Wright
Industries, Technistar, and Acufab. Major companies such as Motorola and Micron
frequently have their own internal tooling development groups to develop their
own equipment requirements and who on occasion will "out source" their over-load
demands to companies like R-Tec Corporation. Management is not aware of any
information to estimate a market share of the industry, but is confident that
R-Tec Corporation has a very small share of the overall market. Management of
R-Tec Corporation primarily relies on it manufacturer's representative to sell
its products and services.

Materials for products, such as aluminum, bar stock, plate stock, wire and
plastics are provided by several subcontractors who bid to provide supplies
according to contract


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specifications. To the best knowledge of Management the required materials are
of a generic nature with ample availability from several sources, and therefore
there is no dependence on a source of raw materials.

During 1999 R-Tec Corporation had approximately 43 customers with material
contractual agreements, four of which customers provided in excess of 10% of
annual revenues, i.e. 3COM Corporation, Micron System Integration, Palm
Computing, Inc., and Performance Design, Inc., for a combined total of 52.2%
from the four. During 2000, R-Tec Corporation had approximately 30 customers
with material contractual agreements, two of which customers provided in excess
of 10% of annual revenues, i.e., MSL Salt Lake and Palm Computing. During 2001,
R-Tec Corporation and merged entities had approximately 18 customers with
material contractual agreements, 3 of which customers provided in excess of 10%
of annual revenue, i.e., 3com, MSL Salt Lake, and Palm Computing.

The nature of the "custom parts" engineering business is such that customers
producing material revenues generally change from year to year and no dependence
on any specific customers develops.

Prior to 1999 R-Tec Corporation did not have any patents or other proprietary
property interests. In 1999 it had in application stage two patents, one of
which was issued for a "Test Probe Positioning Device, and one of which has been
re-applied. The patent issued is #6,064,195 dated May 16, 2000, and will expire
on May 15, 2017. The patent is for a self-aligning device for positioning a test
probe in a socket of a printed circuit board to be tested.

Neither the products nor services provided by R-Tec Corporation presently
require any governmental approval. Management is not currently aware of any
existing or probable governmental regulation on any part of the business.

Excluding the $190,000 of R&D expenses associated with the initial merger,
during 1999 R-Tec Corporation did not expend material funds on research and
development. Any activity that may be considered as research and development has
been only in connection with the performance under a contract with a customer
for services and/or products the cost of which has been paid by the customer as
part of the contract terms. In 2000 and 2001, material funds spent on research
and development were not generally accounted for on the income statement;
strictly as R&D, as these efforts were directed for customers' benefits on a
contractual basis.

Presently, there are no costs or effects of compliance with environmental laws
for R-Tec Corporation. Management is aware however, that with the implementation
of its production facility for the GCI(TM) product group, it will be incumbent
upon the Company to ensure strict compliance with any environmental laws. The
GCI(TM) production line is expected to be operational by June 1, 2002.

R-Tec Corporation currently employs 28 full time employees and 8 part time
employees in the Boise office and 2 full time employees in the Utah office. See
discussion of Utah office and employees under Item 2 "Description of Property."


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R-Tec Interconnect, Inc. a subsidiary of the Company

R-Tec Interconnect, the newly formed subsidiary of R-Tec Holding, Inc., as
previously discussed, was merged into R-Tec Corporation effective September 1,
2001. The products and product group previously contained within R-Tec
Interconnect will continue in R-Tec Corporation. Common resources are being
utilized to help develop the IC products and to focus on minimizing overhead
costs.

The product group transferred into R-Tec Corporation will be the continued
engineered design and manufacture of testing sockets and related testing
interface products to existing customers. Testing sockets for the IC industry
include a variety of custom designs and technical requirements as determined by
customer's specifications. The Company will also focus on developing a
standardized, lower cost, testing solution for its existing customer base.

Testing devices include test sockets with probe contacts and a new proprietary
interface device engineered by the Company called GCI(TM). This new technology
can be incorporated into existing design structure for socket testing devices
with minimal design adjustments. The GCI(TM) presents new opportunities to the
Company due to its favorable characteristics and responses to issues regarding,
co-planarity, inductance, and durability.

During 2001, customers received shipments of R-Tec Corporation's proprietary
technology and began testing the new interconnect products. Product introduction
has taken longer than originally projected and the Company continues to work on
enhancing its products to meet specific customers' technological needs.

Significant customers for R-Tec Corporation's testing products include Maxim,
Amkor, RF Micro Devices, Gamma Technology, Anadigics, Micron System Integration,
Celeritek, Teradyne, Cisco Systems, Inc., Transmeta, P.T. Products & Services,
3Com, and Motorola. It is anticipated that customer usage will become broad
based and that the Company will not become dependent or at risk for a
concentration of its interconnect products within one or several customers.

Competitors for the testing product interface market include the following
companies: 3m, Aries Electronics, Cerprobe, ECT, Gold Tech, John Tech, Loranger
International, Primeyield, and Tecknit. Among these competitors, which it is
believed by management represent a combined market share of approximately 75% to
80% of the $247,000,000 testing product interface market, four utilize spring
probe technology. The remainders utilize various testing technologies. It is
believed by management that the new R-Tec Corporation GCI(TM) products represent
a leading edge challenge to other competitors in this same market.

Production for the testing devices is accomplished by using existing engineering
resources within R-Tec Corporation's personnel group and by outsourcing some
facets of the production needs. All assembly of manufactured products is
accomplished within the


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Company's current facilities. Within the addition of the GCI(TM) production
facility, it is anticipated that the Company will become more competitive, have
faster response time to customers, and be able to better control product
quality.

Sources of raw materials for production are represented by commonly used
materials available to the outsourced manufacturers previously mentioned and
management does not foresee any limitations or interruptions in the availability
of materials for production. These common raw materials include aluminum, steel,
gold, plastics, solder, and copper.

Management is not aware of any governmental approvals or legislative impacts
that would affect its current product lines. As previously indicated, some
compliance and necessary expense will be effected with the addition of the
GCI(TM) production line. However, current estimates for permits and hazardous
material handling for ongoing operations through outsourcing are nominal and not
material.

ITEM 2.  DESCRIPTION OF PROPERTY.
Description of Property of R-Tec Corporation (Subsidiary)

R-Tec Corporation is a tenant in a single purpose industrial building located at
1471 E. Commercial Avenue, in Meridian, Idaho. The building is owned by H2C2 &
Associates, LLC, an Idaho limited liability company (owned by Mr. and Mrs.
Hastings and Mr. and Mrs. Clayton, shareholders of R-Tec Corporation) and leased
100% to R-Tec Corporation under a 5 year lease expiring November 30, 2004. See,
"Certain Relationships and Related Transactions" at page 12. The building was
constructed in 1998 according to the applicable commercial building code
requirements, on approximately 1.36 acres of land, and includes a parking area
of 20 spaces.

R-Tec Corporation office space consists of approximately 2000 square feet, and
includes a reception area, conference room, and 6 individual offices. The
assembly and manufacturing areas consist of approximately 4000 square feet. The
rent is at the rate of $4,365 per month, subject to Cost of Living Index
increases on an annual basis. The Company leased in 2001 an additional office
trailer, approximate size of 12 feet by 50 feet, which is situated directly to
the east of the original building and houses primarily sales and marketing
personnel. The rent of the office trailer is at the rate of $435 per month.

In December of 2000, R-Tec Corporation entered into a lease agreement for office
and production space for a satellite division of R-Tec Corporation, i.e.,
Creative Test Solutions, in North Salt Lake, Utah. The Creative Test Solutions
division houses the software engineering support group for R-Tec Corporation.
Creative Test Solutions is not a separate legal entity but is recognized as a
part of the R-Tec Corporation structure. The office space in Utah consists of
approximately, 2,400 square feet of combined office and warehouse space with
monthly lease payments of $1,320 per month and additional expenses as per a
triple net lease agreement. All operating expenses including employment
reimbursement and taxes are paid directly from the Corporate offices in
Meridian, Idaho and are included in the expense structure of R-Tec Corporation.
As of December 31, 2000, two employees, Alan Ashcroft


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and Nyle Stewart, work at the Utah office under the supervision of Emory
Christensen, Engineering Manager.

R-Tec Holding, Inc. does not have any separate corporate offices, but uses, when
required, the offices of R-Tec Corporation for its purposes, without the payment
of any rent or other obligation, until such time as independent offices may be
required.

Except for the described leasehold interest in the occupied premises by R-Tec
Corporation, neither R-Tec Holding, nor IntorCorp, Inc. has any investments in
real estate, nor interests in real estate, real estate mortgages, nor securities
of or interests in persons primarily engaged in real estate, activities.

IntorCorp, Inc. is an Idaho corporation owned 50% by R-Tec Corporation and 50%
by C.T. Corporation an electrical engineering company. The outstanding common
stock of IntorCorp was issued originally to C.T. Corporation and to Biogan
International in exchange for their respective interest in the intellectual
technology for the IntorCorp Motor. By virtue of the transactions described in
Item 1 hereof, the interest of Biogan International has descended to R-Tec
Corporation. The board of directors of IntorCorp is comprised of four members,
two from each of C.T. Corporation and two (Gary A. Clayton and Douglas G.
Hastings) from R-Tec Corporation, with Mr. Douglas G. Hastings as President.
IntorCorp has never had assets other than the intellectual technology for the
IntorCorp Motor, nor has it conducted any business.

ITEM 3.  LEGAL PROCEEDINGS

There were no material legal proceedings to report at fiscal year end 2001.

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

a) An annual meeting of shareholders was held on the 15th day of November, 2001.

b) Directors elected at the meeting and the tabulated results of the voting were
as follows:

             Name                             Votes For           Votes Against

             Douglas G. Hastings              19,835,091          2,260

             Gary A. Clayton                  19,835,091          2,260

             Rulon L. Tolman                  19,835,091          2,260

             David R. Stewart                 19,835,091          2,260

             Bill Browand                     19,835,091          2,260

c) Other matters of voting included:

      1) ratification of Balukoff, Lindstrom, & Co., P.A. as the company's
         independent auditors. Voting was tabulated and the results were
         as follows:

          Votes For                Against or Abstaining


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          19,820,065               27,286


                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
        STOCKHOLDER MATTERS.

Market Information

The Registrant's stock is publicly traded on the OTC BB under the symbol RTHG.
Public trading was initiated July 2, 2001.

Quarterly prices for the stock are as follows:


Year 2001 Quarter                   Stock price High          Stock price Low
-----------------------------------------------------------------------------

3rd quarter 2001                    $ 7.25                    $ 0.01
4th quarter 2001                    $ 0.85                    $ 0.31

Holders of Record of Each Class of Common Equity.

Class                                 Date of Reporting  No. of Shares Held

Series A Convertible Preferred        12-31-01                 2,781,564
Common Stock                          12-31-01                19,009,205


Unregistered Equity Securities Sold by Registrant During 2001.

During 2001 Registrant issued 1,852,024 shares of common stock of Registrant
without registration under the Securities Act in private transactions to the
class of persons indicated, for consideration of cancellation of debt, services
rendered, and cash.

Series "A" Preferred Stock

During 2001, the Company received no subscriptions from Series "A" Preferred
Stock sold to existing shareholders of such stock.

Common Stock

During the 4th quarter, 2001, the Company received no additional subscriptions
from Common Stock sales through private placement offerings.


<PAGE>


On January 3, 2002, the Company Board of Directors authorized the Company to
enter into a Subscription and Stock Purchase Agreement with various accredited
investors for the sale of up to 1.7 million restricted shares of common stock at
$.50 per share. The purchase of the shares also includes the receipt of an
option with a strike price of $.50. The option can not be exercised for a period
of six months and expires and the end of two years

The described stock transactions were exempt from registration under the
provisions of Section 4(2) of the Securities Act of 1933, as amended.


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS AND/OR PLAN OF
         OPERATION.

The following discussion contains forward-looking statements that involve known
and unknown risks and uncertainties which may cause actual results in future
periods to differ materially from those indicated herein as a result of a number
of factors. When the Company uses words like "may," "believes," "expects,"
"anticipates," "should," "estimate," "project," "plan," their opposites and
similar expressions, the Company is making forward-looking statements. These
expressions are most often used in statements relating to business plans,
strategies, anticipated benefits or projections about the anticipated revenues,
earnings or other aspects of our operating results. We make these statements in
an effort to keep stockholders and the public informed about our business, and
have based them on our current expectations about future events. Such statements
should be viewed with caution. These statements are not guarantees of future
performance or events. As noted elsewhere in this report, all phases of our
business are subject to uncertainties, risks and other influences, many of which
the Company has no control over. Additionally, any of these factors, either
alone or taken together, could have a material adverse effect on the Company and
could change whether any forward-looking statement ultimately turns out to be
true. The Company undertakes no obligation to publicly release updates or
revisions to these statements. The following discussion should be read in
conjunction with audited consolidated financial statements and the notes thereto
for the year ending December 31, 2001, included elsewhere in this Form 10-KSB.

Corporate Structure

The Company has undertaken some consolidation during 2001 and has merged all
revenue generating entities into one operating division, i.e., R-Tec
Corporation. Included in this operating division are product groups and include,
1) the custom engineered automation product group originally part of R-Tec
Corporation, 2) the interconnect devices group, originally part of R-Tec
Interconnect which was merged into R-Tec Corporation as of September 1, 2001, 3)
the retail machine shop sales group, originally part of R-Tec Machine Tool,
Inc., which was purchased as of July 3, 2001, and 4) the software solutions
product group, which previously existed within R-Tec Corporation and is located
in the Utah office.


<PAGE>


IntorCorp, is a separately owned corporation of R-Tec Corporation but is not an
operating or revenue generating product group. It is anticipated that IntorCorp
will either be merged into R-Tec Corporation as a potential division or product
group or dissolved as an entity in 2002.

Performance Overview

Revenues:

The Company recognized revenues of $2,209,826 for year end 2001, compared with
$1,552,587 for year end 2000, representing an annualized growth of 42%. Sales
were broken down by product groups within our single reporting segment as
follows: Automation Products, 78%; Interconnect Products, 19%; Software
Solutions, 1%; Machine Shop Retail Sales, .5%; and Other Sales, 1.5%.

Sales for the Automation Product group were strong through the second quarter of
2001 and then fell off substantially as the entire technology sector slumped
with the downturn in the economy. As technology customers, who represent the
majority of the Company's clientele, reduced their budgets, capital budgeting
expenditures were sharply curtailed, reflecting fewer orders for the company's
Automation Products. Recognition of revenue from ongoing projects early in the
first and second quarters of 2001 helped increase sales year-to-year but do not
accurately reflect new sales growth. New sales growth in the Automation Products
group remained at nearly the same levels as year 2000.

Sales for the Interconnect Products group increased to approximately $400,000
for year 2001. Sales were distributed among a broad base of technology customers
purchasing initial, small quantities to test product integration and
compatibility with existing technologies, and a few larger customers placing
re-orders of larger quantities. Sales in this product group were split evenly
for socket devices and the company's proprietary GCI(TM) interface products.

Sales for the other product groups represented approximately 3% of sales. Sales
for the Software Solutions Products, Machine Shop Retail Products, and Other
Products groups all dropped off sharply following the second quarter of 2001.
The company attributes the decline in sales in these product groups as direct,
proportional relationships to the decline in the economy and anticipates a
resurgence to correspond with general economic growth trends.

To increment sales, after taking into account the challenging economic
environment, especially within the technology sectors, the company has hired two
additional sales representatives, solidified a strategic partnership with
National Instruments for representation of the company's products, and has added
two new external sales distributors, i.e., Lorill Electronics in California, and
Anderson Marketing Associates in Texas. The sales department has also divided
sales territories within the United States.


<PAGE>


In addition, the Company is expending resources in developing new products
within its GCI(TM) family. Research & development includes products to be
introduced into the consumer interconnect sector.


Profitability:

The Company recognized losses of ($1,439,903) in year 2001, compared to
($440,157) in year 2000. The increased losses arise from an increase in
operating costs of $1,676,454 from $1,442,764 , a 16% increase, year-to-year and
an increase in selling, general and administrative expenses of $1,967,925 from
$492,537, a 300% increase, year-to-year.

Operating costs increased in total dollars year-to-year, but represent a
favorable trend as the operating margin increased from 7% in 2000 to 24% in
2001. This favorable trend is in line with management's commitment to analyze
product groups and individual jobs to maximize profitability through job costing
analyses.

The increase in selling, general and administrative expenses represents an
unfavorable trend as these expenses increased from 32% of sales in 2000, to 85%
in 2001. The increase is attributable to adding additional management structure
and employees to prepare for future growth. In addition, $251,101 in expense was
recognized in 2001 as a non-cash option expense for consulting services by the
Olympus Group. Management is aware of the need to increment sales growth to
match the increases in selling, general and administrative expenses.

Management's goal is to focus on profitability in the near future. In order to
accomplish this goal, the following policies have been implemented: 1)
restrictive budgets have been put in place to eliminate non-essential
expenditures, 2) to reduce product costs; a production facility to manufacture
GCI(TM) products is under construction to bring in-house this process. It is
anticipated that with a reduction in product costs in this product group, there
will also be an increase in product quality and customer satisfaction. The
GCI(TM) products facility will also allow for handling of larger volumes in
anticipation of future sales growth, 3) management has restricted additional
payroll costs including overtime and has eliminated bonuses or other
non-essential payroll costs, and 4) the sales group has increased its staff to
create greater exposure and quoting opportunities for R-Tec's products.

Net loss per common share for year end 2001 was ($0.08) compared to ($0.03) for
year end 2000.

Changes in Financial Condition

At December 31, 2001, current assets were $558,943, with current liabilities of
$394,734, compared to December 31, 2000 with current assets of $815,664, and
current liabilities of 644,503. The current ratios at December 31, 2001 and
December 31, 2000 were 1.42 and 1.27 respectively.


<PAGE>


Current assets decreased from December 31, 2000 to December 31, 2001 primarily
due to a decrease in sales in the third and fourth quarters of 2001 and a
corresponding decrease in accounts receivable. In addition, $456,830 of cash
from paid in capital was used to purchase additional production equipment
including the micro machining laser necessary for the GCI(TM) production
facility.

Short term liabilities decreased from $664,503 at December 31, 2000 to $394,734
at December 31, 2001 due to a decrease in accounts payable, arising from slowing
sales and corresponding vendor payables for work in process in the third and
fourth quarters, and also due to the restructuring of short term liabilities as
discussed below.

On the balance sheet for short term liabilities, balance sheet items were
changed as follows: 1) a short term note payable to related parties was
converted to a long term note payable, 2) a short term note for accrued selling
expenses was converted to a long term note payable, and 3) accrued expenses for
preferred stock dividends were converted to long term. The effect of these
changes was a reduction in short term liabilities. Amounts of these conversions
are disclosed in note F of the notes to financial statements contained herein.

Total assets increased from $954,558 in 2000 to $1,760,896 in 2001, an increase
of 84%, due primarily to the acquisition of production equipment as previously
mentioned and the acquisition of intangible assets through the acquisition of
Browand, LaMeire and Associates, Inc. asset purchase and the R-Tec Machine Tool,
Inc. purchase. Production equipment purchases were consummated using cash funds,
excepting the assignment and assumption of capitalized leases for existing
equipment previously owned by R-Tec Machine Tool, Inc., while the Browand,
LaMeire and Associates, and R-Tec Machine Tool, Inc. purchases were consummated
using stock instruments. Total liabilities increased slightly year-to-year for
the same periods from $772,539 to $915,655, an increase of 19% due primarily to
long term notes payable to related parties.


Liquidity and Capital Resources


The Company has experienced a slowing of sales in the third and fourth quarters
of 2001. The net results have been a reduction in work in process and
corresponding accounts receivable. Therefore, funds generated from operations
have been diminished and the Company has continued to expend efforts to seek
additional capital funding. The liquidity ratio of 1.42 accurately represents
short term funding but has been strengthened with the conversion of previous,
short term debt to long term debt, rather than an increase in sales and
corresponding increases in cash and cash equivalents accounts.

It is the expectation of management that the Company will need additional funds
from paid in capital to augment cash flows from operations through subsequent
quarters in 2002 for ongoing operating expenses. The Company requires
approximately $225,000 monthly for operating expenses. Contributions from
product sales reduce this amount needed, but currently are difficult to project
due to instability in relational general economic indicators and variability in
firm commitments for orders from R-Tec's existing customer base.


<PAGE>


Sales from all product groups are expected to increase in 2002, but appear to be
directly tied to overall economic performance in the technology sectors. Overall
economic performance within the technology sectors is not a foreseeable event
that the Company can predict with any degree of accuracy. However, an
anticipated increase in sales will help offset needs for funding for operations.
For capital expenditures, and in order to complete the construction of the
GCI(TM) production facility and for any other short term capital expenditures,
the Company will need additional paid in capital. The company anticipates that
budgeted amounts of approximately $200,000 for capital expenditures in the first
and second quarters of 2002 will need to come from additional paid in capital.

The Company maintains its financial partnership with the Olympus Group, which
has committed previous financial support, and is involved in ongoing
negotiations with said group for additional equity capital funding. Within the
first quarter of 2002, the Company has receive additional paid in capital of
approximately $523,400 through efforts by the Olympus Group. However, a decline
in the Company's stock price during the third and fourth quarters of 2001, and
the subsequent first quarter of 2002, has effectively increased the cost of
capital through equity funding. The Company may determine to seek short term
debt financing to provide additional capital resources. It would be the plan of
management to replace these debt financings with equity financings at a point in
time where an increase in the Company's stock price would represent a favorable
transition. Although management is optimistic that it can, to the extent the
Company is not able to acquire either equity or debt funding, management cannot
guarantee that adequate funds will be available for ongoing operations.

Company Strategy

For the short term, management will focus on returning the Company to
profitability by focusing resources to increase sales, by eliminating
non-essential expenditures, and if necessary, reducing overhead costs including
areas of payroll costs, and by focusing on increased product margins through
reducing manufacturing costs and continued analysis by job and product groups to
ensure maximized margins.

To ensure continued customer satisfaction and re-order sales, the Company will
continue to pursue completion, as funding permits, of the GCI(TM) production
facility. It is the anticipation of the Company that this production facility,
upon completion and process stability will be the first step towards seeking ISO
9000 certification in the future. It is management's understanding that
significant customers are requesting stabilization and certification in order to
implement GCI(TM) products into their respective production environments. These
implementations could represent substantial initial orders and re-orders to the
Company.

Management is continuing, as funding allows, to research and develop additional
products within its GCI(TM) Product group, especially for the consumer related
sectors, which may represent a broader product sector than initial market
penetration into the IC testing sector. Further testing and design modifications
may also be undertaken on the IntorCorp motor technology as funding permits.


<PAGE>


Ongoing Business Concern

The Company recognizes the unpredictability of general economic indicators,
which directly influence sales, and the corresponding difficulty in predicting
with a degree of accuracy, sales projections. Although current sales projections
for R-Tec Corporation suggest an increment in revenues for 2002, and a return to
profitability, the Company is not able to ensure that these projections will be
reached. For the short term, the Company is aware that it will be dependent on
additional paid in capital until such time as sales increase to provide adequate
working capital to support operating expenses, work in process, and capital
funding needs.

Income Taxes

The following reconciles the federal tax provisions with the expected provisions
by applying statutory rates (34%) to income before income taxes as of December
31, 2001:


                                                     2001              2000
                                                ---------------  ---------------

   Provision at statutory rate                  $     (470,000)  $     (141,622)
   State income taxes, net of federal expense          (83,000)          (1,923)
   Effect of graduated rates                           (23,000)          10,376
   Effect of merger                                     40,000               --
   Change in valuation allowance                       536,000          121,265
   Other                                                    --             (989)
                                                      --------         ---------

   Income tax expense (benefit)                 $           --   $      (12,893)
                                                ==============   ===============

The net operating loss carry forward at December 31, 2001, for federal tax
purposes of approximately $1,550,000 begins to expire in the year 2020.

Recently Issued Accounting Statements
-------------------------------------

In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 141, "Business Combinations" and
No. 142, "Goodwill and Other Intangible Assets". SFAS 141 requires business
combinations to be accounted for by the purchase method starting July 1, 2001.
Both the Browand, LaMeire, and Associates, Inc. and the R-Tec Machine Tool, Inc.
acquisitions were accounted for in accordance with SFAS 141. SFAS 142 requires
intangible assets to be amortized over their useful life if determinable.
Intangible assets with indeterminable lives (such as goodwill) are no longer
subject to amortization, rather they are subject to impairment by applying a
fair-value-based test. SFAS 142 is generally effective for fiscal years
beginning after December 15, 2001. However, the non amortization provisions
regarding goodwill are effective immediately. Accordingly, goodwill acquired as
a result of the Machine Tool acquisition on July 3, 2001, has not been
amortized.

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations". SFAS 143 requires the fair value of a liability for an asset
retirement obligation


<PAGE>


be recognized in the period in which it is incurred. SFAS 143 will be effective
for years beginning after June 15, 2002, although earlier adoption is permitted.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets". SFAS 144 slightly changes and clarifies the
accounting for long-lived assets. SFAS 144 will be effective for years beginning
after December 15, 2001, although earlier adoption is permitted. The Company
believes that the adoption of these accounting standards will not have any
material effect on the financial statements of the Company.


<PAGE>

ITEM 7:  FINANCIAL STATEMENTS



                        Consolidated Financial Statements





                               R-TEC HOLDING, INC.
                                AND SUBSIDIARIES




                           December 31, 2001 and 2000


<PAGE>


                               TABLE OF CONTENTS

                                                                       Page No.



INDEPENDENT AUDITORS' REPORT ..........................................     1

FINANCIAL STATEMENTS

  Consolidated Balance Sheet ..........................................     2

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

  Consolidated Statements of Cash Flows................................     4

  Consolidated Statements of Changes in Shareholders' Equity...........     5

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


<PAGE>


                          INDEPENDENT AUDITORS' REPORT


To the Shareholders and Board of Directors
R-Tec Holding, Inc. and Subsidiary
Boise, Idaho


We have audited the accompanying consolidated balance sheet of R-Tec Holding,
Inc. and Subsidiary as of December 31, 2001, and the related consolidated
statements of operations, cash flows, and changes in shareholders' equity for
the years ended December 31, 2001 and 2000. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of R-Tec Holding, Inc.
and Subsidiary as of December 31, 2001, and the results of their operations and
their cash flows for the years ended December 31, 2001 and 2000, in conformity
with U.S. generally accepted accounting principles.



/s/
Balukoff Lindstrom & Company, P.A.
Boise, Idaho
February 22, 2002


                                      -1-


<PAGE>

                       R-TEC HOLDING, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEET
                                December 31, 2001

<TABLE>
<CAPTION>
                                                                                                         2001
                                                                                                    -------------
<S>                                                                                                    <C>
Current assets
     Cash                                                                                              $ 330,044
     Accounts receivable (net of $25,000 allowance
         for doubtful accounts)                                                                          150,848
     Costs and estimated earnings in excess
         of billings on uncompleted contracts                                                             52,027
     Income taxes receivable                                                                              15,295
     Prepaid expenses                                                                                      3,094
     Notes receivable, current portion                                                                     7,635
                                                                                                    -------------
                                                                    Total current assets                 558,943

Equipment and leasehold improvements, at cost,
     net of accumulated depreciation                                                                     628,957
Intangible assets, at cost, net of accumulated
     amortization                                                                                        320,228
Goodwill                                                                                                 201,218
Other assets, at cost, net of accumulated
     amortization                                                                                         44,075
Notes receivable, less current portion                                                                     7,475
                                                                                                    -------------
                                                                     Total assets                    $ 1,760,896
                                                                                                    =============

Current liabilities
     Accounts payable                                                                                  $ 204,808
     Accrued expenses                                                                                     28,491
     Leases payable, current portion                                                                      61,435
     Notes payable                                                                                       100,000
                                                                                                    -------------
                                                               Total current liabilities                 394,734

Accrued preferred dividends payable                                                                       95,116
Lease payable, less current portion                                                                       56,510
Notes payable to related parties, less current portion                                                   369,295
                                                                                                    -------------
                                                                       Total liabilities                 915,655

Shareholders' equity
     Series A cumulative convertible preferred stock, par value $0.23437 per
         share, 5,000,000 authorized, 2,781,564
         shares issued and outstanding                                                                   651,100
     Common stock, no par value per share,
         30,000,000 authorized, 19,009,205 shares
         issued and outstanding                                                                        2,132,755
     Additional paid-in capital                                                                          358,540
     Accumulated deficit                                                                              (2,297,154)
                                                                                                    -------------
                                                              Total shareholders' equity                 845,241
                                                                                                    -------------

                                                Total liabilities and shareholders' equity            $ 1,760,896
                                                                                                    =============
</TABLE>


                             See accompanying notes



                                      -2-
<PAGE>

                       R-TEC HOLDING, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEET
                                December 31, 2001

<TABLE>
<CAPTION>
<S>                                                                                         <C>                     <C>
                                                                                                2001                    2000
                                                                                             ----------              ---------

Revenues                                                                                    $2,209,826             $1,552,587

Operating costs                                                                              1,676,454              1,442,764
                                                                                             ----------              ---------

                                                                   Gross profit                533,372                109,823

Selling, general and administrative expenses                                                 1,881,400                492,537
Research and development                                                                         3,150                 22,710
                                                                                             ----------              ---------

                                                                 Operating loss             (1,351,178)              (405,424)

Interest expense                                                                               (38,303)               (13,189)
Interest income                                                                                  8,177                  2,080
                                                                                             ----------              ---------
                                                                                               (30,126)               (11,109)
                                                                                             ----------              ---------


Loss before income taxes                                                                    (1,381,304)              (416,533)
Income taxes expense (benefit)                                                                       -                (12,893)
                                                                                             ----------              ---------

                                                                       Net loss             (1,381,304)              (403,640)

Preferred stock dividends                                                                       58,599                 36,517
                                                                                             ----------              ---------

                       Net loss available to common shareholders                           $(1,439,903)            $(440,157)
                                                                                           ============            ===========

Net loss per common share                                                                      $ (0.08)               $ (0.03)
Weighted average shares outstanding                                                         17,761,069             17,114,174
</TABLE>


                                      -3-
<PAGE>

                       R-TEC HOLDING, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Years Ended December 31, 2001 and 2000


<TABLE>
<CAPTION>
                                                                                        2001                      2000
<S>                                                                               <C>                        <C>
                                                                                   --------------             ------------
Cash flows from operating activities
     Net loss                                                                       $ (1,381,304)              $ (403,640)
     Adjustments to reconcile net loss to net
         cash used by operating activities
         Depreciation and amortization                                                   153,903                   30,275
         Options issued for consulting services                                          251,101                        -
         Common stock issued for services                                                 18,876                    7,447
         Common stock bonuses                                                                  -                   16,555
         Changes in assets and liabilities
             Accounts receivable                                                         360,676                 (406,044)
             Income taxes receivable                                                           -                  (15,295)
             Costs and estimated earnings in excess
               of billings on uncompleted contracts                                      150,503                 (139,325)
             Prepaid expenses                                                                  -                      236
             Accounts payable                                                             41,961                  246,303
             Accrued expenses                                                            (73,670)                  47,261
             Billings in excess of costs and estimated
               earnings on uncompleted contracts                                         (94,663)                  68,685
             Income taxes payable                                                              -                  (12,401)
                                                                                       ----------                ---------
                  Net cash used by operating activities                                 (572,617)                (559,943)


Cash flows from investing activities
     Purchase of equipment and other assets                                             (456,830)                 (58,629)

Cash flows from financing activities
     Collections on loans                                                                  6,140                    5,886
     Notes payable - related parties                                                           -                   65,000
     Proceeds from preferred stock                                                             -                  651,100
     Proceeds from common stock                                                        1,112,634                   35,000
     Net borrowings on line of credit                                                          -                  (64,000)
     Proceeds from notes payable                                                         200,000                        -
     Payments on debt                                                                    (35,917)                  (1,389)
                                                                                       ----------                ---------
                   Net cash provided by financing activities                           1,282,857                  691,597
                                                                                       ----------                ---------

                   Net increase in cash                                                  253,410                   73,025
Beginning cash                                                                            76,634                    3,609
                                                                                       ----------                ---------

                   Ending cash                                                      $    330,044               $   76,634
                                                                                       ==========                =========


Supplemental disclosures of cash flow information
     Interest paid                                                                  $     31,262               $    2,632
     Noncash investing and financing activities
      Dividend paid through investment distribution                                 $          -               $   57,631
      Preferred stock dividends payable                                             $     58,599               $   36,517
      Sale of equipment with debt assumption                                        $          -               $  138,675
      Stock redemption with debt issuance                                           $          -               $  100,000
      Notes payable to related party converted to common stock                      $     65,000               $        -
      Accrued expenses converted to notes payable                                   $    169,295               $        -
      Accrued expenses converted to common stock                                    $     18,876               $        -
      Acquisition of assets, net of liabilities of $113,806
          with common stock                                                         $    557,442               $        -
</TABLE>

                             See accompanying notes


                                      -4-
<PAGE>


                       R-TEC HOLDING, INC. AND SUBSIDIARY
        CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY Years
                        Ended December 31, 2001 and 2000
<TABLE>
<CAPTION>
                                                                                                        Accumulated
                                                                                          Additional       Other
                                                Common       Preferred     Accumulated      Paid-in      Comprehen-
                                                 Stock         Stock        Deficit         Capital      sive Income       Total
                                               ----------     --------     -----------      --------     ----------     -----------
<S>                                           <C>            <C>          <C>             <C>           <C>             <C>
   Balance at December 31, 1999                $  221,729     $   --       $  (417,094)     $107,439     $     --       $   (87,926)

Net loss                                             --           --          (403,640)         --             --          (403,640)
Dividends                                            --           --           (36,517)         --             --           (36,517)
Common stock issuances                             59,002         --              --            --             --            59,002
Preferred stock issuances                            --        651,100            --            --             --           651,100
                                               ----------     --------     -----------      --------     ----------     -----------

    Balance at December 31, 2000                  280,731      651,100        (857,251)      107,439           --           182,019

Net loss                                             --           --        (1,381,304)         --             --        (1,381,304)
Dividends                                            --           --           (58,599)         --             --           (58,599)
Common stock issuances                          1,852,024         --              --            --        1,852,024
Non employee stock options                           --           --              --         251,101           --           251,101
                                               ----------     --------     -----------      --------     ----------     -----------

    Balance at December 31, 2001               $2,132,755     $651,100     $(2,297,154)     $358,540     $     --       $   845,241
                                               ==========     ========     ===========      ========     ==========     ===========
</TABLE>

                             See accompanying notes


                                      -5-
<PAGE>

                      R-TEC HOLDING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000


NOTE A - SIGNIFICANT ACCOUNTING POLICIES

Company Operations

R-Tec Holding, Inc., (the Company), is a system integrator, designer, and
manufacturer of automation and manufacturing equipment, primarily to the
high-tech industry.

Entity

The Company has been in existence, in various forms, since 1995. In 1999 the
Company completed a reverse merger with R-Tec Corporation (R-Tec). After the
merger, R-Tec became a wholly owned subsidiary of the Company. In 2000, the
Company created another subsidiary, R-Tec Interconnect (Interconnect).
Interconnect was merged into R-Tec during 2001.

As more fully described in Note S, the Company had two acquisitions during 2001.
The first resulted in the Company merging R-Tec Machine Tool (Machine Tool) into
R-Tec effective June 3, 2001. The second resulted in the Company acquiring
certain assets of Browand, LaMeire & Associates (Browand) effective July 17,
2001. Both acquisitions were completed by issuing common stock of the Company.

Principles of Consolidation

The consolidated financial statements include the accounts of R-Tec Holding,
Inc. and subsidiary, after elimination of significant intercompany items and
transactions.

Method of Accounting

The Company reports on the accrual basis of accounting for financial purposes.
Long-term construction contracts are reported using the percentage-of-completion
method of revenue recognition. Under the percentage-of-completion method,
earnings are recognized based on the ratio of costs incurred to total estimated
costs. Costs include direct materials, direct labor, subcontractors and job
related overhead. Assets and liabilities relating to the "costs and estimated
earnings in excess of billings on uncompleted contracts" and "billings in excess
of costs and estimated earnings on uncompleted contracts" are recorded as
current assets and current liabilities on the balance sheet as they will be
liquidated in the normal course of contract completion.

Revisions in cost and profit estimates during the course of the work are
reflected in the accounting period in which the facts requiring revision become
known. The entire amount of an estimated ultimate loss is accrued at the time
such a loss becomes known.

                                      -6-
<PAGE>

                      R-TEC HOLDING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000



Credit Risk

The Company grants credit to customers primarily in the technology industry
throughout the United States. The accounting loss incurred if all parties failed
entirely to perform on their obligation is equal to the balance outstanding for
trade accounts receivable.

Cash Equivalents

The Company considers all highly liquid investments maturing in three months or
less as cash equivalents.

Equipment and Leasehold Improvements

Capital additions are classified as equipment and leasehold improvements and are
recorded at cost. Depreciation and amortization is recorded by use of the
straight-line method. The book value of each asset is reduced by equal amounts
over its estimated useful life.

Maintenance and repairs are charged to operations as incurred. When an asset is
disposed of, accumulated depreciation is deducted from the original cost, and
any gain or loss arising from its disposal is credited or charged to operations.

Intangible Assets and Goodwill

Intangible asset additions are recorded at cost. Intangible assets consist of
purchased goodwill and purchased customer lists. Amortization on customer lists
is recorded by use of the straight-line method over the four-year estimated
useful life. Goodwill was acquired subsequent to June 30, 2001, and is not
amortized.

Investment in IntorCorp

R-Tec has a 50% ownership interest in IntorCorp. IntorCorp has had no operations
since its formation in 1998. The only assets of IntorCorp are in-process
research and development technology, which have no value to report in the
balance sheet as of December 31, 2001. The technology acquired relates to 5 HP
motor technologies, which have not been fully developed and does not currently
have alternative future uses.


                                      -7-
<PAGE>


                      R-TEC HOLDING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000



Significant Customers and Suppliers

The Company recorded revenue from services provided to customers that exceeded
10 percent of total revenue as follows:


                                         2001                        2000
                                    ---------------            -------------

     Company A                      $       305,756           $         --
     Company B                              382,658                 699,369
     Company C                              670,670                 280,546
                                     ---------------           -------------

                                    $     1,359,084           $     979,915
                                     ===============           =============

The Company has no vendors that supplied 10% or more of Company purchases,
however; the Company does contract with Browand to provide marketing services.
Amounts paid to this entity in 2001 and 2000 were $36,317 and $221,450,
respectively. During 2001, the Company acquired the customer lists and employees
of Browand.

Income Taxes

Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due or recoverable and
deferred taxes related primarily to differences between the bases of assets and
liabilities for financial and income tax reporting.

Value of Financial Instruments

The Company has a number of financial instruments. The Company estimates that
the fair value of all financial instruments, at December 31, 2001, do not differ
materially from the aggregate carrying values of its financial instruments
recorded in the accompanying balance sheet. The estimated fair value amounts
have been determined by the Company using available market information and
appropriate valuation methodologies. Considerable judgment is required in
interpreting market data to develop the estimates of fair value, and
accordingly, the estimates are not necessarily indicative of the amounts that
the Company could realize in a current market exchange.

Estimates

Management uses estimates and assumptions in preparing financial statements.
Those estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and reported
revenues and expenses. Significant estimates used in preparing these financial
statements include those assumed in determining the collectibility of
receivables, computing profit percentages under the percentage-of-completion
revenue recognition method,


                                      -8-
<PAGE>

                      R-TEC HOLDING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000



determining the allocation of purchase price on acquisitions, and determining
the future revenues and expenses for the purpose of evaluating going concern and
impairment on intangible assets. It is at least reasonably possible that the
significant estimates used will change within the next year.

Earnings Per Share

Earnings per share are computed by dividing net income applicable to common
shareholders by the weighted average number of shares outstanding.

Recently Issued Accounting Statements

In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 141, "Business Combinations" and
No. 142, "Goodwill and Other Intangible Assets". SFAS 141 requires business
combinations to be accounted for by the purchase method starting July 1, 2001.
Both the Browand and the Machine Tool acquisitions were accounted for in
accordance with SFAS 141.

SFAS 142 requires intangible assets to be amortized over their useful life if
determinable. Intangible assets with indeterminable lives (such as goodwill) are
no longer subject to amortization, rather they are subject to impairment by
applying a fair-value-based test. SFAS 142 is generally effective for fiscal
years beginning after December 15, 2001. However, the nonamortization provisions
regarding goodwill are effective immediately. Accordingly, goodwill acquired as
a result of the Machine Tool acquisition on July 3, 2001, has not been
amortized.

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations". SFAS 143 requires the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred. SFAS
143 will be effective for years beginning after June 15, 2002, although earlier
adoption is permitted.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets". SFAS 144 slightly changes and clarifies the
accounting for long-lived assets. SFAS 144 will be effective for years beginning
after December 15, 2001, although earlier adoption is permitted.

The Company believes that the adoption of these accounting standards will not
have any material effect on the financial statements of the Company.


                                      -9-
<PAGE>


                      R-TEC HOLDING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000


NOTE B - UNCOMPLETED CONTRACTS

Costs, estimated earnings and billings on uncompleted contracts consist of:

                                                                     2001

    Costs incurred on uncompleted contracts                    $         35,529
    Estimated earnings                                                   16,498
                                                               ----------------
                                                                         52,027
    Billings to date                                                         --
                                                               ----------------
                                                               $         52,027
                                                               ================

                                                                      2001
    Balance sheet captions are:
      Costs and estimated earnings in excess of
         billings on uncompleted contracts                     $         52,027

      Billings in excess of costs and estimated
         earnings on uncompleted contracts                                   --
                                                               ----------------

                                                               $         52,027
                                                               ================


NOTE C - EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Equipment and leasehold improvements consist of:

                                                                      2001

     Equipment                                                 $        643,653
     Vehicles                                                            33,804
     Leasehold improvements                                              45,720
     Office equipment and furnishings                                    64,681
                                                               ----------------
                                                                        787,858
     Accumulated depreciation and amortization                         (158,901)
                                                               ----------------

                                                               $        628,957
                                                               ================

The estimated useful lives of equipment is five to seven years. The leasehold
improvements are amortized over the life of the lease.


                                      -10-
<PAGE>


                      R-TEC HOLDING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000



NOTE D - INTANGIBLE ASSETS

Intangible assets consist of:

                                                                       2001
                                                               ----------------

     Customer list                                            $        365,975
     Accumulated amortization                                          (45,747)
                                                               ----------------

                                                              $        320,228
                                                               ================
The estimated useful life of customer
lists is four years.

NOTE E - OTHER ASSETS

Other assets consist of:

                                                                       2001
                                                               ----------------

     Software                                                  $         74,421
     Accumulated amortization                                           (30,346)
                                                               ----------------

                                                               $         44,075
                                                               ================

The estimated useful life of software is three years.

NOTE F - NOTES PAYABLE TO RELATED PARTIES

Notes payable to related parties consist of:

   Note payable to Doug Hastings, payable in monthly
   interest only payments at 10%, until maturity in
   February 2005, unsecured.                                   $         50,000

   Note payable to Gary Clayton, payable in monthly
   interest only payments at 10%, until maturity in
   February 2005, unsecured.                                             50,000

   Note payable to Glen Clayton, interest at 9%,
   payable in full with interest in September


                                      -11-
<PAGE>



                      R-TEC HOLDING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000




2004, unsecured.                                                        100,000

Note payable to Browand, payable in monthly
interest only payments at 8%, until maturity in
March 2003, unsecured.                                                  169,295
                                                               ----------------

                                                               $        369,295
                                                               ================

Maturities in future years are:

         2002                                                  $              -
         2003                                                           169,295
         2004                                                           100,000
         2005                                                           100,000
                                                               ----------------

                                                               $        369,295
                                                               ================

NOTE G - CAPITAL LEASE PAYABLE

The Company leases equipment under capital
leases as follows:

                                                                     2001
                                                               ----------------
   Capitalized cost                                            $        176,358
   Accumulated amortization                                              30,582
   Amortization expense, included in depreciation expense                27,129

Future minimum lease payments due as of December 31, 2001
under the capital lease agreements are as follows:

            2002                                               $         70,236
            2003                                                         48,893
            2004                                                         10,380
                                                               ----------------
            Total minimum lease payments                                129,509

            Less amount representing interest                            11,564
                                                               ----------------

            Present value of minimum lease payments                     117,945

            Less current portion                                         61,435
                                                               ----------------


                                      -12-
<PAGE>


                      R-TEC HOLDING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000



            Long-term portion                                  $         56,510
                                                               ================
NOTE H - LEASES

The Company leases its office and manufacturing space from a related party,
H2C2. H2C2 is owned by Doug and Rena Hastings and Gary and Patricia Clayton. The
lease term expires in December 2004, but may be extended, subject to cost of
living increases, for a five-year term at the option of the Company. Doug
Hastings and Gary Clayton are Executive Officers of the Company.

The Company has entered into a five-year lease agreement for office space in
another state. The lease expires January 2006, with annual 3% increases in rent.

Future minimum payments under operating lease agreements at December 31, 2001
are:

         2002                                                  $         51,240
         2003                                                            69,185
         2005                                                            65,324
         2005                                                            17,828
                                                               ----------------

                                                               $        272,272

Rent expense for 2001 and 2000 was $54,620 and $31,462, respectively.

NOTE I - PENSION PLANS

The Company has a SIMPLE Pension Plan covering all employees who are at least 21
years of age, worked at the Company for a minimum of 2 years and made at least
$2,000 in each of the previous two-year periods. The Plan allows the employee to
make elective deferrals up to a maximum of $6,000. The Company is required to
make matching contributions of up to 3% of employee wages or $6,000. During the
years ended December 31, 2001 and 2000, the Company recorded $12,173 and $6,919
respectively, in contributions.

NOTE J - INCOME TAXES

Income taxes are provided for temporary differences between financial and tax
basis income. The components of net deferred taxes are as follows at December 31
using a combined deferred tax rate of 40%:


                                      -13-
<PAGE>



                      R-TEC HOLDING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000



                                                                      2001

Deferred tax asset from:
     Net operating loss carryforward                           $      619,000
     Stock options                                                    100,000
     Bad debt reserve                                                  10,000
                                                               --------------
                                                                      729,000
Deferred tax liability from:
     Fixed assets                                                     (58,000)
Valuation allowance                                                  (671,000)
                                                               ---------------

Net deferred tax                                               $            --
                                                               ===============

The components of income tax expense
 at December 31, are:
                                                   2001              2000
                                            -------------      ----------------
Current
   Federal                                  $         --       $        (9,980)
   State                                              --                (2,913)
                                            --------------     ----------------
                                                      --               (12,893)
Deferred
   Federal                                            --                     --
   State                                              --                     --
                                            --------------        -------------
                                                      --                     --
                                            --------------        -------------
                                            $         --       $       (12,893)
                                            ==============     ===============

The following reconciles the federal tax provisions with the expected provisions
by applying statutory rates (34%) to income before income taxes as of December
31, 2001:

                                                  2001              2000
                                            --------------      -------------

   Provision at statutory rate              $     (470,000)      $    (141,622)
   State income taxes, net of
    federal expense                                (83,000)             (1,923)
   Effect of graduated rates                       (23,000)             10,376
   Effect of merger                                 40,000                  --
   Change in valuation allowance                   536,000             121,265
   Other                                                --                (989)
                                               ------------          ---------

   Income tax expense (benefit)             $           --       $     (12,893)
                                             ==============       =============

The net operating loss carry forward at December 31, 2001, for federal tax
purposes of


                                      -14-
<PAGE>


                      R-TEC HOLDING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000



approximately $1,550,000 begins to expire in the year 2020.

NOTE K - RELATED PARTY TRANSACTIONS

The Company conducts business with other entities affiliated through common
ownership or control.

As described in Note G, the Company leases office and manufacturing space from
H2C2. Amounts paid during 2001 and 2000 for rent were $42,908 and $31,462. The
Company also pays H2C2 for utilities, which amounted to $8,169 and $3,968 for
2001 and 2000, respectively.

The Company occasionally provides loans to affiliated entities. The notes are
unsecured. As of December 31, 2001, H2C2 owed the Company $15,110 on a note
receivable.

Interest expense on related party notes payable was $23,258 and $18,000 for 2001
and 2000, respectively.

The Company has machine tooling performed by Machine Tool, which was owned 25%
each by Doug Hastings and Gary Clayton. Purchases from Machine Tool for 2001 and
2000 were $143,434 and $155,100, respectively. During 2001, the Company acquired
Machine Tool through a merger.

Shareholders of the Company provide legal and accounting services to the
Company. The following amounts were expended:

                                                   2001               2000
                                              --------------     -------------

         John Hansen, attorney               $        5,290     $       4,424
         Robert Montgomery, attorney                 32,364             2,940
         David Stewart, accountant                   15,304            11,371

NOTE L -EMPLOYMENT AGREEMENTS

In 1999, the Company entered into five-year employment agreements with Doug
Hastings and Gary Clayton. The agreements provide for minimum base salaries of
$81,120 to each of them with bonuses determined in relationship to Company
profits.

On September 13, 2000, the Company acquired certain assets of Creative Test
Solutions, L.L.C. for $10,000. The Company entered into five-year employment
agreements with two of the members of Creative Test Solutions, L.L.C. on August
28, 2000. As part of the employment agreement the Company provided signing
bonuses in the form of Common Stock totaling 100,000 shares. Annual salaries of
$59,000 and $69,000 are required.


                                      -15-
<PAGE>


                      R-TEC HOLDING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000



In 2001, the Company entered into five-year employment agreements with Jeanette
LaMeire and Bill Browand. The agreements provide for minimum base salaries of
$70,000 to each of them with increases and bonuses in relationship to Company
profits.

NOTE M - PREFERRED STOCK

The Board of Directors adopted an amendment to the Articles of Incorporation in
January 2000 to provide for the original preferred stock to be divided into
series, with the first series, Series A Preferred Stock, consisting of
cumulative convertible preferred stock with a par value of $.23437. Dividends on
this preferred stock are cumulative from the date of issuance at the rate of
$.0222 per share, per annum, payable out of funds legally available. Such
dividends are payable only when, as, and if declared by the Board of Directors,
and shall accumulate from the date of issue, payable annually. Unpaid dividends
are not interest bearing. Dividends on Common Stock cannot be paid until all
dividends on the Series A Preferred Stock have been paid. Each Series A
Preferred stock is convertible, at the option of the Company, at any time on or
before the fifth day before any redemption date (January 31 each year) to the
Company's Common Stock. The conversion price is $.117185 per share of Common
Stock, after the Common Stock dividend declared in 2000. The Series A Preferred
Stock shall be automatically converted on the earlier of the date specified by
vote or written consent or agreement of at least two-thirds of the outstanding
shares of such series or immediately on the closing of the sale of public
offering of Common Stock in excess of $2.50 per share and $1,000,000 in
proceeds.

The remaining preferred shares outstanding shall be designated, as the Board of
Directors shall determine into classes, series, and preferences, limitations,
restrictions and relative rights of each class or series of preferred stock.

NOTE N - COMMON STOCK DIVIDEND

The Board of Directors approved a stock dividend of one share of Common Stock
for each share of Common Stock held as of October 18, 2000. The weighted average
earnings per share have been adjusted as though the dividend was outstanding for
all periods presented.

NOTE O - CONCENTRATIONS OF CREDIT RISK

Financial instruments that potentially subject the Company to concentrations of
credit risk consist of cash in checking and savings and trade accounts
receivable. At December 31, 2001, $58,227 was insured by the Federal Deposit
Insurance Corporation. At December 31, 2001 the Company had a $333,373 balance
in a Wells Fargo Bank Treasury Plus MMF account which was not insured by the
Federal Deposit Insurance Corporation. Accounts receivable can generally be
protected against loss by filing under the applicable Federal Uniform Commercial
Code laws and




                                      -16-
<PAGE>

                      R-TEC HOLDING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000



filing laws of the State of Idaho.

NOTE P - GOING CONCERN CONTINGENCY

The Company incurred operating losses during 2001 and 2000 of approximately
$1,381,000 and $404,000, respectively. This creates an uncertainty regarding the
Company's ability to continue as a going concern. The operating losses were
largely the result of increased general and administrative expenses as the
result of the growing structure of the Company as well as costs incurred to
issue options. The Company's ability to continue as a going concern is primarily
dependent upon three factors: increased sales, maximizing contract profits, and
obtaining investor contributions. Management expects sales to increase during
2002 and expects the profitability on contracts to increase. Subsequent to
December 31, 2001, the Company has issued $523,400 of Common Stock related to
the Subscription and Stock Purchase Agreement discussed in the following
footnote.

NOTE Q - SUBSEQUENT EVENT

On January 3, 2002, the Company Board of Directors authorized the Company to
enter into a Subscription and Stock Purchase Agreement with various accredited
investors for the sale of up to 1.7 million restricted shares of common stock at
$.50 per share. The purchase of the shares also includes the receipt of an
option with a strike price of $.50. The option cannot be exercised for a period
of six months and expires at the end of two years.

NOTE R - STOCK OPTION PLAN

Effective December 12, 2000, the Board of Directors of Company adopted a stock
option plan which allows for the grant of options for up to 2,000,000 shares of
the Company's Common Stock to officers, directors or key employees of the
Company, consultants of the Company or employees of companies that do business
with the Company. The plan allows for granting incentive stock options to
employees and non-qualified stock options to all other parties. The plan
provides for the options to be granted on incentive stock options at a price
equal to the market price of the stock and at a price of not less than 85% of
the market price of the stock for non-qualified stock options. The plan further
allows for the option period to not exceed five years for the incentive stock
options and not to exceed ten years for the non-qualified stock options. A
schedule of the options is as follows:


                                      -17-
<PAGE>


                      R-TEC HOLDING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000


                                           Number of             Exercise price
                                           Options                Per Share
                                        ----------------         --------------

Outstanding at December 31, 2000                  60,000     $             1.00
   Granted                                     1,462,100            .50 to 1.00
   Exercised                                          --                     --
   Expired                                            --                     --
                                        ----------------         --------------

Outstanding at December 31, 2001               1,522,100     $      .50 to 1.00
                                        ================     ==================

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards (FAS) No. 123, which establishes financial accounting and
reporting standards for stock-based employee compensation. This standard defines
a fair value method of accounting for an employee stock option or similar equity
instrument. This statement gives entities the choice between adopting the fair
value method or continuing to use the intrinsic value method under Accounting
Principles Board (APB) Opinion No. 25 with footnote disclosures of the pro forma
effects if the fair value method had been adopted. The Company has opted for the
latter approach for incentive employee stock options. However, FAS No. 123
requires the use of a fair value method of accounting for stock options issued
to non-employees.

During 2001, 441,200 stock options were issued to key employees and 1,100,000
stock options were issued to an outside consulting firm of the Company in
consideration for contracting to raise additional capital through qualified
private offerings of the Company's common stock. Approximately $250,000 of
expense was recognized for the 1,100,000 stock options issued to the
non-employee outside consulting firm in accordance with FAS No. 123. Had
compensation expense for the Company's issuances to employees under its stock
option plan been determined based on the fair value at the grant date for awards
in 2001 and 2000 consistent with the provisions of FAS No. 123, the Company's
results of operations would have been reduced to the pro forma amounts indicated
below:

                                                       December 31,
                                             ----------------------------------
                                                  2001                2000
                                             ----------------     -------------

Net loss available to common - as reported   $    (1,439,903)     $    (403,640)
Net loss available to common - pro forma     $    (1,487,094)     $    (418,640)
Common loss per share - as reported          $          (.08)     $        (.03)
Common loss per share - pro forma            $          (.08)     $        (.03)

The fair value of each option grant is estimated at the date of grant using the
       Black-Scholes option-pricing model with the following assumptions:


                                      -18-
<PAGE>


                      R-TEC HOLDING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000


Weighted average:
  Risk-free interest rate                         5.5%
  Expected life                                   4 years
  Expected volatility                             156%
  Expected dividends                              None

The weighted average fair value of options granted during 2001 and 2000 were
$.70 and $1.00, respectively.

The following table summarized information about fixed stock options outstanding
at December 31, 2001.

<TABLE>
<CAPTION>
                    Options Outstanding                                              Options Exercisable
                                           Weighted
                                           Average
                                           Remaining                   Weighted                          Weighted
      Range of                            Contractual                  Average                          Average
      Exercise       Number                  Life                      Exercise        Number            Exercise
       Prices        Outstanding            (Years)                     Price          Exercisable        Price
     ----------      ---------------    -------------------         ----------       -----------      ----------
     <S>             <C>                     <C>                       <C>              <C>          <C>
     $.50 to $1.00   1,522,100                4                         $.70             60,000       $    1.00
</TABLE>

NOTE S - ACQUISITIONS

On July 3, 2001, the Company acquired R-Tec Machine Tool, Inc. (Machine Tool),
an Idaho corporation, pursuant to a Share Exchange and Reorganization Agreement
by and between the Company and the four individual shareholders of Machine Tool.

Under the terms of the Agreement, the parties agreed to be bound by and accept
the fair market value placed on Machine Tool obtained from an independent
business appraisal. Consideration for the acquisition was 291,248 shares of the
common stock of the Company valued at $1.00 per share, which the parties agree
and acknowledge was the fair market value of the Company's shares as of the date
of the Agreement. Common stock issuances during the period prior to the
acquisition provided the basis for the $1.00 per share valuation. The Company
exchanged 291,248 shares of common stock for all of the outstanding shares of
stock of Machine Tool. Machine Tool was owned by 50% by Doug Hastings and Gary
Clayton. Two other shareholders owned the remaining 50%. Machine Tool had been
providing substantially all of the machine tooling necessary to complete custom
automation work for the Company. The Company determined it could reduce costs
and decrease the time requirement for machine tooling if Machine Tool was
acquired. In addition, Machine Tool operates in space adjoining to the Company.


                                      -19-
<PAGE>


                      R-TEC HOLDING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000



Significant assets acquired and liabilities assumed were as follows:

     Cash                                            $      15,734
     Equipment                                             188,102
     Goodwill                                              201,218
     Notes payable assumed                                (113,806)
                                                     -------------

                                                     $     291,248
                                                     =============

Goodwill is all reported at the entity level as the Company has only a single
segment at December 31, 2001. Goodwill is not amortizable for income tax
purposes.

On July 17, 2001, the Company acquired certain assets from Browand, LaMeire &
Associates, Inc. (Browand), an Oregon corporation, pursuant to an Asset Purchase
Agreement by and between the Company and Browand and its two shareholders, Bill
Browand and Jeanette LaMeire.

Under the terms of the Agreement, the Company acquired certain assets, which
include the customer list and industry contacts, certain items of office
equipment and inventory. Substantially, all of the purchase price related to the
customer list and industry contacts. Consideration for the acquisition was
380,000 shares of the common stock of the Company valued at $1.00 per share,
which the parties agree and acknowledge was the fair market value of the
Company's shares as of the date of the Agreement. Common stock issuances during
the period prior to the acquisition provided the basis for the $1.00 per share
valuation.

Browand had previously provided for substantially all of the Company's selling
activities. The Company determined by bringing these resources into the Company
they could focus the sales efforts on specific Company products and reduce
costs.

Significant assets acquired and liabilities assumed were as follows:

     Equipment                                       $      12,025
     Customer lists                                        365,975
     Other                                                   2,000
                                                     -------------
                                                     $     380,000
                                                     =============

Based on the industry in which the Company operates and the rapidly changing
technology and customers, the Company determined the estimated useful life of
the customer lists was four years.


                                      -20-
<PAGE>

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT
         ACCOUNTANTS ON ACCOUNTING, AND FINANCIAL DISCLOSURE.

None


                                    PART III


ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
         PERSONS.

         9.1     Directors and Officers.


     Name                Age      Position                        Date Appointed

Douglas G. Hastings      44       Director, President/CEO         Nov.3, 1999
Gary A. Clayton          44       Director, VP Engineering        Nov.3, 1999
Rulon L. Tolman          51       Director, VP Investor Rel.      Original
David R. Stewart         48       Director                        Nov.3, 1999
Robert C. Montgomery     54       Secretary                       Nov. 3, 1999
Michael T. Montgomery    45       Treasurer, CFO, VP Finance      March 1, 2001
William E. Browand       52       Director, VP Sales              Sept 1, 2001
Jeanette LaMeire         48       VP Marketing                    Oct 9, 2001

The directors of the Company are elected to serve until the next annual
shareholder's meeting or until their respective successors are elected and
qualified. Officers hold office until removal by the Board of Directors. There
are no arrangements or understandings among the Officers and Directors pursuant
to which any of them were elected as Officers and Directors except for the
following. When the Company was formed, shareholders Douglas G.


<PAGE>


Hastings, Gary A. Clayton, Rulon L. Tolman, Ronald J. Tolman, L. William
Glazier, Robert C. Montgomery, George W. Wadsworth and Keith Cline, entered into
a voting agreement under which Hastings and Clayton have the right to nominate 3
of the 5 directors and the other named shareholders have the right to nominate 2
of the 5 directors. The combined ownership, which controls a voting percentage
of approximately 65%, would then be voted as a block for the nominated
directors. The voting agreement is effective for 5 years from August 11, 1999.

Family Relationships: Douglas G. Hastings is married to Rena Clayton Hastings, a
sister of Gary A. Clayton. Robert C. Montgomery and Michael T. Montgomery are
brothers.

Business Experience of Officers and Directors:

Douglas G. Hastings, Meridian, Idaho, is currently serving as President and CEO
of the Company. He received a Micro M.B.A. in May of 1999, and received special
training in Robotics, Machine Vision and software controls. Prior to starting
R-Tec Corporation in 1995, Mr. Hastings was employed by Hewlett Packard from
1981 to 1995 specializing in electrical and mechanical tool design and controls.

Gary A. Clayton, Meridian, Idaho, is currently serving as Vice President of
Engineering for the Company. He received a BS degree in Mechanical Engineering
from BYU in 1983. He received training in Robotics and Industrial Controls in
1987 (with honors), and a Masters Degree in Mechanical Engineering in 1993 from
the University of Utah. Prior to 1995 (when he helped start R-Tec Corporation),
Mr. Clayton was the Engineering Manager for Lynn Industries of Boise, Idaho for
a year, and prior thereto was Project Engineer at Thiokol Corporation in Brigham
City, Utah, for design, implementation and project management of HVAC system,
process equipment, CNC type machine tools, and plant automation.

Rulon L. Tolman, Boise, Idaho, is currently serving as Vice President of Public
Relations for the Company. Mr. Tolman was employed with Mutual of New York from
1978 through 2000 in various capacities including Account Executive, Field
Underwriter and Sales Manager. Previously Mr. Tolman was a Production Supervisor
with Boise Cascade Container Division managing 80 employees.

David R. Stewart, Boise, Idaho, is a Certified Public Accountant with Stewart &
Associates, P.A. with more than 20 years experience. He has been President of
the accounting firm for the past 6 years. He obtained his BS degree in
Accounting in 1979 from the University of Utah.

William E. Browand, Boise, Idaho, is currently serving as Vice President of
Sales for the Company. Mr. Browand was appointed to the board July 17, 2001, by
unanimous consent of the remaining directors to fill the position left by the
resignation effective July 1, 2001, of John R. Hansen, Jr. Mr. Browand obtained
a BSEE degree (Batchelor of Science in Electrical Engineering) from Penn State
University in 1979. Since that time he has worked in the high tech industry
including positions with Texas Instruments and Floating Point Systems, as a test
engineer and project manager. In 1990 he was one of the principals who started


<PAGE>


Browand, LaMeire & Associates, Inc., a sales representative firm specializing in
the marketing and sale of test interface devices to the high tech industry. He
has been the Vice President of Sales of Browand, LaMeire & Associates since its
inception and through the years has developed extensive contacts in the high
tech industry.

Michael T. Montgomery, is presently CFO, Vice President of Finance and Treasurer
of the Company. He received a Bachelor of Arts Degree in Finance, with composite
minors in Accounting & Economics, from Brigham Young University in 1981. He
completed the MBA program at Boise State University in 1986. Prior to his
employment with the Company, he was involved in production management for 15
years, financial management 12 years and 1 year international business
management and government negotiations.

Jeanette LaMeire, is presently Vice President of Marketing of the Company. In
1990 she was one of the principals who started Browand, LaMeire & Associates,
Inc., a sales representative firm specializing in the marketing and sale of test
interface devices to the high tech industry. She has been President of Browand,
LaMeire & Associates since its inception and as such has had responsibility for
all aspects of finance and business development.

Robert C. Montgomery, is presently Secretary and General Counsel of the Company.
He received his JD Degree from the University of Idaho in 1974 and is admitted
to practice law in the states of Idaho, Oregon and Washington. He has served as
legal counsel to both private and nonprofit corporations. He was a former
adjunct professor of Business Law and Ethics at Boise State University, and has
practiced law in Idaho since 1974.

9.5      Compliance with Section 16(a) of the Exchange Act:

Section 16 of the Securities Exchange Act of 1934 ("Section 16") requires that
reports of beneficial ownership of common stock and preferred stock and changes
in such ownership be filed with the Securities and Exchange Commission by
Section 16 "reporting persons" including directors, certain officers, holders of
more than 10% of the outstanding common stock or preferred stock, and certain
trusts of which reporting persons are trustees. The Company is required to
disclose each reporting person whom it knows has failed to file any required
reports under Section 16 on a timely basis. Based solely upon a review of copies
of Section 16 reports furnished to the Company for the year ended December 31,
2001, the Company finds the following information is appropriately disclosed:
None of the officers, directors and 10% shareholders (all 10% holders are
officers and directors) filed Form 3 for calendar year 2000, but did file a Form
5 with respects to calendar year 2000, concerning stock acquired prior to July,
2001, the starting date for the Company's stock being quoted on the NASDAQ
over-the-counter Bulletin Board. None of the new officers and directors
appointed during the year filed a Form 3 during calendar year 2001 and none of
the officers, directors and 10% shareholders filed Form 4 for calendar year
2001. However, all of the officers, directors and 10% shareholders filed a Form
5 on or before February 14, 2002, respecting transactions occurring during
calendar year 2001. Douglas G. Hastings should have filed a Form 4, but did not,
with respect to 3 stock acquisitions and 2 transactions involving gifting of
shares during calendar year 2001. He did file a Form 5 reporting these
transactions. Gary A. Clayton should have filed a Form 4, but did not, with
respect to 3


<PAGE>


stock acquisitions and 2 transactions involving gifting of shares during
calendar year 2001. He did file a Form 5 reporting these transactions. Rulon L.
Tolman should have filed a Form 4, but did not, with respect to 2 stock
acquisitions and 1transaction involving gifting of shares during calendar year
2001. He did file a Form 5 reporting these transactions. David R. Stewart should
have filed a Form 4, but did not, with respect to 1 stock acquisition during
calendar year 2001. He did file a Form 5 reporting this transaction. William E.
Browand should have filed a Form 4, but did not, with respect to 2 stock
acquisitions during calendar year 2001. He did file a Form 5 reporting these
transactions. Jeanette LaMeire should have filed a Form 4, but did not, with
respect to 2 stock acquisitions during calendar year 2001. She did file a Form 5
reporting these transactions. Michael T. Montgomery should have filed a Form 4,
but did not, with respect to 1 stock acquisition during calendar year 2001. He
did file a Form 5 reporting this transaction. Robert C. Montgomery should have
filed a Form 4, but did not, with respect to 1 stock acquisition during calendar
year 2001. He did file a Form 5 reporting this transaction.


9.6      Resumes of Management and Key Consultants of IntorCorp Inc.


Directors of IntorCorp Inc. are Scott DeHart, Wayne Stewart, Douglas Hastings
and Gary Clayton.

Scott DeHart is 52 years of age, and received Bachelors and Masters Degrees from
Brigham Young University in Electrical Engineering. From 1975 to 1997 Mr. DeHart
was employed with Hewlett Packard and included 4 years experience as Section
Manager of the Greeley Division in Greeley, Colorado; 4 years as Section Manager
of Disk Storage Systems Division in Boise, Idaho; and 2 years as Project
Manager, Firmware Development and Firmware Development Manager. The assignments
included planning, development and managing conceptualized projects to market
production.

Wayne Stewart is 54 years of age, is a graduate of Brigham Young University and
attended graduate school at Purdue. From 1983 to 1995 he was the Manufacturing
Manager for the disk memory division of Hewlett Packard, located in Boise,
Idaho. From 1995 to 1997 he was VP over world manufacturing for Whirlpool, and
in 1997 he accepted the position of VP of operations at Iomega.

ITEM 10.  EXECUTIVE COMPENSATION.

The 2001 salary and stock remuneration paid to the officers and directors and
other benefits received by each of them are set forth below:

R-Tec Corporation paid executive compensation for the years ended December 31,
2000 and 2001 to the following:

Douglas G. Hastings, President.          Year 1999         $53,175
                                         Year 2000         $78,912
                                         Year 2001         $86,058


<PAGE>


On July 1, 2001, the Company granted to the following officers options to
purchase 50,000 shares each of common stock at $1.00 per share, exercisable 1
year from date of grant: Douglas G. Hastings, Gary A. Clayton, Rulon L. Tolman,
Michael T. Montgomery, William E. Browand, and Jeanette LaMeire.

No other executive compensation or forms of compensation, short or long term
apply and are required to be disclosed as required by Reg. S-B 228.402 (Item
402).


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT

The following table sets forth information regarding the shares of Common Stock
and Preferred Stock of the Company that is convertible into common stock, which
is presently held beneficially by (i) each director and executive officer of the
Company, (ii) all officers and directors as a group, and (iii) each person known
by the Company to beneficially own 5% or more of the outstanding shares of the
Company's common and preferred stock. Share ownership and subscriptions are
reflected as of December 31, 2001.

Name and Address              Amount & Nature
of Beneficial Owner            of Benef. Owner                   Percent
                              Common - Preferred            Common - Preferred
--------------------------------------------------------------------------------

a.  MORE THAN FIVE PERCENT SHAREHOLDERS

L. William Glazier (11)            250,000  569,345          1.32%    20.47%
     121 Tyson Dr.
     Cottage Grove, OR 97424

Ronald J. Tolman   (11)            694,340  600,427          3.66%    21.59%
     2326 Bruins Avenue
     Boise, Idaho 83704


b.  DIRECTORS AND EXECUTIVE OFFICERS

Gary A. Clayton (1)(2)(3)            4,110,659   -0-        22.64%      -0-%
     1471 E. Commercial Ave
     Meridian, Idaho 83642

Douglas G. Hastings (1)(2)(4)        4,110,657   -0-        22.64%      -0-%
     1471 E. Commercial Ave
     Meridian, Idaho 83642

Rulon L. Tolman (1)(2)(5)             959,250 532,478       5.51%      19.14%


<PAGE>


     7213 Potomac Drive
     Boise, Idaho 83704

David R. Stewart (2)(6)                88,490      -0-       0.46%       -0-%
     9486 Fairview Ave
     Boise, Idaho

Michael T. Montgomery (1)(7)           65,000      -0-       0.34%       -0-%
         3072 Maywood Ave.
         Boise, Idaho 83704

William E. Browand  (1)(2)(8)         430,000*     -0-       2.27%       -0-%
         C/O R-Tec Holding, Inc.
         1471 E. Commercial Ave.
         Meridian, Idaho 83642

Jeanette LaMeire  (1)(9)              430,000*     -0-       2.27%       -0-%
         C/O R-Tec Holding, Inc.
         1471 E. Commercial Ave.
         Meridian, Idaho 83642

Robert C. Montgomery (1)(10)          239,876  149,506       1.35%      5.38%
         2160 S. Twin Rapid Way
         Boise, Idaho 83709

All Officers and Directors
as a Group (7 persons)              11378272*  1,851,756     55.49%    86.82%

*380,000 of the total shares listed as beneficially owned by William E. Browand
 and Jeanette LaMeire are the same shares and are not counted twice for this
 calculation. Please refer to notes 8 & 9 for the explanation.

Total Shares Issued and Outstanding as of 12/31/01 include:

                                    Common  19,009,205 Preferred  2,781,564

     (1)  These individuals are the executive officers of the Company.

     (2)  These individuals are the directors of the Company.

     (3)  The beneficial ownership of Gary A. Clayton includes 50,000 options by
          grant.

     (4)  The beneficial ownership of Douglas G. Hastings includes 50,000
          options by grant.


<PAGE>


     (5) The beneficial ownership of Rulon L. Tolman includes 65,000 options by
         grant.

     (6)  The beneficial ownership of David R. Stewart includes 22,500 options
          by grant.

     (7)  The beneficial ownership of Michael T. Montgomery includes 50,000
          options by grant.

     (8)  The beneficial ownership of William E. Browand includes 50,000 options
          by grant and 380,000 shares of the Company's common stock issued to
          Browand, LaMeire & Associates, Inc., a corporation of which Mr.
          Browand and Jeanette LaMeire are each 50% shareholders. The shares
          were issued pursuant to the terms of an asset purchase agreement
          between the Company and Browand, LaMeire and Associates.

     (9)  The beneficial ownership of Jeanette LaMeire includes 50,000 options
          by grant and the same 380,000 shares of the Company's common stock
          issued to Browand, LaMeire & Associates, Inc., a corporation of which
          Ms. LaMeire is a 50% shareholder as indicated in No. 8 above. The
          shares were issued pursuant to the terms of an asset purchase
          agreement between the Company and Browand, LaMeire and Associates.

     (10) The beneficial ownership of Robert C. Montgomery includes 22,500
          options by grant.

     (11) If converted to Common Stock at the present conversion ratio, the
          Preferred Stock would represent approximately 23% of the after-
          conversion issued and outstanding common stock.

Securities authorized for issuance under equity compensation plans


<TABLE>
<CAPTION>
Plan category                      Number of securities to be         Weighted average exercise           Number of securities
                                    issued upon exercise of          price of outstanding options,    remaining available for future
                                 outstanding options, warrants            warrants and rights                   issuance
                                           and rights
                                              (a)                               (b)                                 (c)
<S>                                       <C>                                   <C>                                <C>
Equity compensation plans not             2,000,000                             $1.00                              477,900
approved by security holders

                                          2,000,000                             $1.00                              477,900
Total
</TABLE>


<PAGE>


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:

a.   Commercial Building Ownership and leases:

R-Tec Corporation currently leases 100% of the building it presently occupies at
1471 E. Commercial Ave, Meridian, Idaho 83642 from H2C2 & Associates, LLC, an
Idaho limited liability company owned by Mr. and Mrs. Hastings and Mr. and Mrs.
Clayton under a five year lease ending November 30, 2004, with an option to
extend the lease for an additional five years. The rental rate is $4,365 per
month subject to annual Cost of Living Index increases.

b.   Stock Transactions with Douglas G. Hastings and Gary A. Clayton.

On November 3, 1999, the Company issued 4,266,797 shares of Common Stock (50%
ownership) in a private placement transaction, to Gary A. Clayton and Douglas G.
Hastings the two shareholder-owners of R-Tec Corporation, an engineering company
located in Meridian, Idaho, in exchange for 80% of the outstanding stock of
R-Tec Corporation. In addition, the Company contributed its stock of IntorCorp,
Inc. to R-Tec Corporation. On November 4, 1999, R-Tec Corporation redeemed the
remaining 20% of R-Tec Corporation stock from the two shareholder-owners for the
price of $100,000 paid with an interest bearing promissory note payable from
available earnings commencing in January of 2001.

(c)  Purchase of R-Tec Machine Tools by the Company

On July 3, 2001, the Company acquired R-Tec Machine Tool, Inc., an Idaho
corporation pursuant to a Share Exchange and Reorganization Agreement by and
between the Company and the four individual shareholders of R-Tec Machine Tool.
Under the terms of the Agreement, the parties agreed to be bound by and accept
the fair market value placed on R-Tec Machine Tool obtained from an independent
business appraisal. Consideration for the acquisition was 291,248 shares of the
common stock of the Registrant valued at $1.00 per share which the parties agree
and acknowledge was the fair market value of the Company's shares as of the date
of the Agreement. The Agreement provides for each of the four R-Tec Machine Tool
shareholders to receive equal shares of the Company's common stock in the
transaction. Two of R-Tec Machine Tool shareholders, Douglas G. Hastings and
Gary A. Clayton, are also officers, directors and major shareholders of the
Company. The other two shareholders of R-Tec Machine Tool are Walter T. Hinkle
and Joseph E. Hawkins. R-Tec Machine Tool is located in the same building used
by the Company as its primary business location.

(d)   Purchase of Assets from Browand, LaMeire & Associates

On July 17, 2001, the Company acquired certain assets from Browand, LaMeire &
Associates, Inc., an Oregon corporation, pursuant to an Asset Purchase Agreement
(the


<PAGE>

"Agreement") by and between the Company and Browand, LaMeire & Associates and
its two shareholders, William E. Browand and Jeanette LaMeire. The Agreement
culminated a lengthy period of discussion and negotiation between the parties.
Under the terms of the Agreement, the Company acquired certain assets which
include the client list and industry contacts, certain items of office equipment
and inventory. Consideration for the acquisition was 380,000 shares of the
common stock of the Company valued at $1.00 per share which the parties agree
and acknowledge was the fair market value of the Company's shares as of the date
of the Agreement. The Agreement provides for the shares to be issued in the name
of Browand, LaMeire & Associates, Inc. Wlliam E. Browand is employed as Vice
President of Sales for the Company and Jeanette LaMeire is employed as Vice
President of Marketing. William E. Browand has also been appointed to the board
of directors of the Company to fill the vacancy left by the resignation of John
R. Hansen, Jr.



ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

          Exhibit Index
Exhibit
Number    Description
------    -----------

2.1       8-K, Acquisition of R-Tec Machine Tool, Inc.
          (Filed July 18, 2001)

2.2       8-K, Acquisition of certain assets of Browand, LaMeire, & Assoc.
          (Filed August 01, 2001)

2.3       8-K/A, Amendment to 8-K Acquisition of R-Tec Machine Tool, Inc.
          Amended Item 7: Financial Statements, Pro-forma Information and
          Exhibits
          (Filed September 17, 2001)

2.4       8-K/A, Amendment to 8-K Acquisition of R-Tec Machine Tool, Inc.
          Amended typographical error only on entity name
          (Filed September 28, 2001)

2.5       8-K/A, Amendment to 8-K, Acquisition of certain assets of Browand,
          LaMeire, & Associates, Amended Item 7: : Financial Statements,
          Pro-forma Information and Exhibits
          (Filed September 28, 2001)

4.1       S-8, R-Tec Holding, Inc., 2000 Stock Option Plan
          (Filed October 02, 2001)

4.2       DEF 14A, Definitive Proxy Statements
          (Filed October 22, 2001)


<PAGE>


                                   SIGNATURES


In accordance with section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.



                               R-Tec HOLDING, INC.
                                  (Registrant)


March 27, 2002                       By  /s/  Douglas G. Hastings
                                        ---------------------------------------
                                              Douglas G. Hastings, President

Principal Executive Officer:         By  /s/  Douglas G. Hastings
                                        ---------------------------------------
                                              Douglas G. Hastings, President

Principal Financial Officer:         By  /s/  Michael T. Montgomery
                                        ---------------------------------------
                                              Michael T. Montgomery, CFO

Majority of Board of Directors:         /s/   Rulon J. Tolman
                                        ---------------------------------------
                                              Rulon J. Tolman, Director

                                        /s/   Gary C. Clayton
                                        ---------------------------------------
                                              Gary C. Clayton, Director

                                       /s/    Douglas G. Hastings
                                       ----------------------------------------
                                              Douglas G. Hastings, Director

                                       /s/    David R. Stewart
                                       ----------------------------------------
                                              David R. Stewart, Director

                                       /s/    William E. Browand
                                       ----------------------------------------
                                              William E. Browand, Director