SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K


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

FOR THE FISCAL YEAR ENDED      December 31, 2001
                               -------------------------------------------------

Commission File Number:           000-28602
                       ---------------------------------------------------------


                          Pro Tech Communications, Inc.
             (Exact Name of Registrant as Specified in its Charter)


         Florida                                        59-3281593
 ---------------------------                   --------------------------
 (State or Other Jurisdiction of                    (I.R.S. Employer
  Incorporation or Organization)                   Identification No.)

   4492 Okeechobee Rd
    Fort Pierce,Florida                                   34947
 ----------------------------------------      ----------------------------
(Address of Principal Executive Offices)                (Zip Code)


       Registrant's Telephone Number, Including Area Code: (772) 464-5100.

Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, $.001
par value

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12  months(or  for such shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of  Registrant's  knowledge,  in  definitive  proxy  or  information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

State the aggregate market value of the voting stock held by  non-affiliates  of
the  Registrant  (based upon the closing  price of such stock as reported on the
National  Association of Securities  Dealers  Automated  Quotation  System as of
March 11, 2002): Common Stock, $.001 par value; $213,521.


                                       1
<PAGE>


                                     PART I

ITEM 1. BUSINESS

A.       General

Pro Tech  Communications,  Inc.,  throughout  this document  referred to as "Pro
Tech,"  "we,"  "our," or "us," was  incorporated  in 1994  under the laws of the
State of Florida and has its principal  executive offices at 4492 Okeechobee Rd,
Fort Pierce, Florida. From its formation on August 30, 1991 to October 31, 1994,
the business was conducted by Pro Tech Systems, a limited partnership  organized
under the laws of the State of  California.  Keith  Larkin,  the Chairman of the
Board of Pro Tech,  was  general  partner of Pro Tech  Systems and there were 12
limited partners in the limited  partnership.  From August 1991 until June 1993,
the limited  partnership was involved in engineering  and designing  lightweight
telecommunications  headsets as well as  preliminary  marketing  efforts for the
products.  From June 1993 until  October  1994,  Pro Tech Systems was engaged in
limited  manufacturing and marketing activities for its products. On November 1,
1994,  all of the assets of Pro Tech  Systems  were  transferred  to Pro Tech as
consideration  for the issuance of  2,000,000  shares of our common  stock,  par
value $.001 per share. These shares were subsequently  distributed on a pro rata
basis to each of the partners of the partnership.  Effective  December 13, 1994,
Pro Tech Systems was formally  dissolved.  On September 13, 2000,  Pro Tech sold
23,702,750  shares  of  its  common  stock,  representing  approximately  83% of
outstanding  common  stock,  to  NCT  Hearing  Products,  Inc.,  a  wholly-owned
subsidiary of NCT Group,  Inc., in exchange for exclusive  rights to certain NCT
Group,  Inc.  technologies  for  use in  lightweight  cellular,  multimedia  and
telephony headsets.

Pro Tech operates mainly in the lightweight headset industry.  During the fiscal
year ended December 31, 2001, we expanded into the telecommunication integration
business  and the call  center  operations  business  (see  section L.  Business
Segments for further discussion of these operations).

Pro Tech  presently  designs,  develops,  manufactures  and markets  lightweight
telecommunications  headsets.  Our  headsets  employ new  concepts  in  advanced
lightweight  design.  Our marketing  strategy  involves the sale of our products
directly to the  commercial  headset  market as a replacement  for  competitors'
products.  We presently sell to the commercial  headset market comprised of fast
food  companies  and other  large  quantity  users of headset  systems.  We have
recently completed  development of several other headsets for the telephone user
market including telephone operating companies,  government  agencies,  business
offices, and professional telephone centers. Our products include:

o        The ProCom Headset
o        The Apollo Headset
o        The Apollo Freedom Series Headset
o        The Gemini Amplifier (telephone)
o        The USB Adapter
o        The DSP Intelligent Microphone
o        The Manager's Headset
o        The APEX
o        The ASTRA
o        The A-10 Amplifier (telephone)
o        The A-27 Amplifier
o        The Active Series Headset
o        The Trinity Headset

There are two  components  to a  complete  telephone  headset.  The first is the
headset component that the user wears, consisting of a speaker and a microphone.
The second is the electronic  amplifier which is relatively  more complex,  time
consuming and costly to produce as it requires many variations to interface with
the wide variety of telephone  systems in the market and generates  higher labor
and material costs. The electronic  amplifier also generally offers lower profit
margins than the headset component. As a


                                       2
<PAGE>


result,  we have outsourced the production of several  amplifiers  engineered to
our  specifications.  We  will  continue  to  concentrate  our  efforts  on  the
production of that portion of the telephone headset that the user wears.

Pro Tech will  also  continue  to  concentrate  efforts  on the  production  and
distribution  of new headsets  designed to connect to and interface with various
electronic  amplifiers and telephone systems currently in use. We have adopted a
co-engineering product development strategy through the use of joint engineering
agreements with companies with  complimentary  engineering  patents.  We project
that this strategy  will greatly  decrease the product  development  cycle while
offering  far  superior  products to our  customers.  We have  continued to make
investments  in technology and have incurred  development  costs with respect to
engineering  prototypes,  pre-production models and field testing of several new
products.  Management  believes that our investment in technology will result in
the improvement of the functionality, speed and cost of components and products.

B.       Industry Background

Designed   specifically   for  air  traffic   controllers  and  other  aerospace
applications,  the first lightweight headsets were intended as a replacement for
the heavy,  bulky  headsets  then in use.  Today,  while  lightweight  telephone
headsets  continue  to  be  used  for  such  purposes,  telephone  headsets  are
predominantly  used as a substitute to telephone  handsets.  These  headsets are
used by a wide variety of customers, including telephone operating companies and
telephone call centers (such as airline  reservations,  catalog sales and credit
collection  operations)  and, to a lesser extent,  by business persons and other
professionals whose occupations require extensive,  though not constant,  use of
the  telephone.  In  comparison to  speakerphones,  telephone  headsets  provide
greater  communication  clarity and security.  We believe that these  advantages
will lead to increased demand for telephone headsets.

Telephone  headsets also have other commercial  applications,  primarily two-way
radio  communication  systems,  such as those  used by fast food  attendants  to
communicate with patrons and other personnel. Personal computer applications for
telephone  headsets  include  audio  input and output via voice  command,  voice
dictation and integrated voice telephone functions.

C.       Existing Products

The ProCom.

Pro Tech's initial entry into the  lightweight  fast food headset market was the
ProCom.  Weighing less than 2 ounces,  the ProCom is worn over the head by means
of a  springsteel  wire  headband  and a  cushioned  earphone.  Attached  to the
earphone,  which may be worn over  either  ear,  is an  adjustable  boom,  which
connects to the ProCom's microphone. The ProCom headset connects to the wireless
belt-pack  system  with the use of various  plug types  offered by the  wireless
belt-pack providers and sold to many fast food franchises around the world.

The Apollo.

The Apollo headset is Pro Tech's most advanced,  lightweight headset design sold
for use with  telephone  users in the call center and small  office  market.  It
incorporates the use of the most advanced  microphone and speaker components and
is designed for durability and comfort over long periods. The Apollo headset was
introduced on August 1, 2001 and since then has been sold  directly  through Pro
Tech's sales force and the internet.  It has also been sold  indirectly  through
our established distributor base in the United States, Canada and Europe.

The Apollo Freedom Series Headset.

A headset with the exact form factor of the Apollo  headset,  the Apollo Freedom
Series  is  made  to  plug   directly  into  phone  systems  that  already  have
amplification  built into their  existing  handset.  Through the use of advanced
circuitry,   many  new  phone   systems  have  built-in  the  added  feature  of
amplification of


                                       3
<PAGE>


sound inside each handset phone,  therefore not requiring  another  amplifier in
order to use a headset with the phone system.  The Apollo Freedom Series headset
adapts to all of these newer design phone systems using sophisticated microphone
technology and a direct connect phone cord.

The Gemini Amplifier.

Introduced on August 1, 2001, the Gemini amplifier is our latest  amplifier.  It
is a full feature  unit  designed to be used in nearly all phone and/or PC phone
configurations  in the call center and small  office  market.  The user has full
control of receive and  transmit  sound levels in addition to being able to work
directly with the latest multi-media  configurations employing analog or digital
technologies. This amplifier's circuitry has been awarded a patent by the United
States Patent and Trademark  Office.  The Gemini  amplifier was awarded "Best of
Show" in the category Best  Desktop/Agent  Productivity Tools at the 12th Annual
Call Center & CRM Solutions 2002 Conference & Exposition held during the week of
February 11, 2002.

The USB Adapter.

The USB adapter is an adapter that allows the use of an amplifier and headset in
PC phone installations. Several new applications such as Internet Protocol (IP)
telephony, voice recognition and auto attendant allow for the use of telephone
headsets which in most cases improve the performance of the application. The USB
adapter allows the use of our headsets and amplifiers in these new market
niches.

The DSP Intelligent Microphone.

The DSP  Intelligent  microphone  is designed to serve those market niches where
the use of a headset is not wanted although the user still requires the need for
headset   functionality   such  as  speech   recognition   and  speech  enabling
input/output  PC gaming  applications.  This product allows for the receiving of
sound to be very focused in addition to eliminating  all background  noise.  Pro
Tech is  currently  directing  our sales and  marketing  efforts  towards  these
emerging PC markets.

The Manager's Headset.

The manager's  headset is a lightweight  over-the-ear  fast food headset,  which
provides improved comfort to the fast food store manager  monitoring  drive-thru
activity.  It was  introduced  and  favorably  received  by the  marketplace  in
February  of 2000.  We will  continue  to offer  this  headset  in our fast food
product line for the year 2002.

The APEX.

Pro Tech  introduced  the APEX  headset for sale in the second  quarter of 1999.
After conducting our own market research,  we determined that there was a demand
for a headset which combined both over-the-head and over-the-ear  features. As a
result, we designed the APEX to incorporate  these features,  which has enhanced
our  ability to market the  product to  cellular,  personal  computer  and small
office telephone users. The APEX is a commercial  adaptation of the headset that
Pro Tech designed for use by the National Aeronautics and Space  Administration,
known as NASA.  Boeing  Defense and Space Group is a prime  contractor for NASA,
and as such has the  responsibility  to choose  certain  components and products
used in NASA's  space  program.  Pro Tech was chosen by Boeing as a supplier  of
telephone  headsets  for NASA  projects  after we provided  Boeing with  product
specifications, which met NASA's requirements. Boeing also subjected our product
to various tests in order to ensure that it would function under  conditions for
space  travel.  The APEX is a smaller  design of the Trinity (see  below),  with
components reduced by 20% in order to create a lightweight  headset. The speaker
and microphone  positioning can be easily adjusted by the user thereby  allowing
the product to fit  numerous  head and ear sizes.  In  addition,  the APEX has a
detachable headband allowing the user the choice of wearing the headset over the
head or over the ear.


                                       4
<PAGE>


The ASTRA.

Pro Tech  introduced  the ASTRA headset for sale in the fourth  quarter of 1999.
The ASTRA headset is a variation of the APEX headset in that it has been adapted
for use directly in non-amplified phone systems. A preamplifier circuit has been
inserted  inside the headset to allow for a direct  connection into an automatic
call distributor or phone system that provides this type of headset.

The A-10 Amplifier.

The A-10  amplifier  is the first in a series  of  multi-line  amplifiers  being
offered  with each of our  headsets.  It is designed  for the small  office/home
office  market  and has been  engineered  to work with over 90% of all  existing
phone systems in the world.

The A-27 Amplifier.

The A-27 amplifier is the first in a series of amplifiers  specifically designed
for  automatic  control  distributors  or phone  systems  which use the standard
PJ-237  2-prong  plug as their  interface.  This  amplifier  will  employ  noise
suppression  technology  designed by Pro Tech. We received  patent  approval for
this  technology  during fiscal year 2001. The A-27 was introduced into the call
center market in the 2nd quarter of fiscal year 2000.

The Active Series Headset.

The Active Series Headset was introduced in the 2nd quarter of fiscal year 2000.
This headset is designed for the mobile  headset user.  Cellular phone users and
automobile hands-free kits are the primary market focus of this product.

The Trinity.

The Trinity was designed for users in noisy environments. Pro Tech completed the
development  of this  product  early in the 2000  calendar  year.  Unlike  other
currently   available   headsets,   the  Trinity  employs  a  light  (1/2-ounce)
"acoustical ear cup" which completely surrounds the user's ear. The perimeter of
this cup rests  lightly in a broad area of contact  around the ear,  rather than
against or in the ear itself,  which we believe  will allow the user to wear the
Trinity in comfort for extended  periods.  Moreover,  by enclosing  the ear, the
acoustical ear cup reduces background noise, thereby significantly improving the
clarity  and  strength  of  reception  from the  earphone.  The Trinity has been
designed as a comfortable  and lightweight  alternative to the bulky  commercial
sound  suppressant  headsets,  which are  presently the only  lightweight  noise
suppression  headsets available to users operating in noisy office environments.
The  Trinity  headset  can be worn in a single  ear cup  version or dual ear cup
version.  Like the ProCom,  the  Trinity is  produced  with a choice of adapters
capable of interfacing with the electronic  amplifiers and telephone  systems of
most major manufacturers.

D.       Marketing and Sales

Pro Tech presently intends to market products primarily through our officers and
staff,  utilizing  industry contacts and calling upon potential  purchasers.  We
plan on supplementing the marketing efforts of our employees by using electronic
commerce  from our web site along with  independent  sales  representatives  and
strategic marketing agreements.


                                       5
<PAGE>


The following summarizes Pro Tech's key alliances:

--------------------------------------------------------------------------------
                             Date Relationship
Key Marketing Alliances         Established                Applications
--------------------------  --------------------- ------------------------------
The McDonald's Corporation      April 1995        Aftermarket Fast Food Headsets
Hello Direct                    April 2000        Marketing Agreement
3M Corporation                  April 2000        Marketing Agreement
Muzak Corporation               July 2000         Marketing Agreement
--------------------------------------------------------------------------------

Pro Tech  markets  and will  continue  to market our  headsets  directly  to the
commercial  headset  market  as a  replacement  for our  competitors'  headsets.
Examples of such  purchasers  include fast food  companies and  franchisees  and
other large  quantity  users of commercial  headset  systems.  We entered into a
non-binding business relationship agreement with the McDonald's Corporation that
allows us to sell our products on a non-exclusive basis to McDonald's franchises
and  company-owned  restaurants.  Initial  test  sales  to  McDonald's  and  its
franchisees  by Pro Tech and Pro Tech Systems  totaled  $424,300 in 1994,  which
included sales to more than 3,500 McDonald's restaurants.  Penetration increased
to more than 7,000  restaurants  during fiscal year 1995 and to more than 11,000
restaurants during the fiscal year ending December 31, 2001.

As Pro Tech  expands,  we will  continue to direct  marketing  and sales efforts
toward: (1) telephone operating companies;  (2) telephone system  manufacturers;
(3) personal computer  manufacturers;  and (4) government agencies. To exploit a
developing market for telephone headsets, we have targeted  manufacturers of new
telephone systems and other  telecommunication  equipment that utilize headsets.
We will also  supplement the above  strategies with joint ventures and marketing
agreements with companies with complementary technologies. Although we presently
intend to sell our products to several large  telephone  users,  there can be no
assurance  that we will be  successful in such efforts.  Other  potential  large
volume  purchasers  of  headsets  are   manufacturers  of  personal   computers,
especially when headsets become a standard telephone accessory.  In addition, we
plan to market our products to  government  agencies.  Pro Tech's  headsets have
been  approved  for sale to  Boeing,  a prime  contractor  of  NASA,  for use by
astronauts in space  travel.  To date, we have had $5,400 of sales to Boeing for
prototype headsets.  While profits from government  contracts are anticipated to
be minimal,  such sales enhance the  credibility  and reputation of the selected
headset and its manufacturer, especially within the telephone industry.

Finally,  Pro Tech's direct  marketing and sales efforts will be supplemented by
the distribution of products through established channels of distribution. These
include:  (1) specialized  headset  distributors that derive a majority of their
revenues  from the sale of headsets  to both end users and, to a lesser  extent,
resellers; and (2) large electronic wholesalers that offer hundreds of products,
including  headsets.  It is anticipated that a majority of sales of our headsets
to commercial  users such as credit card  companies and airlines will be through
such distributors.

In addition to marketing our technology through existing marketing  alliances as
described  above,  as of December 31, 2001,  Pro Tech had an internal  sales and
marketing  force of 6 employees,  2  independent  sales  representative  and our
executive officers and directors.

E.       Manufacturing

Pro Tech is currently  outsourcing  nearly all components  from several Far East
suppliers  who build each  component  according  to Pro  Tech's  specifications.
However,  as a  result  of  manufacturing  inconsistencies  from  one  Far  East
supplier,   Pro  Tech  was  forced  to  temporarily  expand  U.S.  manufacturing
operations to offset the increased  failure rate of the related  products during
the year ended  December  31,  2001.  Pro Tech has since  resolved  all  product
quality issues with its Far East supplier and reduced its  production  headcount
at its U.S.  corporate  offices.  Pro Tech will  continue to adhere to past cost
reduction policies and is in the process of expanding its Far East manufacturing
operations to support the current and future  projected  sales  volumes.  A full
migration  of  this  production   capacity  from  U.S.  operations  to  offshore
operations  will be completed by the second quarter of 2002. An  interruption in
the  supply of a  component  for which Pro


                                       6
<PAGE>

Tech  is  unable  to  readily  procure  a  substitute  source  of  supply  could
temporarily  result in Pro  Tech's  inability  to deliver  products  on a timely
basis,  which in turn could adversely  affect its operations.  To date, Pro Tech
has not  experienced  any  shortages  of supplies.  In order to meet  forecasted
customer  requirements,  Pro Tech has multiple  suppliers for every component to
reduce the risk in a disruption of the supply chain.  At December 31, 2001,  the
value of our inventory was $945,744.

Pro Tech believes that its Fort Pierce,  Florida  office  presently does possess
sufficient  capacity for its current needs. In the event that sales volumes were
to exceed the  capabilities  of the Fort Pierce  location  or Pro Tech's  supply
chain from the Far East were to be disrupted,  Pro Tech would  immediately enter
into subcontracting  arrangements for products with other third parties. A delay
in establishing  such  arrangements,  if necessary,  could adversely  affect Pro
Tech's ability to deliver products on a timely basis to its customers,  which in
turn could adversely affect Pro Tech's operations.  Pro Tech, however,  believes
that subcontracting the manufacture of Pro Tech's products could be accomplished
on short notice given the simple design of Pro Tech's products.

F.       Concentrations of Credit Risk

Pro Tech sells  products and services to  distributors  and end users in various
industries worldwide. As outlined below, our two largest customers accounted for
approximately 35% of revenues during the fiscal year ended December 31, 2001 and
27% of gross  accounts  receivable  at  December  31,  2001.  We do not  require
collateral or other security to support customer receivables.

                                                 As of December 31, 2001,
                                                And for the year then ended
                                       ----------------------------------------
                                              Accounts
               CUSTOMER                     Receivable               Revenue
  ---------------------------------    ------------------      ----------------

  Muzak                                   $  47,436              $   521,156
  McDonalds                                  18,296                  185,377
  All Other                                 178,486                1,468,773
                                       ------------------      ----------------
                              Total       $ 244,218              $ 2,175,306
                                       ==================      ================

Pro Tech regularly  assesses the  realizability  of our accounts  receivable and
performs a detailed analysis of aged accounts  receivable.  When quantifying the
realizability of accounts  receivable,  we take into  consideration the value of
past due receivables and the collectibility of such receivables, based on credit
worthiness.

Financial  instruments,  which potentially subject us to concentration of credit
risk,  consist  principally of cash and cash equivalents and trade  receivables.
Our cash equivalents  consist of commercial paper and other investments that are
readily  convertible  into cash and have original  maturities of three months or
less. We maintain our cash and cash equivalents primarily in one bank.

Pro Tech does not have a significant  foreign exchange  transaction risk because
non-U.S. revenue and purchases are denominated and settled in U.S. dollars.

G.       Competition

The  lightweight   telephone   headset   industry  is  highly   competitive  and
characterized by a few dominant manufacturers. We are aware of several companies
who   manufacture   telephone   headsets.   Primary  among  our  competitors  is
Plantronics,  Inc., the world's largest  manufacturer  of lightweight  telephone
headsets.  Plantronics  was  founded  by Mr.  Larkin,  Pro Tech's  Chairman.  We
estimate  Plantronics'  share of the market to be  approximately  46% worldwide.
Plantronics  reported net sales from all of its products  (including  electronic
amplifiers and other headset  accessories  and services) of  approximately  $401
million for the fiscal year 2001. Our other major competitor is GN Netcom,  Inc.
In 1997, GN NetCom, Inc. purchased both UNEX Corporation and ACS Wireless and in
calender year 2000 announced the purchase


                                       7
<PAGE>


of Hello Direct.  ACS Wireless was founded by Mr. Larkin.  We believe GN Netcom,
Inc. has a market share of approximately 20% worldwide. These companies are well
established  and  have  substantially  more  management,  technical,  financial,
marketing, manufacturing and product development resources than Pro Tech.

Pro Tech believes that in selecting telephone headsets, users primarily consider
price, product quality,  reliability,  product design and features, and warranty
terms. We believe that our headsets are superior in design and construction, and
substantially  lower in price,  than the  models  currently  available  from our
competitors.  However,  we cannot  assure that our products will be perceived by
users and  distributors  as providing a  competitive  advantage  over  competing
headsets.  In addition,  we cannot assure that competing  technologies  will not
become  available  which are  superior,  less costly or marketed by better known
companies. Also, certain customers may prefer to do business with companies that
have greater access to resources.

In addition to direct  competition  from other  companies  offering  lightweight
telephone headsets,  Pro Tech may face indirect competition in our industry from
technological  advances such as interactive voice response systems which require
no human operators for certain applications such as account balance inquiries or
airplane flight information.  We believe that this competition will be more than
offset by increased demand for headsets as voice telecommunication  applications
expand.

H.       Government Contracts

Pro Tech currently is a contract provider of headsets to the Boeing Corporation,
a prime contractor to NASA, for headsets to be used in the  international  space
station.  Government contracts provide for cancellation at the government's sole
discretion,  in which  event the  contractor  or  subcontractor  may recover its
actual costs up to the date of cancellation, plus a specified profit percentage.
Governmental  expenditures for defense are subject to the political  process and
to  rapidly  changing  world  events,  either  or both of which  may  result  in
significant reductions in such expenditures in the proximate future.  Government
contracts or contracts  with prime  government  contractors  are not viewed as a
significant part of Pro Tech's business.

I.       Environmental Regulation Compliance

Compliance with Federal,  state and local provisions regulating the discharge of
materials into the environment,  or otherwise  relating to the protection of the
environment,  does not have any material  effect upon the capital  expenditures,
earnings or competitive position of Pro Tech.

J.       Proprietary Protection

Pro Tech owns one  technology  patent  which was granted  during the fiscal year
2001. We intend to seek patent  protection on our inventions at the  appropriate
time in the future.  The process of seeking patent protection can be lengthy and
expensive,  and there can be no  assurance  that patents will be issued from any
applications  or that any patent issued will be of sufficient  scope or strength
or provide meaningful  protection or any commercial  advantage.  Pro Tech may be
subjected  to,  or  may  initiate,  litigation  or  patent  office  interference
proceedings,  which may require significant  financial and management resources.
The failure to obtain necessary  rights or the advent of litigation  arising out
of any such claims could have a material adverse effect on our operations.

Pro Tech also has a license to  utilize  certain  patent-protected  technologies
owned by its ultimate  parent  company,  NCT Group,  Inc.,  in the area of noise
reduction.

Certain of Pro Tech's  employees  involved in engineering  are required to enter
into confidentially agreements as a condition of employment. We do not currently
own any registered trademarks, although we intend to file trademark registration
applications in the future with respect to distinguishing marks.


                                       8
<PAGE>


K.       Employees

As of December 31, 2001,  Pro Tech had 27  full-time  employees  and 1 part-time
employee,  including  2 persons  in  research  and  development,  11  persons in
administration  and shipping,  6 persons in sales and marketing and 8 persons in
assembly and  production.  None of our employees are represented by a collective
bargaining unit, and we believe that our relationship with employees is good.

L.       Business Segments

Pro   Tech   operates   in   three   business   segments:    headset   products,
telecommunication  integration,  and call center operations. The headset segment
encompasses the design, development,  manufacturing and marketing of lightweight
headsets for  commercial  use.  The  telecommunication  integration  segment was
launched in 2001 to sell and install simple to sophisticated analog, digital and
IP phone  systems.  The  call  center  operation  was  launched  in 2001 to take
advantage of expertise in a specialized niche of the medical market. In December
2001, management decided to suspend operations in the call center segment due to
poor performing  contracts.  Pro Tech has reorganized  this business segment and
intends to resume operations by the third quarter of 2002. All of these segments
operate predominantly within the North American geographic area.

M.       Available Information

We file  annual,  quarterly  and special  reports,  proxy  statements  and other
information with the Securities Exchange  Commission,  known as the SEC. You may
read  and copy any  document  we file at the  SEC's  public  reference  rooms in
Washington, D.C., New York, New York, and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings  are  also   available   to  the  public  from  the  SEC's   Website  at
"http://www.sec.gov."

ITEM 2.  PROPERTIES

Pro Tech's executive,  sales and manufacturing  facilities occupy  approximately
13,000 square feet of space located at 4492 Okeechobee Rd, Fort Pierce,  Florida
34947,  pursuant  to a lease  agreement  dated  March 1, 2001  which  expires in
February 2006 and provides for monthly rental of approximately $5,000 increasing
to approximately $8,000 over the five-year term.


ITEM 3.  LEGAL PROCEEDINGS

Pro Tech is not party to any legal proceeding.


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


None.



                                       9
<PAGE>


                                     PART II

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


Pro Tech's  common stock began  trading on the NASD OTC Bulletin  Board on March
22,  1996.  Our stock is currently  being  traded  under the symbol  "PCTU." The
following  table  sets forth the  average  high and low bid prices of the common
stock as  reported  by the  NASD's  OTC  Bulletin  Board for each of the  fiscal
quarters  during the two fiscal  years  ended  October  31,  1999 and 2000;  the
interim  two-month  period ended  December  31, 2000;  and the fiscal year ended
December 31, 2001. The market quotations reflect  inter-dealer  prices,  without
retail  mark-up,   markdown,   or  commission  and  may  not  represent   actual
transactions.

     Year ended October 31, 1999                       High           Low
    ----------------------------------------------    ----------    -----------
      First Quarter                                   $  0.50       $  0.38
      Second Quarter                                  $  0.38       $  0.27
      Third Quarter                                   $  0.50       $  0.31
      Fourth Quarter                                  $  0.50       $  0.19

     Year ended October 31, 2000                       High           Low
    ----------------------------------------------    ----------    -----------
      First Quarter                                   $0.310        $0.299
      Second Quarter                                  $0.880        $0.788
      Third Quarter                                   $0.670        $0.625
      Fourth Quarter                                  $1.062        $0.625

    Two Months Ended - December 31, 2000               High           Low
    ----------------------------------------------    ----------    -----------
      November 1, 2000 to December 31, 2000           $0.875        $0.312


    Year ended December 31, 2001                       High           Low
    ----------------------------------------------    ----------    -----------
      First Quarter                                   $0.750        $0.281
      Second Quarter                                  $0.500        $0.090
      Third Quarter                                   $0.180        $0.100
      Fourth Quarter                                  $0.130        $0.050

On March 11, 2002, the last reported sale of Pro Tech's common stock as reported
by the NASD OTC Bulletin  Board was $0.04.  As of March 11, 2002,  there were 54
record holders of the common stock,  representing  approximately  650 beneficial
owners.

Pro Tech has neither  declared nor paid any  dividends on shares of common stock
since our  incorporation  in October 1994 and we do not  anticipate  declaring a
cash  dividend in the  reasonably  foreseeable  future.  Any decisions as to the
future  payment of  dividends  will  depend on our  earnings  and our  financial
position and such other  factors as the Board of Directors  deems  relevant.  We
anticipate that we will retain earnings,  if any, in order to finance  expansion
of our operations.

See Item 7.  Management's  Discussion  and Analysis of Financial  Condition  and
Results of Operations for a description of our sales of unregistered  securities
during the twelve months ended December 31, 2001.


                                       10
<PAGE>


ITEM 6.  SELECTED FINANCIAL DATA

The  selected  consolidated  financial  data set forth below is derived from the
historical  financial  statements  of Pro  Tech.  The  data set  forth  below is
qualified  in its  entirety  by and should be read in  conjunction  with Item 8.
Financial  Statements  and  Item 7.  Management's  Discussion  and  Analysis  of
Financial  Condition  and Results of Operations  that are included  elsewhere in
this document.


<TABLE>
<CAPTION>

                                                                    For the Year                  For the Two   For the Year
                                                                        Ended                     Months Ended    Ended
                                                                     October 31,                  December 31,  December 31,
                                                 ------------------------------------------------ ------------  -----------
                                                     1997       1998        1999         2000        2000          2001
                                                 ----------- ----------- -----------  ----------- ------------  -----------
STATEMENTS OF OPERATIONS DATA:
<S>                                                     <C>         <C>         <C>          <C>          <C>           <C>

Net sales                                         $ 996,993  $1,142,482  $1,090,551   $1,562,484    $ 307,902   $ 2,175,306
Cost of goods sold                                  333,755     470,450     414,931      623,555      113,920       860,277
                                                 ----------- ----------- -----------  ----------- ------------  -----------

      Gross profit                                  663,238     672,032     675,620      938,929      193,982     1,315,029
Selling, general and administrative                 698,785     882,385     893,384    1,275,290      561,044     3,715,561
Provision for doubtful accounts                       3,924      38,835       3,771        7,990        1,574         9,958
                                                 ----------- ----------- -----------  ----------- ------------  -----------

      Loss from operations                          (39,471)   (249,188)   (221,535)    (344,351)    (368,636)   (2,410,490)
Other income (expense):
  Interest income (expense), net                     28,688      24,719       9,181      (31,715)      (8,713)      (20,262)
  Miscellaneous income                                   58          89         697        1,726        1,029         4,305
  Loss on disposal of fixed assets                   (1,116)          -      (9,408)           -            -        (2,945)
                                                 ----------- ----------- -----------  ----------- ------------  -----------

      Loss before income taxes                      (11,841)   (224,380)   (221,065)    (374,340)    (376,320)   (2,429,392)
Income tax expense (benefit)                            400        (964)          -            -            -             -
                                                 ----------- ----------- -----------  ----------- ------------  -----------

      Net loss                                      (12,241)   (223,416)   (221,065)    (374,340)    (376,320)   (2,429,392)
Less:
Preferred stock beneficial conversion                     -           -           -    3,569,000            -        79,190
Preferred stock embedded dividend                         -           -           -      375,000            -        62,661
Dividend accretion on preferred stock                     -           -           -        5,425       10,027        24,085
                                                 ----------- ----------- -----------  ----------- ------------  -----------

      Net loss attributable to
           common stockholders                      (12,241)   (223,416)   (221,065)  (4,323,765)    (386,347)   (2,595,328)
                                                 =========== =========== ===========  =========== ============  ===========

 Basic and diluted net loss per share                 (0.00)      (0.05)      (0.05)       (0.57)       (0.01)        (0.08)
                                                 =========== =========== ===========  =========== ============  ===========

 Weighted average number
       of common shares outstanding (1)           4,122,795   4,254,000   4,254,000    7,537,855   28,248,438    32,281,034
                                                 =========== =========== ===========  =========== ============  ===========


                                                   October 31,                                     December 31,
                                                 ------------------------------------------------ -------------------------
                                                    1997        1998        1999         2000        2000          2001
                                                 ----------- ----------- -----------  ----------- ------------  -----------
BALANCE SHEET DATA:
 Total assets                                     1,239,143   1,158,898     945,377   18,652,665   18,264,130    17,184,920

 Total current liabilities                           81,764     209,845     209,300      662,956      651,313     1,549,997
 Long-term debt                                           -           -       8,089        3,687        3,115        36,021
 Retained earnings/(accumulated deficit)             31,197    (192,219)   (413,284)    (787,624)  (1,163,944)   (3,593,336)
 Stockholders' equity(2)                          1,157,469     949,053     727,988   17,986,022   17,609,702    14,965,464
 Working capital/(deficit)                          996,458     724,769     494,148    1,419,819    1,205,686      (329,136)

</TABLE>


(1)  Excludes  shares  issuable upon the exercise of outstanding  stock options,
     warrants  and  convertible  preferred  stock,  since their  effect would be
     antidilutive.

(2)  Pro Tech has never declared nor paid cash dividends on common stock.


                                       11
<PAGE>


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

The  following  discussion  should  be read in  conjunction  with the  financial
statements and the notes thereto included herein.

Caution Concerning Forward-Looking Statements

The  Securities  and  Exchange  Commission   encourages  companies  to  disclose
forward-looking  information so that investors can better understand a company's
future prospects and make informed investment decisions.  This document contains
such  "forward-looking  statements" within the meaning of the Private Securities
Litigation  Reform  Act of 1995,  particularly  statements  anticipating  future
growth in revenues and cash flow.  Words such as  "anticipates,"  "  estimates,"
"projects,"  "intends,"  "plans,"  "believes," "will be," "will continue," "will
likely result," and words and terms of similar substance used in connection with
any  discussion  of future  operating or  financial  performance  identify  such
forward-looking  statements.  Those  forward-looking  statements  are  based  on
management's present expectations about future events. As with any projection or
forecast,  they  are  inherently  susceptible  to  uncertainty  and  changes  in
circumstances,  and Pro Tech is under no obligation to (and expressly  disclaims
any such obligation to) update or alter its  forward-looking  statements whether
as a result of such changes, new information, future events or otherwise.

In addition,  Pro Tech's overall  financial  strategy,  which  includes  growing
operations,  maintaining  financial ratios and  strengthening our balance sheet,
could be  adversely  affected  by  increased  interest  rates,  failure  to meet
earnings expectations,  significant acquisitions or other transactions, economic
slowdowns and changes in our plans, strategies and intentions.

Pro Tech operates in a highly  competitive and rapidly changing  environment and
in  business   segments   that  are   dependent  on  our  ability  to:   achieve
profitability; achieve a competitive position in design, development, licensing,
production  and  distribution  of electronic  systems;  produce a cost effective
product  that  will gain  acceptance  in  relevant  consumer  and other  product
markets; increase revenues from products;  realize funding from product sales to
sustain  our current  level of  operation;  introduce,  on a timely  basis,  new
products; maintain satisfactory relations with our customers; attract and retain
key  personnel;  maintain and expand our  strategic  alliances;  and protect our
know-how and inventions.  Pro Tech's actual results could differ materially from
management's  expectations  because of changes in such factors. New risk factors
can  arise  and it is not  possible  for  management  to  predict  all such risk
factors,  nor can it assess the impact of all such risk  factors on our business
or the extent to which any factor,  or combination of factors,  may cause actual
results  to  differ  materially  from  those  contained  in any  forward-looking
statements.  Given these  risks and  uncertainties,  investors  should not place
undue reliance on forward-looking statements as a prediction of actual results.

Investors  should  also be aware that while Pro Tech  might,  from time to time,
communicate  with securities  analysts,  it is against our policy to disclose to
them any non-public  information or other confidential  commercial  information.
Accordingly, investors should not assume that Pro Tech agrees with any statement
or report issued by any analyst  irrespective of the content of the statement or
report.  Furthermore,  Pro Tech  has a  policy  against  issuing  or  confirming
financial  forecasts or projections  issued by others.  Thus, to the extent that
reports  issued by  securities  analysts  or  others  contain  any  projections,
forecasts or opinions, such reports are not the responsibility Pro Tech.

RESULTS OF OPERATIONS

The Year Ended December 31, 2001 As Compared To The Year Ended December 31, 2000
(Unaudited):

Net loss for the year ended  December 31, 2001  increased  $1,650,050,  or 212%,
over the year ended  December  31,  2000.  This  increase is  attributed  to the
following:  (1) Pro  Tech was  adversely  impacted  by the  September  11,  2001
terrorist  attack.  We experienced a major  reduction in demand for our products
after


                                       12
<PAGE>

the attack;  therefore,  reducing the actual sales gains over the previous year.
Actual revenues for the period  September 12 through  December 31 decreased from
$584,000 in 2000 to  approximately  $480,000 in 2001; (2)  amortization  expense
associated with the September 2000  acquisition of certain  intangible  personal
property from NCT Hearing, Inc. increased from approximately $234,000 in 2000 to
approximately  $933,000 in 2001 due to a full year's  amortization;  (2) payroll
and  related  expenses  increased   approximately  $785,000  due  to  additional
personnel,  increased  health  benefit  expenses,  and salary  increases for the
current year; (3) expenses charged by the parent company including  overhead and
specific  employee time allocations;  and (4) growing  competition in Pro Tech's
distributor  selling channel in the fast food market causing a deterioration  of
gross margins.

Despite the decrease in sales that we attributed to the terrorist  attacks,  net
sales generated during the year ended December 31, 2001 increased  approximately
$445,000,  or 26%,  over the year ended  December 31, 2000.  This increase was a
result of two  factors:  (1) sales from the market  introduction  of several new
telephone headsets and related communication  equipment;  and (2) our ability to
continue to recoup  fast food  headset  market  share lost during the year ended
1999.

Pro Tech continued the sale of products through  distributors,  augmenting these
sales with direct sales from our own outbound  telemarketing  operation.  During
the year ended December 31, 2001, we sold a total of 70,803 headsets and headset
related products,  as compared to 46,314 headsets during the same 2000 period, a
53% increase.  Net unit sales of fast food headsets increased 27% primarily from
the expansion of sales  distribution  channel previously  mentioned.  Consistent
with the our objectives,  the indirect distribution channel accounted for 88% of
net revenues and 86% of unit volumes  versus 77% of net revenues and 78% of unit
volumes  in  the  comparable  2000  period.   We  successfully   maintained  our
relationship  with the McDonald's  Corporation and once again have been selected
to be a part of the McDonald's International Owner Operator's trade show planned
for April 2002.  Sales from outside the fast food market were only  $450,660 for
the  year  ended  December  31,  2001,  as a  result  of  delays  in the  market
introduction of the telephone  product line. These delays were the result of the
lack of working capital required to successfully  enter this market. On July 30,
2001, we received a capital infusion of $500,000 to support this working capital
requirement.

Gross margin percent  decreased 2.4% from the comparable year end period in 2000
as a result of our desire to regain lost market  share due to price  competition
in the fast food headset market as well as a temporary increase in manufacturing
of certain products here in the U.S.

Selling,  general and  administrative  expenses for the year ended  December 31,
2001 increased approximately $1,899,000, or 105%, over the comparable year ended
December  31,  2000.  This  increase  was  the  result  of  the  following:  (1)
amortization  expense associated with the 2000 acquisition of certain intangible
personal property from NCT Hearing increased from approximately $234,000 in 2000
to approximately  $933,000 in 2001; (2) payroll and related  expenses  increased
$785,000 for the year ended December 31, 2001 over the  comparable  2000 period;
and (3) expenses charged by the parent company  including  overhead and specific
employee time allocations increased  approximately  $131,000 over the comparable
2000 period.

We continued to invest in research and development  and new product  development
for mold designs and component  testing.  We are also reviewing several possible
alliances with companies that have complimentary  products,  which could provide
access into several key accounts in the telephone market.  Although we intend to
form alliances,  there are no formal  agreements in place and no assurances that
they will occur in the future.

Interest  expense for the year ended December 31, 2001  decreased  approximately
$21,000, or 46%, from the comparable year ended December 31, 2000. This decrease
was due to the  retirement of  approximately  $300,000 in loans  outstanding  in
2000.  These loans served as bridge financing to the issuance of 1,500 shares of
Series A Convertible Preferred Stock in September 2000.


                                       13
<PAGE>


The Two Months  Ended  December  31, 2000 As  Compared  To The Two Months  Ended
December 31, 1999 (Unaudited):

For the two months  ended  December 31,  2000,  Pro Tech  realized a net loss of
$376,320 compared to a net loss of $68,906 for the two months ended December 31,
1999. The current  reporting  period loss was  attributed to three factors:  (1)
acquisition   of  certain   intangible   property  from  NCT  Hearing   required
amortization expenses of $155,000 during the two months ended December 31, 2000,
(2) we incurred  approximately $84,000 of overhead expense allocation during the
two months ended December 31, 2000 due to acquisition  of  approximately  83% of
Pro Tech's  outstanding  common stock by NCT Hearing;  and (3) the result of the
growing  competition in Pro Tech's distributor  selling channel in the fast food
market causing a deterioration of gross margins.

Net sales generated during the two months ended December 31, 2000 increased 163%
to $307,902  from  $116,716  for the two months ended  December  31, 1999.  This
increase in sales was as a result of two factors: (1) our ability to continue to
recoup fast food headset  market share lost during the year ended 1999;  and (2)
sales from the market introduction of several new telephone headsets and related
communication equipment.

Pro Tech continued the sale of products through  distributors,  augmenting these
sales with direct sales from our own outbound  telemarketing  operation.  During
the two months ended  December 31, 2000, we sold a total of 9,517  headsets,  as
compared  to  3,548  headsets  in the same  two-month  period  in  1999,  a 168%
increase. Net unit sales of fast food headsets increased 189% primarily from the
expansion of sales distribution  channel previously  mentioned.  Consistent with
the our objectives,  the indirect  distribution channel accounted for 77% of net
revenues  and 78% of unit  volumes  versus 70% of net  revenues  and 64% of unit
volumes in the  comparable  1999 two-month  period.  Sales from outside the fast
food market were only $63,336 for the two months ended  December 31, 2000,  as a
result of delays in the market introduction of the telephone product line. These
delays were the result of the lack of working  capital  required to successfully
enter this market. On September 29, 2000, we received a capital infusion of $1.5
million to support this working capital requirement.

Gross margin percent  decreased 4% from the comparable  two-month period in 1999
as a result of our desire to regain lost market  share due to price  competition
in the fast food headset  market as well as an increase in costs  related to the
manufacture of certain products here in the U.S.

Selling,  general and  administrative  expenses for the  two-month  period ended
December 31, 2000 were $561,044 or 182% of revenues  versus  $145,119 or 124% of
revenues in the  comparable  1999  period.  This  increase was the result of the
following:  (1)  due to the  transaction  resulting  in the  acquisition  of the
intangible property from NCT Hearing Products,  Inc., we incurred  approximately
$155,000 of amortization  expense of such intangible  property and an allocation
of overhead expense which amounted to  approximately  $115,000 for the two-month
period  ended  December  31,  2000;  and  (2) we  increased  our  marketing  and
advertising  expenses  to $5,088 from $2,482 in the  comparable  1999  two-month
period as a result of an increase in expenses in marketing material from the use
of an  alternative  source along with the decision to increase our attendance at
trade shows showing targeted return on investments.

We continued to invest in research and development  and new product  development
for mold designs and component  testing.  We are also reviewing several possible
alliances with companies that have complimentary  products,  which could provide
access into several key accounts in the telephone market.  Although we intend to
form alliances,  there are no formal  agreements in place and no assurances that
they will occur in the future.


                                       14
<PAGE>


We generated  interest income of $721 for the two months ended December 31, 2000
as compared to $1,008 for the  comparable  1999 two-month  period.  The interest
income resulted from  investment of the net proceeds from the private  placement
of securities into short-term certificates of deposits.

The Year Ended October 31, 2000 As Compared To The Year Ended October 31, 1999:

For the year ended  October 31, 2000,  Pro Tech  realized a net loss of $374,340
compared to a net loss of $221,065  for the year ended  October  31,  1999.  The
current reporting year loss was attributed to three factors: (1) the acquisition
of certain intangible property from NCT Hearing required  amortization  expenses
of $78,000  during  the month of October  2000,  (2) we  incurred  approximately
$101,000 of overhead  expense  allocation for the period from September 13, 2000
to  October  31,  2000 due to  acquisition  of  approximately  83% of Pro Tech's
outstanding  common  stock by NCT  Hearing;  and (3) the  result of the  growing
competition  in  distributor  selling  channel in the fast food market causing a
deterioration of gross margins.

Net sales  generated  during the year ended  October 31, 2000  increased  43% to
$1,562,484  from $1,090,551 in fiscal year ended October 31, 1999. This increase
in sales was as a result of two  factors:  (1) our ability to continue to recoup
fast food headset market share lost during fiscal year ended 1999; and (2) sales
from the market  introduction  of several  new  telephone  headsets  and related
communication equipment.

Pro Tech continued the sale of products  through  distributors  augmenting these
sales with direct sales from our own outbound telemarketing  operation.  For the
fiscal  year 2000,  we sold a total of 41,121  headsets,  as  compared to 27,641
headsets in the previous  year,  an increase of 49%. Net unit sales of fast food
headsets  increased  33%,  primarily  from the  expansion of sales  distribution
channels  previously  mentioned.  Consistent with our  objectives,  the indirect
distribution  channels  accounted  for 73% of net  revenues and 77% unit volumes
versus  64% of net  revenues  and 74% of unit  volumes  in the  comparable  1999
period.  Sales from outside the fast food market were only  $250,000 as a result
of delays in the market introduction of our telephone product line. These delays
were the result of the lack of working capital  required to  successfully  enter
this market.  On  September  29,  2000,  we received a capital  infusion of $1.5
million to support this working capital requirement.

Gross margin percent  decreased  1.86% to 60.09% versus 61.95% in the comparable
1999 period as a result of our desire to regain  lost market  share due to price
competition  in the fast food  headset  market as well as an  increase  in costs
related to the manufacture of certain products here in the U.S.

Selling, general and administrative expenses for the fiscal year were $1,275,290
or 81.6% of revenues  versus  $893,384 or 89% of revenues in the comparable 1999
period.  This  increase  was the result of several  factors.  First,  due to the
transaction  resulting in the  acquisition of the  intangible  property from NCT
Hearing,  we  incurred  approximately  $78,000 of  amortization  expense of such
intangible  property and an  allocation of overhead  expense  which  amounted to
approximately  $101,000  for the period from  September  13, 2000 to October 31,
2000.  Second,  we decreased our marketing and  advertising  expenses to $54,424
from  $98,738  in the  comparable  1999  period  as a result of a  reduction  in
expenses in marketing  material from the use of an alternative source along with
the decision to reduce  attendance  at trade shows  showing  targeted  return on
investments.  These  trade  shows  allowed us the  opportunity  to  successfully
present  the new  products  planned for market  introduction  in the 1st and 2nd
quarter of fiscal year 2000 along with the  opportunity to perform needed market
research necessary to have successful product introductions in the future.

We continued to invest in research and development  and new product  development
for mold designs and component  testing.  We are also reviewing several possible
alliances with companies that have complimentary  products,  which could provide
access into several key accounts in the telephone market.  Although we intend to
form alliances,  there are no formal  agreements in place and no assurances that
they will occur in the future.


                                       15
<PAGE>

We generated  interest  income of $4,877 for the year ended  October 31, 2000 as
compared to $10,202 for the year ended  October 31, 1999.  The  interest  income
resulted  from  investment  of the net  proceeds  from the private  placement of
securities into short-term certificates of deposits.

LIQUIDITY AND CAPITAL RESOURCES

The current ratio  (current  assets to current  liabilities)  was .79 to 1.00 at
December 31, 2001, as compared to 2.85 to 1.00 at December 31, 2000. At December
31, 2001, current liabilities exceeded current assets by approximately $329,136.

During the current  fiscal year ending  December  31,  2001,  we funded  working
capital  requirements with cash flow from operations,  proceeds from the sale of
convertible  preferred  stock  in  July  2001  and  a new  short-term  factoring
arrangement.   Management  believes  Pro  Tech  has  sufficient  funds  to  meet
anticipated working capital requirements for the next 12 months.

In addition, in order to maximize the potential of the telephone user market and
to enable us to expand into additional  markets,  including  government agencies
and personal  computers,  we will require additional capital. On March 27, 2001,
we were able to roll the  outstanding  loan from Westek  Communications  Inc., a
stockholder,  for $150,000 into a new note for $162,750,  which included accrued
interest  payable  from the old note.  The new note is payable on March 27, 2002
with an interest rate of 8.5%. We will seek to raise  additional  financing as a
result of our relationship  with NCT Hearing and its parent company,  NCT Group,
Inc.

At December 31, 2001, cash and cash equivalents  were $46,881.  Such balance was
invested in interest bearing money market accounts.

Pro Tech had a working  capital  deficit of  $329,136  at  December  31, 2001 as
opposed to working  capital of $1,205,686 at December 31, 2000.  This $1,534,822
decrease was due primarily to the use of the remaining proceeds from the sale of
$1,500,000 of Series A  Convertible  Preferred  Stock in September  2000 and the
increase in our accounts payable and other liabilities.

Cash flows  used in  operating  activities  was  $585,477  during the year ended
December 31, 2001. This use of funds was driven  primarily by the 2001 generated
net loss of $2,429,392 and the increase in inventory of $295,156,  offset by the
depreciation  and  amortization  expense  of  $1,052,737  and the  increases  of
$378,167 in accounts payable and $403,599 in other liabilities.

Net cash  used in  investing  activities  was  $543,352  during  the year  ended
December 31, 2001, due primarily to expenses incurred for leasehold improvements
in connection  with the new office  space,  which we initially  occupied  during
April 2001.

The net cash provided by financing activities was $399,329 during the year ended
December 31, 2001, due primarily to the issuance of the issuance of the Series B
Convertible Preferred Stock.

Pro Tech has no lines of credit with banks or other lending institutions.

Due  to  Pro  Tech's  need  to  fund  new  product   development   and  increase
manufacturing  capacity in order to meet new  business  demands in 2001,  it was
necessary to enter into certain transactions,  which provided additional funding
as follows:

Series B Redeemable Convertible Preferred Stock

On July 30,  2001,  we entered into an agreement to issue 500 shares of Series B
Redeemable  Convertible  Preferred Stock  (Preferred  Stock-B) for $500,000.  We
received  approximately  $419,000 in cash, net of fees and expenses, in exchange
for the Preferred Stock-B. Under such agreement, the shares of Preferred Stock-B
may be converted into shares of Pro Tech common stock or exchanged for shares of
NCT Group,  Inc. (NCT) common stock.  The  conversion  rate into Pro Tech common
stock is the lesser of: (i) the then

                                       16
<PAGE>

lowest  average of the average  closing bid price for a share of Pro Tech common
stock for any consecutive  five day period out of fifteen trading days preceding
the date of such conversion, less a discount of 20%; or (ii) $0.25. The exchange
rate into NCT common stock is the then lowest average of the average closing bid
price for a share of NCT common stock for any consecutive  five trading days out
of the  fifteen  trading  days  preceding  the date of such  conversion,  less a
discount of 20%.

In  addition,  under the  agreement,  we issued a warrant to purchase  1,000,000
shares of our common stock.  The warrant is  exercisable  at $0.13 per share and
expires on July 30,  2004.  We have the right to require the  warrant  holder to
exercise upon a call by Pro Tech under the following  conditions:  (1) one-third
of the warrant is callable if the closing bid price of the common stock for each
of the previous  fifteen days equals or exceeds $0.177 per share and the average
daily  trading  volume  during  such  period  is at least  150,000  shares;  (2)
two-thirds  of the  warrant is  callable  if the closing bid price of the common
stock for each of the previous  fifteen days equals or exceeds  $0.244 per share
and the average  daily  trading  volume  during such period is at least  150,000
shares;  and (3) the entire  warrant is callable if the closing bid price of the
common stock for each of the previous  fifteen days equals or exceeds $0.295 per
share and the  average  daily  trading  volume  during  such  period is at least
150,000 shares.

Goodman Factoring Agreement

On March 26,  2001,  Pro Tech entered  into a factoring  agreement  with Goodman
Factors,  Inc., or Goodman.  We are required to factor  substantially all of our
trade  receivables on a  non-recourse  basis in return for immediate cash credit
equal to eighty-five percent (85%) of these factored receivables, less factoring
fee.  The  factoring  fee is 1.9% of the invoice  amount and 3.5% over the prime
rate on the amount  advanced under the factoring  agreement.  The prime rate was
4.75% at December 31, 2001. In addition,  at December 31, 2001 we had $10,402 in
reserve at  Goodman  representing  not less than  fifteen  percent  (15%) of the
aggregate  unpaid gross amount of all outstanding  accounts  factored under this
factoring  agreement.  If the net amount of accounts submitted for any one month
does not exceed  $100,000,  Goodman may charge an additional  commitment fee, as
described in the agreement.  Such factored receivables are subject to acceptance
by Goodman.  Goodman  also has the option to accept  factored  receivables  with
recourse.  If such recourse receivables are not paid within 46 days, we must buy
back the total outstanding  receivable.  Obligations due to the factor under the
factoring  agreement are collateralized by a continuing security interest in all
of  our  accounts  receivable,  notes  receivable,   chattel  paper,  documents,
instruments and general  intangibles now existing or hereafter acquired of every
kind wherever located,  together with merchandise  returns and goods represented
thereby, and all proceeds therefrom of every kind and nature.

Capital Expenditures

There were no material  commitments for capital  expenditures as of December 31,
2001, and no other material commitments are anticipated in the near future.


                                       17
<PAGE>


ITEM 7A.     QUANTITATIVE OR QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Pro Tech's primary market risk exposures are  fluctuations in interest rates and
foreign  exchange  rates.  We are exposed to  short-term  interest  rate risk on
certain debts and trade  accounts  receivable  sales.  We do not use  derivative
financial  instruments to hedge cash flows for such  obligations.  In the normal
course of business,  we employ  established  policies and  procedures  to manage
these risks.

Based upon a hypothetical 10% proportionate  increase in interest rates from the
average level of interest rates during the last twelve  months,  and taking into
consideration expected investment positions, commissions paid to selling agents,
growth of new business and the expected  borrowing level of variable-rate  debt,
the expected effect on net income related to our financial  instruments would be
immaterial.

ITEM 8.   FINANCIAL STATEMENTS

The  Reports  of the  Independent  Auditors,  Morgan,  Jacoby,  Thurn,  Boyle  &
Associates,  P.A.,  and the  financial  statements  and  accompanying  notes are
attached.

                                                                 Page
Independent Auditors' Report                                     F-1
Balance Sheets as of October 31, 2000; December 31, 2000
  and 2001                                                       F-2
Statements of Operations for the years ended October 31,
  1999 and 2000; the two months ended December 31, 2000;
  and the year ended December 31, 2001                           F-3
Statements of Stockholders' Equity for the years ended
  October 31, 1999 and 2000; the two months ended December 31,
  2000; and the year ended December 31, 2001                     F-4
Statements of Cash Flows for the years ended October 31, 1999
  and 2000; the two months ended December 31, 2000; and the
  year ended December 31, 2001                                   F-5
Notes to Financial Statements                                    F-6


ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

None.

                                    PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth the names,  ages,  positions and the offices held
by each of the  executive  officers  and  directors  of Pro Tech as of March 11,
2002.

Name                     Age                  Positions and Offices
---------------------   ------   -----------------------------------------------
Keith Larkin             78      Chairman of the Board
Richard Hennessey        42      President, Chief Operating Officer and Director
Michael J. Parrella      53      Director
Irene Lebovics           48      Director
Cy E. Hammond            47      Director
Mark Melnick             43      Secretary
Debra Kirven             37      Chief Financial Officer and Treasurer

Keith  Larkin is the founder and Chairman of the Board of Directors of Pro Tech.
He served as the company's Chief Executive  Officer and Treasurer from inception
in 1994 until his  resignation  from these  positions  on February 1, 2002.  Mr.
Larkin's   40-year   professional   career  has  been   devoted  to   designing,
manufacturing and marketing his new designs in lightweight  telephone  headsets.
In 1961,  Mr.  Larkin  founded  Plantronics,  the  current  industry  leader  in
lightweight telephone headsets with annual sales of all


                                       18
<PAGE>

its products (including the electronic  amplifier) in 2000 of approximately $320
million.  From 1961 until he sold his interest in 1967, Mr. Larkin served as the
President  and Chairman of  Plantronics,  during which  Plantronics  established
itself as the main source of  lightweight  telephone  headsets to the  telephone
industry and provided  the  headsets  for NASA  Mercury,  Gemini and Apollo moon
flights. In the late 1970's, Mr. Larkin conceived,  developed and patented a new
design in headsets to compete against Plantronics' headsets.  With Mr. Larkin as
its  President,  ACS Wireless  attained $1 million  monthly sales figures to the
telephone  market  within  three years of operation  and  replaced  Plantronics'
headsets  on the NASA Space  Shuttle.  In 1986,  he left ACS  Wireless to become
involved in  Christian  children's  relief  programs in Haiti and Honduras for a
period of three years.  From January 1989 to August 1991,  Mr.  Larkin served as
the President of Advanced Recreational Technology, Inc., an engineering research
and development  company owned by Mr. Larkin. In August 1991, Mr. Larkin founded
Pro Tech Systems,  a California  limited  partnership that he managed as general
partner.  Pro Tech  Systems  was  formed  to  design,  manufacture,  and  market
lightweight  telephone  headsets.  Upon the transfer of all of the assets of Pro
Tech Systems to the company in November  1994, Mr. Larkin became the Chairman of
the Board of Directors,  Chief Executive Officer, President and Treasurer of Pro
Tech,  positions  which he held until  February  2, 1999,  when he  resigned  as
President  of Pro Tech then until  February  1, 2002,  when he resigned as Chief
Executive  Officer and  Treasurer  but  retained his position as Chairman of the
Board of Directors.

Richard  Hennessey  joined Pro Tech as Director of  Marketing in August 1995 and
was appointed Vice President, Marketing on June 10, 1996. On August 4, 1998, Mr.
Hennessey was appointed Secretary and became a director of Pro Tech. On February
2, 1999, Mr.  Hennessey was appointed  President and Chief Operating  Officer of
Pro Tech.  On January 1, 2002,  Mr.  Hennessey  resigned  from the  position  of
Secretary but retained the positions of President and Chief  Operating  Officer.
From 1982 through 1984,  Mr.  Hennessey  was a salesman with the computer  sales
division of Lanier Business Products located in Boston, Massachusetts. From 1984
through  April 1994,  Mr.  Hennessey  held  various new venture  sales and sales
management positions with Digital Equipment Corporation.

Michael J. Parrella  currently serves as a director of Pro Tech. Mr. Parrella is
Chief Executive Officer and Chairman of the Board of Directors of NCT Group, the
ultimate  parent company of Pro Tech, and serves as Chairman of the Board of NCT
Hearing Products,  Inc., the direct parent company of Pro Tech. Mr. Parrella was
elected  Chairman of the Board of Directors  of NCT Group on April 21, 2000,  on
which date he relinquished the position of President.  From August 1995 to April
21, 2000,  Mr.  Parrella  served as NCT Group's  President  and Chief  Executive
Officer.  From November 1994 to July 1995, Mr. Parrella served as Executive Vice
President of NCT Group.  Prior to that,  from February 1988 until November 1994,
he served as President and Chief  Operating  Officer of NCT Group.  He initially
became a  director  of NCT  Group in 1986.  Mr.  Parrella  also  serves as Chief
Executive Officer and Acting President of NCT Audio Products, Inc., a subsidiary
of NCT Group, a position to which he was elected on September 4, 1997. He became
a director of NCT Audio on August 25, 1998. On January 5, 2001, Mr. Parrella was
elected  Acting  Chief  Executive  Officer  of  Advancel  Logic  Corporation,  a
subsidiary  of NCT Group.  Mr.  Parrella is a director of Advancel and serves as
Chairman of the Board of  Distributed  Media  Corporation,  a subsidiary  of NCT
Group.  Mr.  Parrella  became a director of  subsidiaries  acquired  directly or
indirectly by NCT Group in 2000, including Midcore Software,  Inc. and Pro Tech,
and NCT Group subsidiaries formed in 2000, including DMC Cinema, Inc., NCT Video
Displays,  Inc., DMC New York, Inc.,  ConnectClearly.com,  Inc., DMC HealthMedia
Inc., Distributed Media Corporation  International  Limited,  Artera Group, Inc.
and Artera Group International Limited.

Irene Lebovics currently serves as a director of Pro Tech. She is a director and
President of NCT Group and director and President of NCT Hearing Products,  Inc.
She served as Secretary of NCT Group from February 1999 until September 2001. On
April 25, 2001, Ms. Lebovics became a director of NCT Group. On January 5, 2000,
Ms.  Lebovics  was elected  Acting  Chief  Marketing  Officer and  Secretary  of
Advancel Logic Corporation.  She joined NCT Group as Vice President of NCT Group
and  President of NCT Medical  Systems in July 1989.  In January  1993,  she was
appointed  Senior Vice President of NCT Group.  In November  1994, Ms.  Lebovics
became  President  of NCT Hearing  Products,  Inc.  In 1999,  Ms.  Lebovics  was
appointed  as Executive  Vice  President  of NCT Group,  and in April 2000,  she
became  President  of NCT  Group.  She has held  various  positions  in  product
marketing with  Bristol-Myers,  a consumer products company,  and in advertising
with McCaffrey and McCall. In addition to serving as a director of Pro Tech,


                                       19
<PAGE>

Ms. Lebovics serves as a director of various NCT Group  subsidiaries as follows:
NCT Hearing Products,  Inc., Distributed Media Corporation,  ConnectClearly.com,
Inc., NCT Video Displays,  Inc., DMC New York, Inc., Artera Group,  Inc., Artera
Group International Limited, Midcore Software, Inc., Advancel Logic Corporation,
DMC HealthMedia Inc.,  Distributed Media Corporation  International  Limited and
DMC Cinema, Inc.

Cy E.  Hammond  currently  serves as a director  of Pro Tech.  He is Senior Vice
President,  Chief Financial  Officer,  Treasurer and Assistant  Secretary of NCT
Group.  He joined NCT Group as  Controller  in January 1990 and was  appointed a
Vice  President in February  1994.  Mr.  Hammond also serves as Treasurer of NCT
Hearing Products,  Inc., a position to which he was elected on July 15, 1998, as
Acting  Chief  Financial  Officer and  Treasurer  of NCT Audio  Products,  Inc.,
positions  to which he was elected on  September  4, 1997,  and as Acting  Chief
Financial  Officer,   Treasurer  and  Assistant  Secretary  for  Advancel  Logic
Corporation,  positions to which he was elected on January 5, 2000. During 1989,
he was  Treasurer  and  Director of Finance for Alcolac,  Inc., a  multinational
specialty chemical producer.  Prior to 1989 and from 1973, Mr. Hammond served in
several senior finance  positions at the Research  Division of W.R. Grace & Co.,
the last of which  included  management of the  division's  worldwide  financial
operations.   Mr.  Hammond  also  serves  as  a  director  of  other  NCT  Group
subsidiaries as follows:  NCT Video Displays,  Inc., DMC New York, Inc.,  Artera
Group, Inc., Artera Group International Limited, Noise Cancellation Technologies
(Europe), Inc. and ConnectClearly.com, Inc.

Mark Melnick  currently  serves as Secretary of Pro Tech,  the position which he
has held since January 1, 2002. Mr. Melnick is Vice  President,  General Counsel
and Secretary of NCT Group, Inc., positions he has held since September 2001. He
also serves as Secretary of Distributed Media Corporation, DMC Cinema, Inc., DMC
HealthMedia,  Inc., NCT Audio Products,  Inc., NCT Hearing  Products,  Inc., NCT
Medical Systems, Inc., ConnectClearly.com,  Inc., Midcore Software, Inc., Artera
Group,  Inc.,  Advancel Logic  Corporation,  NCT Muffler,  Inc., Chaplin Patents
Holding Company, Inc., NCT Far East, Inc. and NCT Video Displays, Inc. From 1989
to 2000,  Mr. Melnick was Counsel,  Senior  Counsel and then  Assistant  General
Counsel  of  CBS  Cable  and  its  predecessor-in-interest   Group  W  Satellite
Communications  (a  division of  Westinghouse  Broadcasting  Co.),  in the cable
television  field.  From 1984 to 1988,  he was an  associate  at the law firm of
Stults & Marshall (now known as Balber  Pickard  Battistoni  Maldonado & Van Der
Tuin) in New York, NY. From 1982 to 1984, he was an associate at the law firm of
Seyfarth, Shaw, Fairweather & Geraldson in New York, NY.

Debra Kirven  currently  serves as Chief Financial  Officer and Treasurer of Pro
Tech,  positions  that she has held  since  February  1,  2002.  Ms.  Kirven  is
Assistant  Controller of NCT Group Inc.,  the position  which she has held since
November 27, 2000.  From 1991 to 2000,  Ms. Kirven held various  accounting  and
finance  positions  with  Southern New England  Telecommunications,  Inc. in New
Haven,  CT.  From 1986 to 1991,  Ms.  Kirven was an  accountant  and then senior
accountant with Deloitte & Touche.

Section  16(a)  of the  Securities  Exchange  Act of 1934  requires  Pro  Tech's
directors,  executive officers and persons who own more than 10% of a registered
class  of our  equity  securities  to file  with  the  Securities  and  Exchange
Commission  initial  reports of ownership and reports of changes in ownership in
the Common Stock.  Executive  officers,  directors and persons who own more than
10%  of a  registered  class  of  our  equity  securities  are  required  by SEC
regulation  to furnish us with copies of all Section  16(a) forms they file with
the SEC.

To Pro Tech's  knowledge,  based  solely on review of the copies of such reports
furnished to us and  representations  that no other reports were  required,  Pro
Tech  believes  that  all  filing  requirements   applicable  to  its  officers,
directors,  and greater  than 10%  shareholders  were  complied  with during the
period from January 1, 2001 to December 31, 2001, except that Mr. Larkin did not
timely  file Form 4s with the SEC in  conjunction  with the grant of  options in
June 2001.


                                       20
<PAGE>



ITEM 11.    EXECUTIVE COMPENSATION

The  following  table  sets forth the  aggregate  cash  compensation  paid to or
accrued by all persons  who served as Chief  Executive  Officer  during the last
calendar  year and by each  other  executive  officer  receiving  in  excess  of
$100,000  (the "Named  Executive  Officers")  for services  rendered to Pro Tech
during the fiscal  years ended  October 31, 1999 and 2000;  the two months ended
December 31, 2000 and the fiscal year ended December 31, 2001.

<TABLE>
<CAPTION>

                                                                                                     Securities
                                                                                   Other             Underlying            All
Name and                                                                          Annual          Options/Warrants        Other
    Principal Position           Year             Salary          Bonus         Compensation          SARs(#)          Compensation
--------------------------- ---------------  ----------------- ------------ ------------------  --------------------- --------------
<S>                                    <C>                <C>    <C>            <C>                          <C>            <C>
Keith Larkin
  Chairman of the Board           10/31/99          $  25,000      -              -                      540,000              -
                                  10/31/00          $  22,500      -              -                            -              -
                                  12/31/00          $   7,500      -              -                            -              -
                                  12/31/01          $  56,750      -              -                      540,000              -
Richard Hennessey
  President                       10/31/99          $  51,000      -              -                      200,000              -
                                  10/31/00          $  77,000      -              -                            -              -
                                  12/31/00          $  16,000      -              -                      250,000              -
                                  12/31/01          $ 142,896      -              -                            -              -

</TABLE>

Compensation Arrangements with Certain Officers and Directors

Pro Tech had an employment  agreement with Keith Larkin, which was terminated on
February 2, 1999. The agreement  provided for a maximum annual salary of $90,000
with additional  amounts added using the consumer price index as a minimum.  Mr.
Larkin was eligible for the maximum  annual  salary  during a given year only if
Pro Tech generated  annual sales of at least $2,000,000 and pre-tax income equal
to at least 20% of annual sales. Since we did not meet the minimum  requirements
during  fiscal  years  ended  October  31,  1999 or 2000;  the two months  ended
December 31, 2000; or the fiscal year ended December 31, 2001, Pro Tech paid Mr.
Larkin the compensation set forth in the preceding table.

Pro Tech has no set salary  obligations  to Mr.  Larkin for his services for the
current or future fiscal years.  However, Mr. Larkin has agreed to assign to Pro
Tech all of his rights,  title and  interest  in and to any and all  inventions,
discoveries,  developments,  improvements,  processes, trade secrets, trademark,
copyright and patent rights of which he conceives  during his tenure as Chairman
of the Board of Directors.

Pro Tech does not have a written employment agreement with Richard Hennessey.

Messrs.  Larkin and Hennessey did not receive any  additional  compensation  for
serving as directors.

Compensation of Directors

No directors of Pro Tech have received any fees for serving as a director.

Stock Option Plans

On November  28,  2000,  Pro Tech issued to its  employees,  options to purchase
500,000  shares of common stock at $0.4375 per share under the 1998 Stock Option
Plan, which vest as follows: 125,000 immediately,  125,000 on November 28, 2001,
125,000 on November  28, 2002,  and 125,000 on November  28,  2003.  The options
expire on November 28, 2007.

On June 1, 2001,  Pro Tech  issued  options to the  Chairman  to  purchase up to
540,000  shares at an  exercise  price of $0.17 per share  under the 1998  Stock
Option Plan, which options vested immediately upon


                                       21
<PAGE>

issuance.  In  addition,  on June 1, 2001 Pro Tech  issued  options to two other
employees  to  purchase up to 400,000  shares at an exercise  price of $0.17 per
share under the 1998 Stock Option Plan, which options vested or vest as follows:
160,000 immediately upon issuance;  120,000 on June 1, 2002; and 120,000 on June
1, 2003. In January 2002  employment of these two employees was terminated  and,
according to the option  agreement,  such  granted  options will expire in April
2002.  The exercise  prices of the options  granted above were equal to the fair
market  value of the common stock on the grant dates and expire seven years from
date of grant.

                2001 Aggregated Option and Warrant Exercises and
                   December 31, 2001 Option and Warrant Values

The following table sets forth certain  information with respect to the exercise
of options and warrants to purchase  common stock during the year ended December
31, 2001 and the unexercised  options and warrants held and the value thereof at
that date, by each of Mr. Larkin and Mr. Hennessey.

<TABLE>
<CAPTION>

                                                               Number of Shares
                          Number of                               Underlying                 Value of Unexercised
                            Shares                           Unexercised Options             In-the-Money Options
                           Acquired                            and Warrants at                  And Warrants at
                              On            Value             December 31, 2001                December 31, 2001
                                                        -------------------------------------  ---------------------------------
       Name              Exercise (#)      Realized     Exercisable (#)     Unexercisable (#)     Exercisable      Unexercisable
--------------------     -------------   -------------  ---------------  --------------------  ---------------   ---------------
<S>                                                           <C>                                 <C>               <C>
Keith Larkin                        -               -         540,000                     -       $     -           $    -

Richard Hennessey                   -               -         425,000               125,000       $     -           $    -

</TABLE>


During the fiscal year ended October 31, 2000; the two months ended December 31,
2000;  and the fiscal year ended  December 31, 2001,  neither Mr. Larkin nor Mr.
Hennessey  exercised  any stock  options.  The fair  market  value of Pro Tech's
common stock as of December  31, 2001 was less than the exercise  price for both
Mr. Larkin's and Mr. Hennessey's stock options.  Accordingly, as of December 31,
2001, Mr. Larkin's and Mr. Hennessey's unexercised stock options had no value as
indicated above.

1996 Stock Option Plan

On April 15, 1996,  the Board of  Directors  adopted the 1996 Stock Option Plan.
The 1996 Plan  provides  for the grant of options to purchase up to an aggregate
of 590,000  of  authorized  but  unissued  shares of common  stock  (subject  to
adjustment  in certain  cases  including  stock  splits,  recapitalizations  and
reorganizations)  to  officers,   directors,   consultants,  and  other  persons
rendering services to Pro Tech.

The purposes of the 1996 Plan are to provide  incentive to employees,  including
officers,  directors and consultants, to encourage such persons to remain in the
employ of Pro Tech and to attract  persons of experience  and ability.  The 1996
Plan  terminates  on April 15, 2002.  The Board of Directors  determined in 2000
that no further grants would be made under the 1996 Plan.

Options granted under the 1996 Plan may be either incentive stock options within
the meaning of the Internal Revenue Code of 1986, as amended, or options that do
not qualify as incentive  options.  The exercise price of incentive options must
be at least equal to the fair market  value of the shares of common stock on the
date of grant provided, however, that the exercise price of any incentive option
granted to any person who,  at the time of the grant of the  option,  owns stock
aggregating  10% or more of the total  combined  voting power of Pro Tech or any
parent or subsidiary of Pro Tech,  must not be less than 110% of the fair market
value.

On April 15, 1996, options to purchase 540,000 and 50,000 shares of common stock
were granted to the then  President and officers,  respectively,  at an exercise
price of $0.50 per share.  The  exercise  price was the fair value of a share of
common stock at the date of the grant,  which was determined from the price paid
per share  during Pro  Tech's  stock  offering  carried  out in 1996.  The stock
options were exercisable  upon the grant date,  extending over a period of three
years.


                                       22
<PAGE>


Prior to fiscal year 1998,  Pro Tech  received  $25,000 upon  issuance of 50,000
shares of common stock upon the exercise of 50,000  options by its officers.  On
April 13, 1999,  the remaining  540,000  options  issued to Pro Tech's  previous
President  were  extended  for 2 years to April  15,  2001.  Such  options  have
expired.

1998 Stock Option Plan

On March 5, 1998, the Board of Directors  adopted the 1998 Stock Option Plan for
the benefit of directors, officers and employees of and consultants to Pro Tech.
The 1998 Plan  originally  authorized  the issuance of options to purchase up to
500,000  shares of common stock and was increased to 2,000,000  shares of common
stock on August 11,  2000.  On August 4, 1998,  options to purchase  200,000 and
100,000  shares were  granted to officers  and  employees,  respectively,  at an
exercise price of $0.375 per share. The exercise price was the fair market value
of a share of  common  stock at the date of the  grant.  Of  these,  options  to
purchase  150,000  shares of common stock were granted to Richard  Hennessey and
vested as follows:  50,000  immediately,  50,000 on August 4, 1999 and 50,000 on
August 4, 2000.  The  remaining  options  vested  immediately.  All  options are
exercisable over a three-year period from the date of vesting.

On April 13, 1999, the remaining 1998 Plan options to purchase 200,000 shares of
common stock were granted to Richard Hennessey at an exercise price of $0.38 per
share.  The exercise  price was greater than the fair market value of a share of
common stock at the date of the grant.  The options vest and are  exercisable as
follows: 100,000 immediately;  50,000 on April 13, 2000; and 50,000 on April 13,
2001. The options expire April 13, 2004.

On November 28, 2000, the Board of Directors authorized the issuance to Pro Tech
employees of options to purchase an aggregate of 500,000  shares of common stock
at an exercise price of $0.4375 per share,  the fair market value on the date of
grant.  Included in these grants was a grant to Mr. Hennessey to acquire 250,000
shares of common stock. The shares underlying Mr.  Hennessey's stock option vest
as follows:  25% (or 62,500  shares) on the date of grant and 25% on each of the
first,  second and third  anniversaries of the date of grant. The options expire
on November 28, 2007.

On June 1, 2001, the Board of Directors  granted  options to three  employees of
Pro Tech for the  purchase of an aggregate  of 940,000  shares of common  stock,
including  an option to Mr.  Larkin to  acquire  540,000  shares.  Mr.  Larkin's
options have an exercise price of $0.17 per share,  the fair market value on the
date of grant,  and vest on the date of  grant.  The  options  expire on June 1,
2008.


ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
            AND MANAGEMENT.

The following table sets forth information concerning the shares of common stock
beneficially owned as of March 11, 2002 by each person who: (1) to the knowledge
of Pro Tech,  was the holder of 5% or more of the common stock of Pro Tech as of
such date;  (2) serves as a  director  of Pro Tech;  (3) was among the five most
highly  compensated  executive  officers of Pro Tech (including Pro Tech's Chief
Executive  Officer) in the fiscal  year ending  December  31,  2001;  and by all
executive  officers and  directors  of Pro Tech as a group.  Except as otherwise
noted,  each beneficial  owner has sole investment and voting power with respect
to the listed shares.


                                       23
<PAGE>


                                           Amount and
                                           Nature of           Approximate
                                           Beneficial          Percentage
 Name of Beneficial Owner                  Ownership (1)       Of Class (1)
 --------------------------------------    --------------      -----------

 Keith Larkin                                  1,550,000  (2)        4.6%
 Richard Hennessey                               425,000  (3)        1.3%
 Michael J. Parrella                                   -  (4)           -
 Irene Lebovics                                        -  (4)           -
 Cy E. Hammond                                         -  (4)           -
 NCT Hearing Products, Inc.                   27,102,174  (5)       81.6%
 Carole Salkind                              129,462,019  (6)       79.6%
 Alpha Capital Aktiengesellschaft             11,672,374  (7)       26.0%
 Zakeni Limited                                3,351,941  (8)        9.2%
 All Executive Officers and Directors
    as a Group (7 persons)                     1,975,000             5.7%

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

(1)  Assumes  the  exercise  of  currently  exercisable  options or  warrants to
purchase  shares of common stock and the conversion of  convertible  securities.
The percentage of class ownership is calculated separately for each person based
on the assumption  that the person listed on the table has exercised all options
and warrants currently  exercisable by that person and converted the convertible
securities held by that person,  but that no other holder of options or warrants
has exercised such options or warrants or converted such convertible securities.

(2) Includes  790,000 shares of common stock  underlying  stock options that are
presently  exercisable.  540,000 of such stock options are  exercisable at $0.17
per  share  and  expire on June 1,  2008;  250,000  of such  stock  options  are
exercisable  at $0.06 per share and expire on  February 1, 2009.  Also  includes
240,000  shares of common stock owned by The Seek  Foundation,  an  organization
described in Section 501(c)(3) of the Internal Revenue Code of 1954, as amended.
The  directors  of such  organization  are Keith  Larkin  and his wife,  Cynthia
Larkin.  Excludes  40,000  shares  held  by  Westek  Communications,  a  company
controlled   by  Mr.   Larkin's  son  and  400  shares  held  by  Mr.   Larkin's
grandchildren, shares over which Mr. Larkin disclaims beneficial ownership.

(3) Includes  shares of common stock from stock option  agreements,  as follows:
(1) 300,000 shares of common stock  underlying stock option  agreements,  all of
which are presently  exercisable  (of such  options,  50,000 expire on August 4,
2002,  50,000  expire on August 4, 2003 and 200,000  expire on August 13, 2004);
and (2) 250,000 shares of common stock underlying a stock option  agreement,  of
which 125,000 are presently  exercisable (the 250,000 options expire on November
28, 2007).

(4) Messrs.  Parrella  and  Hammond,  and Ms.  Lebovics are officers of, and Mr.
Parrella and Ms.  Lebovics  serve as directors  of, NCT Group.  NCT Hearing is a
wholly-owned  subsidiary  of NCT Group.  Messrs.  Parrella and Hammond,  and Ms.
Lebovics  are  directors  of NCT Hearing and  disclaim  beneficial  ownership in
respect of Pro Tech's common stock held by NCT Hearing.

(5) The address of NCT Hearing  Products,  Inc. is 20 Ketchum Street,  Westport,
Connecticut 06880. Mr. Parrella,  Chairman of the Board of NCT Hearing Products,
Inc., has voting and  dispositive  control over Pro Tech shares on behalf of NCT
Hearing.

(6) Ms. Salkind's business address is c/o Sills, Cummis, Radin, Tishman, Epstein
& Gross, One Riverfront Plaza,  Newark, New Jersey 07102.  Includes  119,326,272
shares  issuable upon the exchange of convertible  notes in aggregate  principal
amount of $8,608,416 and 1,802,414 shares for interest thereon through March 11,
2002,  calculated at an exchange  price of $0.14 on  $2,535,469  of  convertible
secured

                                       24
<PAGE>

notes and at an exchange price of $0.06 on the remaining  aggregate principal of
$6,072,947 of convertible  notes. Also includes  8,333,333 shares deliverable to
Ms. Salkind upon the exercise of a currently  exercisable  warrant,  delivery of
which shares would be an obligation of NCT Group.

(7) Alpha  Capital  Aktiengesellschaft's  business  address is Pradafant 7, 9490
Furstentums,  Vaduz,  Lichtenstein.  Konrad Ackermann,  Director, has voting and
dispositive control of Pro Tech's shares on behalf of Alpha Capital. In addition
to shares  owned,  includes  shares of common  stock that Alpha  Capital has the
right to acquire pursuant to the exercise of a currently exercisable warrant for
1,000,000  shares.  Also includes  shares of common stock that Alpha Capital has
the right to  acquire  pursuant  to its right to  convert  its 500 shares of our
Series B Convertible Preferred Stock for our common stock plus accretion thereon
at 4% per annum through March 11, 2002. Such  conversion  shares were determined
using 80% of an assumed $0.06 price per share five-day average closing bid price
of the 15-day trading period immediately preceding the assumed conversion.

(8) Includes shares of common stock that Zakeni Limited has the right to acquire
pursuant  to the  exercise  of a currently  exercisable  warrant  for  2,250,000
shares.  Also includes  shares of common stock that Zakeni Limited has the right
to acquire  pursuant  to its right to convert its 50 shares of Pro Tech Series A
Convertible  Preferred  Stock for our common stock plus accretion  thereon at 4%
per annum through March 11, 2002. Such conversion  shares were determined  using
80% of an assumed $0.06 price per share  five-day  average  closing bid price of
the 15-day  trading period  immediately  preceding the assumed  conversion.  The
business  address of Zakeni  Limited is 620 Wilson Avenue,  Suite 501,  Toronto,
Ontario,  Canada  MSK 1Z3.  Sheldon  Salcman,  Vice  President,  has  voting and
dispositive control of Pro Tech's shares on behalf of Zakeni Limited.


ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

None.

                                       25
<PAGE>



PART IV

ITEM 14.   Exhibits, Financial Statements Schedules and
           Reports on Form 8-K.

(a)  (1) Financial  Statements.  The following financial  statements are filed
         as part of this Form 10-K.

Independent Auditors' Report

Balance Sheets as of  October 31, 2000; December 31, 2000 and 2001

Statements of Operations  for the years ended October 31, 1999 and 2000; for the
two months ended December 31, 2000; and for the year ended December 31, 2001

Statements  of  Stockholders'  Equity for the years  ended  October 31, 1999 and
2000;  for the two  months  ended  December  31,  2000;  and for the year  ended
December 31, 2001

Statements of Cash Flows for the years ended October 31, 1999 and 2000;  for the
two months ended December 31, 2000; and for the year ended December 31, 2001

Notes to Financial Statements

     (2)  Financial   Statements   Schedules-   Schedules  are  omitted  as  not
          applicable or not required

     (3)  Exhibits including those Incorporated by Reference.

    3(a)  Amended and Restated Articles of Incorporation of Pro Tech, as adopted
          by Pro Tech and  filed  with the  Department  of State of the State of
          Florida on July 30, 2001,  incorporated herein by reference to Exhibit
          3(a) of Pro Tech's Form 10-Q filed on August 13, 2001.

    4(a)  Warrant to purchase  1,000,000 shares of common stock of Pro Tech at a
          purchase   price  of  $0.13   per  share   issued  to  Alpha   Capital
          Aktiengesellschaft,  incorporated  herein by reference to Exhibit 4(a)
          of Pro Tech's Form 10-Q filed on August 13, 2001.

    10(a) *Stock Option,  dated November 28, 2000, issued by Pro Tech to Richard
          Hennessey,  incorporated  herein by reference to Exhibit  10(f) of Pro
          Tech's Form 10-K filed on March 30, 2001.

    10(b) *Stock Option, dated June 1, 2001, issued by Pro Tech to Keith Larkin,
          incorporated by reference to Exhibit 10(b) of Pro Tech's Form 10-Q
          filed on August 13, 2001.

    10(c) *Stock Option, dated June 1, 2001, issued by Pro Tech to Carl Cacarro,
          incorporated by reference to Exhibit 10(c) of Pro Tech's Form 10-Q
          filed on August 13, 2001.

    10(d) *Stock Option, dated June 1, 2001, issued by Pro Tech to Michael
          Naparstek, incorporated by reference to Exhibit 10(d) of Pro Tech's
          Form 10-Q filed on August 13, 2001.

    10(e) Shareholder's Agreement dated September 13, 2000 by and between Pro
          Tech and NCT Hearing Products, Inc., incorporated herein by reference
          to Exhibit 10(n) of Pro Tech's Form 10-K filed on February 14, 2001.

    10(f) Lease Agreement between Pro Tech and Fort Pierce Properties,
          LLC, dated October 17, 2000, for rental of space at Orange
          Blossom Mall, Ft. Pierce, FL, incorporated herein by reference
          to Exhibit 10(q) of Pro Tech's Form 10-Q filed on May 15, 2001.


                                       26
<PAGE>


    10(g) Amendment #1, dated January 26, 2001, to October 17, 2000
          Lease Agreement, incorporated herein by reference to Exhibit
          10(r) of Pro Tech's Form 10-Q filed on May 15, 2001.

    10(h) Amendment #2, dated January 26, 2001, to October 17, 2000
          Lease Agreement, incorporated herein by reference to Exhibit
          10(s) of Pro Tech's Form 10-Q filed on May 15, 2001.

    10(i) Securities and Purchase Agreement, dated July 30, 2001, among
          Pro Tech, NCT Group, Inc. and Alpha Capital
          Aktiengesellschaft, incorporated herein by reference to
          Exhibit 10(i) of Pro Tech's Form 10-Q filed on August 13, 2001.

    10(j) Registration Rights Agreement, dated July 30, 2001, among Pro
          Tech, NCT Group Inc. and Alpha Capital Aktiengesellschaft,
          incorporated herein by reference to Exhibit 10(j) of Pro
          Tech's Form 10-Q filed on August 13, 2001.

         * Denotes a management contract or compensatory plan or arrangement.


                                       27
<PAGE>


                                   SIGNATURES


In accordance  with Section 13 or 15(d) of the Securities  Exchange Act of 1934,
the Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on March 19, 2002.

                          PRO TECH COMMUNICATIONS, INC.
                                  (Registrant)


                      By: /s/RICHARD HENNESSEY
                          --------------------------------------
                          Richard Hennessey, President

                      By: /s/DEBRA KIRVEN
                          -------------------------------------
                          Debra Kirven, Chief Financial Officer

In accordance  with the  Securities  Exchange Act of 1934,  this report has been
signed  below by the  following  persons  on  behalf  of the  registrant  in the
capacities and on the dates indicated.


     Signature                             Capacity             Date
  ---------------------------------- ------------------------ ------------------

  /s/RICHARD HENNESSEY               Director and President       March 19, 2002
  ----------------------------------
        Richard Hennessey

  /s/KEITH LARKIN                    Chairman of the Board        March 19, 2002
  ----------------------------------
        Keith Larkin

  /s/MICHAEL J. PARRELLA             Director                     March 19, 2002
  ----------------------------------
        Michael J. Parrella

  /s/CY E. HAMMOND                    Director                    March 19, 2002
  ----------------------------------
        Cy E. Hammond

  /s/IRENE LEBOVICS                   Director                    March 19, 2002
  ----------------------------------
        Irene Lebovics


                                       28
<PAGE>



                          Independent Auditors' Report


The Board of Directors
Pro Tech Communications, Inc.:


We have audited the accompanying balance sheets of Pro Tech Communications, Inc.
as of October 31, 2000, December 31, 2000 and 2001 and the related statements of
operations,  stockholders'  equity  and cash  flows for each of the years in the
two-year  period ended October 31, 2000;  for the two months ended  December 31,
2000; and for the year ended December 31, 2001.  These financial  statements are
the responsibility of Pro Tech's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Pro Tech Communications,  Inc.
as of October  31,  2000,  December  31,  2000 and 2001,  and the results of its
operations and its cash flows for each of the years in the two-year period ended
October 31, 2000;  for the two months ended  December 31, 2000; and for the year
ended  December 31, 2001 in  conformity  with  accounting  principles  generally
accepted in the United States of America.


/s/ Morgan, Jacoby, Thurn, Boyle & Associates, P.A.
---------------------------------------------------
     Morgan, Jacoby, Thurn, Boyle & Associates, P.A.

Vero Beach, Florida
March 1, 2002



                                      F-1
<PAGE>


<TABLE>
<CAPTION>

PRO TECH COMMUNICATIONS, INC.
BALANCE SHEETS                                                                October 31,           December 31,
                                                                            -------------   ------------------------------
                                                                                2000            2000             2001
                                                                            -------------   -------------    -------------
<S>                                                                                   <C>             <C>              <C>
ASSETS
Current assets:
     Cash and cash equivalents                                              $   1,070,408    $    776,381     $     46,881
     Accounts receivable, less allowance for doubtful accounts
        of $26,557; $28,131; and $24,784, respectively                            421,372         421,805          219,434
     Inventories, net of reserves (note 2)                                        558,860         650,588          945,744
     Due from officers and employees                                                  365             400            2,876
     Other current assets                                                          31,770           7,825            5,926
                                                                            -------------   -------------    -------------
                     Total current assets                                       2,082,775       1,856,999        1,220,861

Property and equipment, net (note 3)                                              278,805         271,090          758,530

Intangible assets, net of accumulated amortization of
     $77,655; $232,964; and $1,164,821, respectively                           16,229,837      16,074,528       15,142,671

Due from officer                                                                   56,824          57,206           59,670
Other assets                                                                        4,424           4,307            3,188
                                                                            -------------   -------------    -------------
                                                                            $  18,652,665    $ 18,264,130     $ 17,184,920
                                                                            =============   =============    =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable                                                       $     216,807    $    168,750     $    546,917
     Accrued expenses (note 4)                                                    102,165         105,198          199,526
     Current portion of capital lease obligations (note 11)                         6,757           5,590           10,083
     Other liabilities (notes 5 and 10)                                           187,227         221,775          620,172
     Notes payable (note 6)                                                       150,000         150,000          173,299
                                                                            -------------   -------------    -------------
                     Total current liabilities                                    662,956         651,313        1,549,997

Capital lease obligations (note 11)                                                 3,687           3,115           36,021
                                                                            -------------   -------------    -------------

                     Total liabilities                                            666,643         654,428        1,586,018

Commitments (note 11)

Series B Redeemable Convertible Preferred stock, $.01 par value, $1,000
     stated value, authorized, issued and outstanding 0; 0; and
     500 shares, respectively (note 7)                                                  -               -          633,438

Stockholders' equity (notes 8 and 9):
     Preferred stock, $.01 par value, authorized 998,000 shares, none
          issued and outstanding                                                        -               -                -
     Series A Convertible Preferred stock, $.01 par value, $1,000
          stated value, authorized 1,500 shares, issued and outstanding
          1,500; 1,500; and 50 shares, respectively                             1,505,425       1,515,452           52,521
     Common stock, $.001 par value, authorized 40,000,000 shares,
          issued and outstanding 28,248,438; 28,248,438; and 33,200,311
          shares, respectively                                                     28,248          28,248           33,200
     Additional paid-in-capital                                                17,239,973      17,229,946       18,473,079
     Accumulated deficit                                                         (787,624)     (1,163,944)      (3,593,336)
                                                                            -------------   -------------    -------------
                     Total stockholders' equity                                17,986,022      17,609,702       14,965,464
                                                                            -------------   -------------    -------------
                                                                            $  18,652,665    $ 18,264,130     $ 17,184,920
                                                                            =============   =============    =============
The accompanying notes are an integral part of the financial statements.
</TABLE>

                                      F-2
<PAGE>


<TABLE>
<CAPTION>

PRO TECH COMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS
                                                                       For the Year         Two Months    For the Year
                                                                          Ended               Ended          Ended
                                                                        October 31,        December 31,   December 31,
                                                                -------------------------  ------------   ------------
                                                                   1999         2000          2000           2001
                                                                -----------  ------------  ------------   ------------
<S>                                                                 <C>           <C>           <C>            <C>
Net sales                                                       $ 1,090,551  $  1,562,484  $    307,902   $  2,175,306
Cost of goods sold                                                  414,931       623,555       113,920        860,277
                                                                -----------  ------------  ------------   ------------
        Gross profit                                                675,620       938,929       193,982      1,315,029
Selling, general and administrative                                 893,384     1,275,290       561,044      3,715,561
Provision for doubtful accounts                                       3,771         7,990         1,574          9,958
                                                                -----------  ------------  ------------   ------------
        Loss from operations                                       (221,535)     (344,351)     (368,636)    (2,410,490)
Other income (expense) :
    Interest income                                                  10,202         4,877           721          4,530
    Interest expense                                                 (1,021)      (36,592)       (9,434)       (24,792)
    Miscellaneous income                                                697         1,726         1,029          4,305
    Loss on disposal of fixed assets                                 (9,408)            -             -         (2,945)
                                                                -----------  ------------  ------------   ------------
        Loss before income taxes                                   (221,065)     (374,340)     (376,320)    (2,429,392)
Income tax expense (benefit)(note 9)                                      -             -             -              -
                                                                -----------  ------------  ------------   ------------
NET LOSS                                                        $  (221,065) $   (374,340) $   (376,320)  $ (2,429,392)
                                                                ===========  ============  ============   ============
Adjustments attributable to preferred stock (notes 7 and 8):
   Preferred stock beneficial conversion feature                $        -   $  3,569,000  $          -   $     79,190
   Preferred stock embedded dividend requirement                         -        375,000             -         62,661
   Preferred stock dividend (accretion)                                  -          5,425        10,027         24,085
                                                                -----------  ------------  ------------   ------------
NET LOSS ATTRIBUTABLE TO
COMMON STOCKHOLDERS                                             $  (221,065) $ (4,323,765) $   (386,347)  $ (2,595,328)
                                                                ===========  ============  ============   ============
Basic and diluted loss per share                                $     (0.05) $      (0.57) $      (0.01)  $      (0.08)
                                                                ===========  ============  ============   ============
Weighted average common shares outstanding -
   basic and diluted                                              4,254,000     7,537,855    28,248,438     32,281,034
                                                                ===========  ============  ============   ============

The accompanying notes are an integral part of the financial statements.

</TABLE>

                                      F-3
<PAGE>


<TABLE>
<CAPTION>

PRO TECH COMMUNICATIONS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY  (note 8)


                                                Series A                                 Additional
                                                Preferred                Common            Paid in      Accumulated
                                                  Stock                  Stock             Capital        Deficit         Total
                                            ------------------   ---------------------  -------------  ------------  --------------
                                              Shares   Amount     Shares       Amount
<S>                                            <C>        <C>           <C>       <C>            <C>           <C>             <C>

Balance, October 31, 1998                        -   $      -     4,254,000  $  4,254   $  1,137,018   $  (192,219)      $ 949,053
Net loss                                         -          -             -         -              -      (221,065)       (221,065)
                                            ------------------   ---------------------  -------------  ------------  --------------
Balance, October 31, 1999                        -          -     4,254,000     4,254      1,137,018      (413,284)        727,988
Issue common stock under
  stock option plans (note 9)                    -          -        12,000        12          4,548             -           4,560
Issue common stock in exchange for certain
  intangible assets including 279,688
  shares issued as issuance costs, net of
  related issuance costs of $179,678             -          -    23,982,438    23,982     16,103,832             -      16,127,814
Sale of preferred stock                      1,500  1,500,000             -         -              -             -       1,500,000
Dividend on preferred stock                      -      5,425             -         -         (5,425)            -               -
Net loss                                         -          -             -         -              -      (374,340)       (374,340)
                                            ------------------   ---------------------  -------------  ------------  --------------
Balance, October 31, 2000                    1,500  1,505,425    28,248,438    28,248     17,239,973      (787,624)     17,986,022
Dividend on preferred stock                      -     10,027             -         -        (10,027)            -               -
Net loss                                         -          -             -         -              -      (376,320)       (376,320)
                                            ------------------   ---------------------  -------------  ------------  --------------
Balance, December 31, 2000                   1,500  1,515,452    28,248,438    28,248     17,229,946    (1,163,944)     17,609,702
Exchange/conversion of preferred stock      (1,450)(1,478,578)    4,951,873     4,952      1,473,626             -               -
Issuance costs on sale of Series B
  Preferred Stock (note 7)                       -          -             -         -        (81,408)            -         (81,408)
Redemption adjustment on Series B
   Preferred Stock (note 7)                      -          -             -         -       (125,000)            -        (125,000)
Dividend on preferred stock                      -     15,647             -         -        (24,085)            -          (8,438)
Net loss                                         -          -             -         -              -    (2,429,392)     (2,429,392)
                                            ------------------   ---------------------  -------------  ------------  --------------
Balance, December 31, 2001                      50   $ 52,521    33,200,311  $ 33,200   $ 18,473,079   $(3,593,336)   $ 14,965,464
                                            ==================   =====================  =============  ============  ==============

The accompanying notes are an integral part of the financial statements.

</TABLE>


                                      F-4
<PAGE>



<TABLE>
<CAPTION>

PRO TECH COMMUNICATIONS, INC.                                              For the Year              For the         For the Year
STATEMENTS OF CASH FLOWS                                                      Ended              Two Months Ended       Ended
                                                                            October 31,            December 31,      December 31,
                                                                    --------------------------   ----------------    -------------
                                                                       1999           2000            2000                2001
                                                                    -----------    -----------   ----------------    -------------
<S>                                                                 <C>            <C>           <C>                    <C>

Cash flows from operating activities:
    Net loss                                                        $ (221,065)    $ (374,340)   $      (376,320)    $  (2,429,392)
    Adjustments to reconcile net loss to net
         cash used in operating activities:
      Depreciation and amortization                                     45,222        128,658            164,153         1,052,737
      Provision for doubtful accounts                                    3,771          7,990              1,574             9,958
      Loss on disposal of fixed assets                                   9,408              -                  -             2,945
      Changes in operating assets and liabilities:
         (Increase) decrease in accounts receivable                     (9,459)      (223,439)            (2,007)          192,413
         Increase in inventories, net                                  (40,273)      (272,977)           (91,728)         (295,156)
         (Increase) decrease in due from officers and employees           (590)           852               (417)           (4,940)
         (Increase) decrease in other assets                           (17,519)         2,161             24,062             2,316
         Increase(decrease) in accounts payable                         63,724        116,703            (48,057)          378,167
         Increase (decrease) in accrued expenses                       (73,077)         1,777              8,235           101,876
         Increase in other liabilities                                       -        101,057            115,516           403,599
                                                                    -----------    -----------   ----------------    -------------
            Net cash used in operating activities                   $ (239,858)    $ (511,558)   $      (204,989)    $    (585,477)
                                                                    -----------    -----------   ----------------    -------------
Cash flows from investing activities:
    Capital expenditures                                               (49,482)      (130,152)            (1,129)         (543,702)
    Proceeds on sale of fixed asset                                          -              -                  -               350
    Proceeds on maturity of short-term investments                     254,545              -                  -                 -
                                                                    -----------    -----------   ----------------    -------------
            Net cash provided by (used in) investing activities     $  205,063     $ (130,152)   $        (1,129)    $    (543,352)
                                                                    -----------    -----------   ----------------    -------------
Cash flows from financing activities:
    Proceeds from:
      Notes payable                                                          -        536,145                  -                 -
      Sale of preferred stock (net) (notes 7 and 8)                          -      1,020,347                  -           500,000
      Sale of common stock (net)                                             -          4,560                  -                 -
    Payment made on:
      Notes payable                                                          -              -            (86,170)             (797)
      Issuance/conversion costs on preferred stock                           -              -                  -           (81,408)
      Capital lease obligations                                         (3,574)        (9,362)            (1,739)          (18,466)
                                                                    -----------    -----------   ----------------    -------------
            Net cash (used in) provided by financing activities     $   (3,574)    $ 1,551,690   $       (87,909)    $     399,329
                                                                    -----------    -----------   ----------------    -------------
Net (decrease) increase in cash and cash equivalents                $  (38,369)    $  909,980    $      (294,027)    $    (729,500)
Cash and cash equivalents - beginning of period                        198,797        160,428          1,070,408           776,381
                                                                    -----------    -----------   ----------------    -------------
Cash and cash equivalents - end of period                           $  160,428     $ 1,070,408   $       776,381     $      46,881
                                                                    ===========    ===========   ================    =============

Supplemental disclosures of cash flow information:
   Cash paid during the year for Interest                           $    1,021     $   36,592    $         2,072     $      10,883
                                                                    ===========    ===========   ================      ===========

Supplemental disclosures of non-cash investing and financing activities:

During the year ended October 31, 1999; the year ended October 31, 2000; and the
     year ended December 31, 2001, Pro Tech acquired assets under capital leases
     for $20,471, $2,909, and $55,865 respectively.
During the year ended December 31, 2001, Pro Tech acquired an asset under a loan
     for $11,346.
During the year ended October 31, 2000, Pro Tech acquired licenses and patent
     rights through issuance of 23,982,438 shares of common stock valued at
     $16,307,492.
During the year ended October 31, 2000, Pro Tech issued Series A Convertible
     Preferred Stock in exchange for the satisfaction of notes payable amounting
     to $299,975.
During the year ended October 31, 2000; the two months ended December 31, 2000;
    and the year ended December 31, 2001, Pro Tech adjusted the carrying value
    of preferred stock and additional paid-in capital for a 4% dividend totaling
    $5,425; $10,027; and $24,085, respectively.

The accompanying notes are an integral part of the financial statements.

</TABLE>


                                      F-5
<PAGE>



                          PRO TECH COMMUNICATIONS, INC.

                          Notes to Financial Statements

(1)  Organization and Summary of Significant Accounting Policies

    (a)    Organization

          Pro Tech Communications, Inc., herein referred to as "Pro Tech," "we,"
          or "our," was organized and  incorporated  under the laws of the State
          of Florida for the purpose of  designing,  developing,  producing  and
          marketing lightweight telephone headsets. We presently manufacture and
          market  headsets  primarily  for fast food  companies  and other large
          quantity users of headset systems. We are in the process of completing
          the  development  of several  designs for the  telephone  user market,
          which includes telephone operating companies,  government agencies and
          business  offices.  Our  business  strategy  is to  offer  lightweight
          headsets with design  emphasis on performance and durability at a cost
          below that of our competitors.

          As a result of the issuance of common stock on September 13, 2000 (see
          note 8 - Capital  Stock),  Pro Tech became a subsidiary of NCT Hearing
          Products,  Inc.,  herein  referred to as "NCT Hearing," a wholly-owned
          subsidiary  of NCT Group,  Inc.,  herein  referred  to as "NCT." As of
          December  31,  2001,  NCT  Hearing  owned  approximately  81.6% of the
          outstanding common stock of Pro Tech.

          On December  28,  2000,  we decided to change our  year-end to conform
          with NCT,  which is  December  31.  Accordingly,  we  reported  on the
          two-month  transition  period in our Form 10-K as of December 31, 2000
          and the current  Form 10-K  represents  the first full  twelve  months
          ended as of December 31, 2001.

    (b)    Cash and Cash Equivalents

          Pro Tech  considers all highly  liquid  investments  purchased  with a
          maturity of three months or less to be cash equivalents.

    (c)    Inventory

          Inventories  are  stated  at the  lower  of  cost or  market.  Cost is
          determined using the first-in, first-out (FIFO) method.

    (d)    Revenue and Cost Recognition

          Pro Tech recognizes revenues as products are shipped.  Generally, each
          headset,  depending on the model, is sold with a warranty ranging from
          90 days to two years.  We provide,  by a current charge to income,  an
          amount  we  estimate  that will be  needed  to cover  future  warranty
          obligations  for products  sold with a warranty  during the year.  The
          accrued  liability for warranty costs is included in accrued  expenses
          in the balance sheet.

    (e)    Property and Equipment

          Property and  equipment is carried at cost.  Depreciation  is computed
          using the straight-line  method over the estimated useful lives of the
          assets,  which are generally 3-10 years.  Repair and maintenance costs
          are charged to expense when incurred.


                                      F-6
<PAGE>



    (f)    Intangible Assets

          Intangible assets consist of licensing rights of certain  technologies
          acquired  from NCT Hearing  through the  issuance of common stock (see
          note  8  -  Capital   Stock).   Amortization  is  computed  using  the
          straight-line  method over the estimated useful lives of the assets of
          17.5  years.   Intangible   assets  are   periodically   reviewed  for
          impairments  (see note 1 (o))  where  the fair  value is less than the
          carrying  value.  Amortization  expense was $77,655 for the year ended
          October 31, 2000; $155,309 for the two months ended December 31, 2000;
          and $932,857 for the year ended December 31, 2001.

    (g)    Income Taxes

          Income taxes are accounted  for under the asset and liability  method.
          Deferred tax assets and  liabilities are recognized for the future tax
          consequences   attributable  to  differences   between  the  financial
          statement  carrying  amounts of existing  assets and  liabilities  and
          their  respective tax bases.  Deferred tax assets and  liabilities are
          measured  using enacted tax rates  expected to apply to taxable income
          in the years in which those  temporary  differences are expected to be
          recovered or settled. The effect on deferred tax assets or liabilities
          of a change in tax rates is  recognized  in income in the period  that
          includes the enactment date.

    (h)    Advertising

          The costs of advertising, promotion and marketing programs are charged
          to  operations  in the year  incurred  and are  included  in  selling,
          general and administrative  expenses in the accompanying statements of
          operations.  Advertising  costs were $98,738 and $54,424 for the years
          ended  October  31,  1999 and 2000;  $5,088 for the two  months  ended
          December 31, 2000; and $42,242 for the year ended December 31, 2001.

    (i)    Research and Development

          Research  and  development  costs are expensed  when  incurred and are
          included in selling,  general and administrative expenses. The amounts
          charged  to expense  were  $70,809  and  $41,554  for the years  ended
          October 31, 1999 and 2000;  $11,517 for the two months ended  December
          31, 2000; and $71,097 for the year ended December 31, 2001.

    (j)    Fair Value of Financial Instruments

          The  estimated  fair  value of Pro Tech's  cash and cash  equivalents,
          accounts receivable and current  liabilities  approximate the carrying
          amount due to the short-term nature of such financial instruments.

    (k)    Use of Estimates

          The preparation of Pro Tech's financial  statements in conformity with
          generally accepted  accounting  principles requires management to make
          estimates and assumptions  that affect the reported amounts of assets,
          liabilities,   revenues  and  expenses  and   contingent   assets  and
          liabilities. Actual results could differ from those estimates.

    (l)    Reclassifications

          We have reclassified some amounts in prior period financial statements
          to comform to the current period's presentation.


                                      F-7
<PAGE>


    (m)    Loss Per Common Share

          Pro Tech reports loss per common share in accordance with Statement of
          Financial   Accounting   Standards  No.  128,  "Earnings  Per  Share."
          Generally,  the per share  effects of potential  common shares such as
          warrants,  options,  convertible debt and convertible  preferred stock
          have not been included,  as the effect would be antidilutive (see note
          8 - Capital Stock).  However, when preferred stock will be convertible
          to common  stock at a conversion  rate that is at a discount  from the
          common  stock market  price at the time of  issuance,  the  discounted
          amount is an assured  incremental  yield,  the "beneficial  conversion
          feature," to the  preferred  shareholders  and is accounted  for as an
          embedded  dividend to preferred  shareholders.  We have reflected such
          beneficial  conversion feature as a preferred stock dividend and as an
          adjustment to the net loss attributable to common stockholders.

    (n)    Stock Options

          Pro Tech has adopted the  disclosure  only  provisions of Statement of
          Financial  Accounting  Standards No. 123,  "Accounting for Stock-Based
          Compensation,"  and  continues to apply  Accounting  Principles  Board
          Opinion  No. 25 and  related  interpretations  in  accounting  for our
          stock-based compensation plans.

    (o)    Long-Lived Assets

          Long-lived  assets and certain  identifiable  intangibles are reviewed
          for impairment  whenever events or changes in  circumstances  indicate
          that  the  carrying  amount  of  an  asset  may  not  be  recoverable.
          Recoverability  of  assets  to be  held  and  used  is  measured  by a
          comparison of the carrying amount of an asset to future net cash flows
          expected to be generated by the asset.  If such assets are  considered
          to be impaired,  the  impairment  to be  recognized is measured by the
          amount by which the  carrying  amount of the assets  exceeds  the fair
          value of the  assets.  Assets to be  disposed  of are  reported at the
          lower of the carrying  amount or fair value less costs to sell.  There
          were no such  impairments  for the years  ending  October 31, 1999 and
          2000;  for the two months ended  December  31, 2000;  and for the year
          ended December 31, 2001.

    (p)    Concentrations of Credit Risk

          Financial   instruments,   which  potentially   subject  Pro  Tech  to
          concentration of credit risk, consist of cash and cash equivalents and
          trade  receivables.  We maintain cash and cash equivalents in accounts
          with various financial institutions in amounts, which at times, may be
          in excess of the FDIC  insurance  limit.  As of December 31, 2001, our
          cash and cash  equivalent  balances did not exceed the FDIC  insurance
          limit.  Pro Tech has not  experienced  any losses on such accounts and
          does not believe it is exposed to any significant risk with respect to
          cash and cash equivalents.

          We sell our  products and  services to  distributors  and end users in
          various industries worldwide. We regularly assess the realizability of
          accounts  receivable and take into consideration the value of past due
          receivables  and the  collectibility  of such  receivables,  based  on
          credit  worthiness.  We do not require collateral or other security to
          support customer receivables.

          Pro Tech is currently outsourcing all components from several Far East
          suppliers  who  build  each  component  to  our   specifications.   An
          interruption  in the supply of a component  for which we are unable to
          readily procure a substitute source of supply could temporarily result
          in Pro Tech's inability to deliver  products on a timely basis,  which
          in turn could adversely  affect our operations.  To date, Pro Tech has
          not  experienced any shortages of supplies;  however,  during 2001, we
          experienced a temporary  quality  control issue with one supplier that
          required us to obtain


                                      F-8
<PAGE>

          alternative  means and,  in effect,  double up on that  portion of our
          inventory to cover the anticipated returns under warranty.

    (q)    Recent Accounting Standards

          In August 2001, the Financial Accounting Standards Board, or the FASB,
          issued   Statement  of  Financial   Accounting   Standards   No.  144,
          "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS
          144 addresses financial accounting and reporting for the impairment or
          disposal  of  long-lived   assets.   SFAS  144  supersedes  SFAS  121,
          "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
          Assets to Be Disposed Of," and the accounting and reporting provisions
          of  Accounting  Principles  Board No. 30,  "Reporting  the  Results of
          Operations  -  Reporting  the  Effects of  Disposal  of a Segment of a
          Business, and Extraordinary, Unusual and Infrequently Occurring Events
          and Transactions,"  for the disposal of a segment of a business.  SFAS
          144 also amends  Accounting  Research  Bulletin No. 51,  "Consolidated
          Financial Statements," to eliminate the exception to consolidation for
          a  subsidiary  for  which  control  is  likely  to be  temporary.  The
          provisions of SFAS 144 are effective for financial  statements  issued
          for fiscal  years  beginning  after  December  15,  2001,  and interim
          periods within those fiscal years, with early application  encouraged.
          The provisions are to be applied  prospectively.  Management  does not
          anticipate  that  adoption of SFAS 144 will have a material  impact on
          our  financial  position  or  results  of  operations  as we have  not
          disposed  of,  and do not  anticipate  disposing  of, a segment of the
          business.

          In July 2001,  the FASB  issued SFAS No.  143,  "Accounting  for Asset
          Retirement  Obligations."  SFAS 143 requires  that the fair value of a
          liability  for an asset  retirement  obligation  be  recognized in the
          period in which it is incurred if a reasonable  estimate of fair value
          can be made.  Management does not anticipate that adoption of SFAS 143
          will have a material  impact on our  financial  position or results of
          operations   as  we  currently  do  not  have  any  asset   retirement
          obligations.

          In July 2001,  the FASB,  issued  Statement  of  Financial  Accounting
          Standards No. 141,  "Business  Combinations,"  and SFAS 142, "Goodwill
          and Other Intangible Assets." SFAS 141 requires the purchase method of
          accounting  be used for all business  combinations  subsequent to June
          30, 2001 and specifies the criteria for the  recognition of intangible
          assets acquired in a business combination.  Under SFAS 142, we will be
          required to reassess the value of goodwill and other intangible assets
          previously recorded in connection with prior acquisitions,  as well as
          their useful lives.  SFAS 142 is effective for fiscal years  beginning
          after  December  15,  2001  and  will  require  that  goodwill  not be
          amortized,  but  rather  be  subject  to an  impairment  test at least
          annually.  Separately  identified  and  recognized  intangible  assets
          resulting  from business  combinations  completed  before July 1, 2001
          that  do not  meet  the  new  criteria  for  separate  recognition  of
          intangible  assets will be subsumed into goodwill  upon  adoption.  In
          addition, the useful lives of recognized intangible assets acquired in
          transactions  completed before July 1, 2001 will be reassessed and the
          remaining amortization periods adjusted accordingly.  Adoption of SFAS
          141 did not have a  significant  impact on our  financial  statements.
          Management  does  anticipate  that we will have an  impairment  on our
          Intangible  Asset  with the  adoption  of SFAS  142;  however,  we are
          currently still  evaluating the factors  involved in determining  that
          impairment.

          In  September  2000,  the FASB issued SFAS No.  140,  "Accounting  for
          Transfers and  Servicing of Financial  Assets and  Extinguishments  of
          Liabilities  -a  Replacement  of FASB  Statement  No.  125."  SFAS 140
          revises the  criteria for  accounting  for  securitizations  and other
          transfers of financial  assets and collateral.  In addition,  SFAS 140
          requires  additional  disclosures.   Except  for  the  new  disclosure
          provisions, which were effective for the year ended December 31, 2000,
          SFAS 140 is effective for the transfer of financial  assets  occurring
          after  March  31,  2001.  The  application  of SFAS  140 has not had a
          material  impact on the  business,  results of operations or financial
          condition of Pro Tech. We follow the provisions of SFAS 140 to account
          for  our  factoring   agreement  discussed  in  note  10  -  Factoring
          Agreement.


                                      F-9
<PAGE>


          In June 2000,  the FASB issued SFAS No. 138,  "Accounting  for Certain
          Derivative   Instruments  -  an  Amendment  of  SFAS  133."  SFAS  138
          establishes   accounting   and  reporting   standards  for  derivative
          instruments,  including  certain  derivative  instruments  embedded in
          other contracts (collectively referred to as derivatives). SFAS 138 is
          effective for all fiscal  quarters of all fiscal years beginning after
          June 15,  2000.  In June 1998,  the FASB  issued  Statement  No.  133,
          "Accounting for Derivative  Instruments and Hedging  Activities." SFAS
          133 requires us to recognize all  derivatives  on the balance sheet at
          fair value.  Derivatives  that are not hedges must be adjusted to fair
          value through income.  If the derivative is a hedge,  depending on the
          nature of the  hedge,  changes in the fair  value of  derivatives  are
          either offset against the change in fair value of assets, liabilities,
          or  firm   commitments   through   earnings  or  recognized  in  other
          comprehensive  income until the hedged item is recognized in earnings.
          The ineffective portion of a derivative's change in fair value will be
          immediately  recognized in earnings. The adoption of SFAS 133 and SFAS
          138 on January 1, 2001 did not have a material impact on our financial
          statements as we currently do not use derivative instruments.

    (r)    Liquidity

          Pro Tech has  incurred  recurring  losses  from  operations  since its
          inception,  aggregating  $3,593,336  through  December 31, 2001. These
          losses,  which  include  the  cost for  development  of  products  for
          commercial use, have been funded  primarily from product sales and the
          sale of common  stock and  preferred  stock  convertible  into  common
          stock.

          In  addition,  Pro Tech had  negative  working  capital of $329,126 at
          December  31, 2001,  including  the amount due to the parent and other
          affiliated  companies of $556,142.  Pro Tech has taken steps to reduce
          its   working   capital   requirements.   These   steps   include  the
          reorganization  of  the  call  center  operations,  the  reduction  of
          workforce  levels in all  areas of the  products  operations,  and the
          institution of tighter controls over all expenditures.

          As a result of the restructuring that Pro Tech has put into place (see
          note 17 - Subsequent  Events),  management believes Pro Tech will have
          sufficient funds to meet anticipated working capital  requirements for
          the next 12 months, provided the parent and other affiliated companies
          do not require immediate payment on the amounts outstanding.

(2)      Inventory

Inventory consisted of the following:

                        October 31,                  December 31,
                                            ------------------------------------
                          2000                    2000                2001
                     ------------------     -----------------   ----------------
Finished goods              $ 300,747          $ 322,411           $ 609,852
Raw materials                 180,347            178,540             273,202
Work in progress               77,766            149,637              62,690
                     ------------------     -----------------   ----------------
Total Inventory             $ 558,860          $ 650,588           $ 945,744
                     ==================     =================   ================



                                      F-10
<PAGE>



(3)      Property and Equipment, Net

The following is a summary of property and equipment:


<TABLE>
<CAPTION>


                                       October 31,                  December 31,
                                                       -------------------------------------
                                          2000               2000                2001
                                     ----------------  -----------------   -----------------
<S>                                               <C>                 <C>                <C>

Production molds                            $ 295,621           $ 296,583          $ 454,331
Office equipment                               66,918              67,068            145,546
Production equipment                           36,049              36,067             39,140
Leased equipment                               23,380              23,380             79,235
Leasehold improvements                         29,577              29,577            329,626
Vehicles                                        3,573               3,573             12,414
Marketing displays                             16,160              16,160             16,160
                                      ----------------    -----------------    ----------------
    Total cost                                471,278             472,408          1,076,452
Less accumulated depreciation
  and amortization                            192,473             201,318            317,922
                                      ----------------    -----------------    ----------------
Total Property and equipment, net           $ 278,805           $ 271,090          $ 758,530
                                      ================    =================    ================

</TABLE>


Total  depreciation  and  amortization  expense,  with  respect to property  and
equipment, was $45,067, $51,546, $8,844 and $120,194 for the years ended October
31, 1999 and 2000;  for the two months ended December 31, 2000; and for the year
ended December 31, 2001, respectively.

(4)      Accrued Expenses

Accrued expenses consisted of the following:


                                 October 31,                December 31,
                                                  -----------------------------
                                    2000                2000            2001
                               ----------------   -------------   -------------
Accrued warranty expense              $ 78,879       $  74,753        $  96,391
Accrued payroll and vacation            12,531          20,329           69,554
Other accrued expenses                  10,755          10,116           33,581
                               ----------------   -------------   -------------
Total Accrued expenses               $ 102,165       $ 105,198        $ 199,526
                               ================   =============   =============

(5)      Other Liabilities

Other liabilities consisted of the following:

<TABLE>
<CAPTION>

                                     October 31,                 December 31,
                                                      -------------------------------------
                                         2000               2000                2001
                                   -----------------  -----------------   -----------------
<S>                                             <C>                <C>                  <C>

Due to NCT (see note 14)                  $ 101,057          $ 216,573           $ 195,298
Due to NCT Hearing (see note 14)                  -                  -             325,733
Due to NCT Europe (see note 14)                   -                  -              35,111
Due to Factor (see note 10)                  86,170              5,202              64,030
                                   -----------------  -----------------   -----------------
Total Other liabilities                   $ 187,227          $ 221,775           $ 620,172
                                   =================  =================   =================

</TABLE>

(6)      Notes Payable

On March 27, 2000, Pro Tech received a loan of $150,000 from a stockholder.  The
loan matured on March 27, 2001 and bore  interest at 8.5% per annum,  payable at
maturity. On the maturity date, Pro Tech was


                                      F-11
<PAGE>


allowed to roll this note into a new note which included the original  principal
amount plus accrued  interest to date.  This  $162,750 note matures on March 27,
2002 and bears interest at 8.5% per annum, payable at maturity.

On May 13, 2001, Pro Tech received a bank loan of $11,346. The loan provides for
payments of $245,  including  interest at prime plus 2.3% (7.05% at December 31,
2001),  through May 13,  2006.  The loan is secured by a vehicle with a net book
value of $9,800.  As of December 31, 2001, the balance  outstanding  was $10,549
and future maturities are: 2002,  $1,938;  2003,  $2,150;  2004,  $2,385;  2005,
$2,646; and 2006 $1,430.

(7)      Series B Redeemable Convertible Preferred Stock

On July 30,  2001,  we entered into an agreement to issue 500 shares of Series B
Redeemable  Convertible  Preferred Stock  (Preferred  Stock-B) for $500,000.  We
received  approximately  $419,000 in cash, net of fees and expenses, in exchange
for the Preferred Stock-B.  The Preferred Stock-B has a dividend of 4% per annum
on the stated  value,  payable  upon  conversion  or  exchange in either cash or
common  stock.  Under such  agreement,  the shares of  Preferred  Stock-B may be
converted  into shares of Pro Tech common stock or  exchanged  for shares of NCT
common stock.  The conversion  rate into Pro Tech common stock is the lesser of:
(i) the then lowest average of the average  closing bid price for a share of Pro
Tech common stock for any  consecutive  five-day  period out of fifteen  trading
days  preceding  the date of such  conversion,  less a discount  of 20%; or (ii)
$0.25.  The  exchange  rate into NCT common  stock is the lowest  average of the
average  closing bid price for a share of NCT common  stock for any  consecutive
five trading days out of the fifteen  trading  days  preceding  the date of such
conversion,  less a discount of 20%. In  accordance  with  Emerging  Issues Task
Force  98-5,  as codified in EITF  00-27,  we recorded a  beneficial  conversion
feature of $125,000 in connection  with the  Preferred  Stock-B  issuance.  This
entry was a reduction to the  outstanding  balance of the preferred stock and an
increase to additional paid in capital. The beneficial  conversion feature is to
be  recognized  as an increase to preferred  stock and a decrease to  additional
paid in  capital  over  the  period  from the  date of  issuance  to the date of
earliest  conversion  (50% on January 30, 2002 and 50% on July 30, 2002).  As of
December 31, 2001 we recognized $79,190 of beneficial conversion. This amount is
included in the calculation of net loss  attributable to common  stockholders on
the statements of operations for the year ended December 31, 2001.

For purposes of determining  net loss  attributable to common  stockholders,  we
calculated the difference  between the carrying amount and the redemption amount
of the Preferred Stock-B.  Using a cumulative  dividend of four percent (4%) per
annum on the stated  value,  which is payable upon  conversion in either cash or
common stock,  the total  dividends on the Preferred  Stock-B was $8,438 for the
year ended December 31, 2001.

We have  classified  the  Preferred  Stock-B as  temporary  equity  rather  than
stockholders'  equity  because,  at December  31,  2001,  under the terms of the
agreements  entered  into in  connection  with  the  issuance  of the  Preferred
Stock-B, the holders of those shares may have had a right to require Pro Tech to
redeem the  shares.  Because  any such  redemption  would not be within the sole
control of Pro Tech,  Rule  5-02.28  of  Regulation  S-X  applies  and  mandates
treatment of the shares as temporary equity.

The Preferred Stock-B is carried on our balance sheet as of December 31, 2001 at
$633,438,  the redemption value,  which is comprised of 125% of the stated value
of $500,000; plus the accrued accretion of $8,438.

(8)      Capital Stock

On August 11,  2000,  Pro  Tech's  shareholders  approved  an  amendment  to the
Articles of Incorporation to increase the number of authorized  shares of common
stock from  10,000,000 to 40,000,000  and to authorize the creation of 1,000,000
shares of non-voting, blank check preferred stock.


                                      F-12
<PAGE>


Series A Convertible Preferred Stock

On August  14,  2000,  Pro Tech's  Board of  Directors  designated  the Series A
Convertible  Preferred Stock (Preferred Stock-A) with 1,500 authorized shares, a
par  value of $0.01  per  share,  and a stated  value of $1,000  per  share.  On
September 29, 2000,  Pro Tech entered into an agreement to issue 1,500 shares of
Preferred  Stock-A for  $1,500,000.  We received  $1,200,025  cash and satisfied
$299,975 of notes payable in exchange for the Preferred  Stock-A.  The Preferred
Stock-A  has a  dividend  of 4% per  annum on the  stated  value,  payable  upon
conversion or exchange in either cash or common stock. Under such agreement, the
shares of  Preferred  Stock-A  may be  converted  into shares of Pro Tech common
stock or  exchanged  for  shares of NCT  common  stock.  Each  share of stock is
convertible into Pro Tech's common stock based on a conversion price that is the
lower of: the lowest average closing bid price for a five-day consecutive period
out of fifteen  trading days, less a discount of 20%; or a fixed price of $0.50.
The  exchange  rate into NCT common  stock is the lowest  average of the average
closing  bid price for a share of NCT  common  stock  for any  consecutive  five
trading  days  out of the  fifteen  trading  days  preceding  the  date  of such
conversion, less a discount of 20%. In accordance with EITF 98-5, as codified in
EITF  00-27,  we  recorded  a  beneficial  conversion  feature  of  $375,000  in
connection  with the  Preferred  Stock-A  issuance.  Because  these  shares were
convertible  immediately  upon  issuance,  we recognized  the entire  beneficial
conversion  amount  on the date of  issuance.  This  amount is  included  in the
calculation of net loss attributable to common stockholders on the statements of
operations for the year ended October 31, 2000.

Pro Tech, at its option,  may redeem up to $500,000 of the Preferred  Stock-A if
the closing bid price of Pro Tech's  common  stock is less than $0.50 per share.
The  redemption  price is equal to 125% of the  stated  value  plus  100% of the
cumulative  4%  dividend.  The stock may be redeemed at the  holders'  option if
two-thirds of all preferred  stockholders  require such  redemption upon certain
events of noncompliance  with the terms of the Series A Preferred Stock Purchase
Agreement or  Registration  Rights  Agreement.  Any  outstanding  shares will be
mandatorily converted on March 31, 2005.

For purposes of determining  net loss  attributable to common  stockholders,  we
calculated the difference  between the carrying amount and the redemption amount
of the Preferred Stock-A.  Using a cumulative  dividend of four percent (4%) per
annum on the stated  value,  which is payable upon  conversion in either cash or
common stock, the total dividends on the Preferred Stock-A was $5,425;  $10,027;
and $15,647 for the year ended October 31, 2000;  the two months ended  December
31, 2000; and the year ended December 31, 2001, respectively.

During the year ended December 31, 2001, 1,162 shares of Preferred  Stock-A were
converted  into  4,951,873  shares  of our  common  stock  and 288  shares  were
exchanged into 2,975,978 shares of common stock of NCT.

Common Stock

On  September  12,  2000,  Pro  Tech  acquired   licensing  rights  for  certain
technologies from NCT Hearing Products, Inc. in consideration of the issuance of
23,982,438 shares of common stock,  including 279,688 shares of common stock for
costs of issuance. The intangible assets received in the exchange were valued at
the fair value of our stock, which was $16,307,492.

At October 31, 2000, December 31, 2000 and December 31, 2001, $4,000 was held in
escrow  for the  benefit  of Pro Tech  pending  completion  of the  subscription
agreements  by two  investors  for  4,000  shares of common  stock  each.  These
receivables are netted against additional paid-in capital.

The  number of  shares of common  stock  required  to be  reserved  for was 89.1
million at December 31, 2001. This reserve  includes  amounts for the conversion
of preferred  stock and for the exercise of options and  warrants.  In addition,
the required reserve includes approximately 65.5 million shares for the exchange
of $6,223,132 worth of NCT notes payable,  plus accrued interest,  into Pro Tech
common  stock.  These notes give the holder the right,  among other  rights,  to
exchange  such notes into Pro Tech common stock at prices  ranging from $0.06 to
$0.14 per share.


                                      F-13
<PAGE>


Common stock issued and required to be reserved for issuance exceeded the number
of  shares   authorized  at  December  31,  2001.  Pro  Tech  plans  to  request
authorization  for additional  shares of common stock at the next  stockholders'
meeting.

Warrants

In connection  with the  Preferred  Series-A,  we provided  warrants to purchase
4,500,000  shares of Pro Tech's common stock.  The warrants are  exercisable  at
$0.50 per share and expire on October 28, 2003. We have the right to require the
warrant  holders  to  exercise  upon a call  by Pro  Tech  under  the  following
conditions:  (1) one-third of the warrants are callable if the closing bid price
of the common  stock for each of the  previous  fifteen  days  equals or exceeds
$0.68 per share and the average  daily  trading  volume during such period is at
least 150,000 shares; (2) two-thirds of the warrants are callable if the closing
bid price of the common  stock for each of the  previous  fifteen days equals or
exceeds $0.94 per share and the average daily trading  volume during such period
is at least  150,000  shares;  and (3) all of the  warrants  are callable if the
closing  bid price of the common  stock for each of the  previous  fifteen  days
equals or exceeds  $1.135 per share and the average daily trading  volume during
such period is at least 150,000 shares.

We  estimated  the fair value of this  warrant to be  approximately  $3,569,000,
using the following assumptions in applying the Black-Scholes  valuation method:
dividend yield of 0%; risk-free interest rate of 5.97%,  volatility of 100%, and
an expected life of three years.  The $3,569,000 is included in the  calculation
of net loss attributable to common  stockholders on the statements of operations
for the year ended October 31, 2000.

In  connection  with the  Preferred  Series-B,  we issued a warrant to  purchase
1,000,000  shares of our common stock.  The warrant is  exercisable at $0.13 per
share and  expires on July 30,  2004.  We have the right to require  the warrant
holder to exercise upon a call by Pro Tech under the following  conditions:  (1)
one-third  of the  warrant is  callable  if the  closing bid price of the common
stock for each of the previous  fifteen days equals or exceeds  $0.177 per share
and the average  daily  trading  volume  during such period is at least  150,000
shares;  (2)  two-thirds  of the warrant is callable if the closing bid price of
the common stock for each of the previous  fifteen days equals or exceeds $0.244
per share and the average  daily  trading  volume during such period is at least
150,000 shares;  and (3) the entire warrant is callable if the closing bid price
of the common  stock for each of the  previous  fifteen  days  equals or exceeds
$0.295 per share and the average daily  trading  volume during such period is at
least 150,000 shares.

We estimated the fair value of this warrant to be approximately  $63,000,  using
the  following  assumptions  in applying  the  Black-Scholes  valuation  method:
dividend yield of 0%; risk-free interest rates of 4.25%, volatility of 100%, and
an expected life of three years.  The $63,000 is included in the  calculation of
net loss attributable to common stockholders on the statements of operations for
the year ended December 31, 2001.

The  following  table  summarizes  warrants to purchase  common stock during the
years ended October 31, 2000 (no warrants were outstanding during the year ended
October 31, 1999),  during the two months ended December 31, 2000 and during the
year ended December 31, 2001:


                                      F-14
<PAGE>


<TABLE>
<CAPTION>


                                   October 31, 2000                December 31, 2000               December 31, 2001
                           ------------------------------  ------------------------------   --------------------------------
                                               Weighted                        Weighted                         Weighted
                                               Average                         Average                          Average
                                               Exercise                        Exercise                         Exercise
                              Shares            Price          Shares           Price          Shares            Price
                           -------------  ---------------  -------------   --------------   -------------  -----------------
<S>                                 <C>              <C>            <C>              <C>             <C>                <C>

Warrants outstanding
     beginning of period              -     $          -      4,500,000      $     0.500       4,500,000       $      0.500
Warrants granted              4,500,000            0.500              -                -       1,000,000              0.130
Warrants terminated                   -                -              -                -               -                  -
                           -------------  ---------------  -------------   --------------   -------------  -----------------
Warrants outstanding
     end of period            4,500,000     $      0.500      4,500,000      $     0.500       5,500,000       $      0.433
                           =============  ===============  =============   ==============   =============  =================

</TABLE>


As of December 31, 2001, the  outstanding  warrants have exercise prices ranging
from  $0.13  to $0.50  and a  weighted  average  remaining  contractual  life of
approximately 2 years.

(9)      Stock Option Plans

On April 15, 1996,  the Board of  Directors  adopted the 1996 Stock Option Plan,
for the benefit of directors,  officers and employees of and  consultants to Pro
Tech.  The 1996 Plan  authorized  the issuance of up to 590,000 shares of common
stock.  On April 15,  1996,  540,000  and  50,000  shares  were  granted  to the
President and officers,  respectively,  at an exercise price of $0.50 per share.
The exercise  price was the fair value of a share of common stock at the date of
the grant. On April 13, 1999, the original  expiration date of the options,  the
remaining  540,000  options were extended to April 15, 2001, at which point they
expired.  The 1996 Plan  terminates  on April 15,  2002.  The Board of Directors
determined in 2000 that no further grants would be made under the 1996 Plan.

On March 5, 1998, the Board of Directors  adopted the 1998 Stock Option Plan for
the benefit of directors, officers and employees of and consultants to Pro Tech.
This plan  originally  authorized the issuance of up to 500,000 shares of common
stock and was increased to 2,000,000  shares of common stock on August 11, 2000.
On August 4, 1998,  200,000 and  100,000  shares  were  granted to officers  and
employees,  respectively, at an exercise price of $0.375 per share. The exercise
price was the fair  market  value of a share of common  stock at the date of the
grant. Of these, options to purchase 150,000 shares of common stock were granted
to Richard Hennessey and vested as follows: 50,000 immediately; 50,000 on August
4, 1999; and 50,000 on August 4, 2000. The remaining options vested immediately.
All options are exercisable over a three-year period from the date of vesting.

Of the 300,000 options granted on August 4, 1998,  12,000 were exercised  during
March and April 2000,  total  proceeds  received by Pro Tech amounted to $4,560,
188,000  options  expired  during the year ended  December  31, 2001 and 100,000
remain outstanding and exercisable.

On April 13, 1999,  the remaining  1998 Plan options to purchase  200,000 shares
were  granted an officer at an exercise  price of $0.38 per share.  The exercise
price was greater  than the fair market  value of a share of common stock at the
date of the grant.  The options  vest and are  exercisable  as follows:  100,000
immediately; 50,000 on April 13, 2000; and 50,000 on April 13, 2001. The options
expire on April 13, 2004.

On November  28, 2000,  Pro Tech issued  options to purchase  500,000  shares of
common stock at $0.4375 per share under the 1998 Stock  Option Plan,  which vest
as follows:  125,000  immediately,  125,000 on  November  28,  2001,  125,000 on
November 28,  2002,  and 125,000 on November  28,  2003.  The options  expire on
November 28, 2007.

On June 1,  2001,  Pro Tech  issued  options to the Chief  Executive  Officer to
purchase up to 540,000  shares at an exercise price of $0.17 per share under the
1998 Stock Option Plan,  which options  vested  immediately  upon  issuance.  In
addition,  on June 1, 2001 Pro Tech  issued  options to two other  employees  to
purchase up to 400,000  shares at an exercise price of $0.17 per share under the
1998 Stock Option Plan, which options


                                      F-15
<PAGE>


vested or vest as follows: 160,000 immediately upon issuance; 120,000 on June 1,
2002;  and  120,000 on June 1, 2003.  In January  2002  employment  of these two
employees was terminated and,  according to the option  agreement,  such granted
options will expire in April 2002.  The exercise  prices of the options  granted
above were equal to the fair market value of the common stock on the grant dates
and expire seven years from date of grant.

The following table summarizes stock option activity for the years ended October
31, 1999 and 2000;  for the two months ended December 31, 2000; and for the year
ended December 31, 2001:


<TABLE>
<CAPTION>

                                            October 31, 1999                     October 31, 2000
                                    ----------------------------------  ------------------------------------
                                                        Weighted                              Weighted
                                                        Average                               Average
                                                        Exercise                              Exercise
                                       Shares            Price              Shares             Price
                                    -------------  -------------------  ---------------  -------------------
<S>                                          <C>                  <C>              <C>                  <C>

Option outstanding,
     beginning of the period             840,000              $ 0.455        1,040,000              $ 0.441
Options granted                          200,000                0.380                -                    -
Options exercised                              -                    -          (12,000)              (0.380)
Options expired                                -                    -                -                    -
                                    -------------  -------------------  ---------------  -------------------
Options outstanding,
     end of period                     1,040,000              $ 0.441        1,028,000              $ 0.442
                                    =============  ===================  ===============  ===================
Options exercisable,
     end of period                       890,000              $ 0.451          978,000              $ 0.445
                                    =============  ===================  ===============  ===================


                                            December 31, 2000                    December 31, 2001
                                    ----------------------------------  ------------------------------------
                                                        Weighted                              Weighted
                                                        Average                               Average
                                                        Exercise                              Exercise
                                       Shares            Price              Shares             Price
                                    -------------  -------------------  ---------------  -------------------
Option outstanding,
     beginning of the period           1,028,000              $ 0.442        1,528,000              $ 0.440
Options granted                          500,000                0.438          940,000                0.170
Options exercised                              -                    -                -                    -
Options expired                                -                    -         (728,000)              (0.468)
                                    -------------  -------------------  ---------------  -------------------
Options outstanding,
     end of period                     1,528,000              $ 0.440        1,740,000              $ 0.283
                                    =============  ===================  ===============  ===================
Options exercisable,
     end of period                     1,103,000              $ 0.444        1,187,500              $ 0.265
                                    =============  ===================  ===============  ===================


</TABLE>


As of December 31, 2000,  Pro Tech's  outstanding  stock  options have  exercise
prices  ranging  from  $0.17  to  $0.4375  and  a  weighted  average   remaining
contractual life of approximately 5.5 years.

No compensation expense was recorded during the years ended October 31, 1999 and
2000;  during the two months ended  December 31, 2000; and during the year ended
December  31,  2001  for the  options  issued  to  officers  and  employees,  in
accordance  with APB 25. Had  compensation  expense been  determined on the fair
value at the date of grant in  accordance  with the  provisions of SFAS 123, the
net loss and loss per share attributable to common  stockholders would have been
adjusted to the pro forma amounts indicated below:


                                      F-16
<PAGE>


<TABLE>
<CAPTION>


                              October 31,                           December 31,
                           -------------------------------------  -------------------------------------
                                 1999                2000               2000                2001
                           ------------------  -----------------  -----------------   -----------------
<S>                                       <C>               <C>                <C>                 <C>

Net loss:
     As reported                  $ (221,065)      $ (4,323,765)        $ (386,347)       $ (2,595,328)
                           ==================  =================  =================   =================
     Pro forma                    $ (369,295)      $ (4,341,632)        $ (443,642)       $ (2,784,121)
                           ==================  =================  =================   =================
Loss per common share:
     As reported                  $    (0.05)      $      (0.57)        $    (0.01)       $      (0.08)
                           ==================  =================  =================   =================
     Pro forma                    $    (0.09)      $      (0.58)        $    (0.02)       $      (0.09)
                           ==================  =================  =================   =================

</TABLE>

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions  used for grants  during the year ended  October 31, 1999:  dividend
yield of 0%; expected volatility of 141%;  risk-free interest rate of 5.76%; and
expected lives ranging from three to five years.

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions  for grants during the two months ended December 31, 2000:  dividend
yield of 0%; expected volatility of 100%;  risk-free interest rate of 5.54%; and
expected lives ranging from four to seven years.

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions  for grants during the year ended December 31, 2001:  dividend yield
of 0%;  expected  volatility  of 100%;  risk-free  interest  rate of 4.25%;  and
expected lives ranging from five to seven years.

(10)     Factoring Agreement and Financing Arrangement

On December 22, 1999, Pro Tech entered into a short-term  factoring  arrangement
providing  for  advances of up to  $300,000,  based on 80% of selected  accounts
receivable  factored under the agreement on a recourse  basis. We were charged a
factoring fee of 1% on each advance,  plus 2% per month on advances outstanding.
In  addition,  the minimum  fee charged per month was 1% of the total  factoring
plan, or $3,000, during the life of the agreement,  which was for six months and
automatically renewable for additional six-month terms, unless terminated by Pro
Tech with 30 days notice.  Obligations under this agreement were  collateralized
by all of our accounts receivable,  inventory, and equipment. This agreement was
terminated in December 2000.

At October 31, 2000, accounts receivable factored under this agreement and still
outstanding  were  $103,223,  of  which,  $86,170  had been  received  under the
borrowing   arrangement   and  was  classified  as  Other   Liabilities  in  the
accompanying  balance sheet. At December 31, 2000,  accounts receivable factored
under this  agreement and still  outstanding  were $15,279,  no borrowings  were
outstanding,  and amounts  payable to the finance company  representing  accrued
fees totaled  $5,202.  Total fees incurred  under this  arrangement  amounted to
$25,167 and $6,991 during the year ended October 31, 2000 and for the two months
ended December 31, 2000, respectively, and are classified as interest expense in
the accompanying statements of operations.

On March 26,  2001,  Pro Tech entered  into a factoring  agreement  with Goodman
Factors, Inc., referred to as "Goodman." We are required to factor substantially
all of our trade  receivables  on a  non-recourse  basis in return for immediate
cash credit equal to eighty-five  percent (85%) of these  factored  receivables,
less a factoring  fee. The factoring fee is 1.9% of the invoice  amount and 3.5%
over the prime rate on the amount  advanced under the factoring  agreement.  The
prime rate was 4.75% at December 31, 2001. In addition,  at December 31, 2001 we
had $10,402 in reserve at Goodman  representing  not less than  fifteen  percent
(15%) of the aggregate unpaid gross amount of all outstanding  accounts factored
under this factoring agreement.  If the net amount of accounts submitted for any
one month does not exceed $100,000,  Goodman may charge an additional commitment
fee, as described in the  agreement.  As of December 31, 2001, no such fees were
required.  Such  factored  receivables  are  subject to  acceptance  by Goodman.
Goodman also has


                                      F-17
<PAGE>


the  option to accept  factored  receivables  with  recourse.  If such  recourse
receivables are not paid within 46 days, we must buy back the total  outstanding
receivable.  Obligations  due to the factor under the  factoring  agreement  are
collateralized  by a  continuing  security  interest  in  all  of  our  accounts
receivable, notes receivable, chattel paper, documents,  instruments and general
intangibles now existing or hereafter  acquired of every kind wherever  located,
together  with  merchandise  returns  and  goods  represented  thereby,  and all
proceeds therefrom of every kind and nature.

At December 31, 2001,  accounts  receivable  factored  under this  agreement and
still  outstanding were $74,432,  of which,  $64,030 had been received under the
factoring  agreement,  under the recourse  provisions,  and is included in Other
Liabilities  (see note 5 - Other  Liabilities).  Total fees incurred  under this
arrangement  amounted  to  $13,008  during  the year ended  December  31,  2001.
Interest expense  incurred under this arrangement  amounted to $5,901 during the
year ended December 31, 2001.

(11)      Commitments

Future minimum lease payments under noncancelable operating leases for buildings
and equipment and the present value of future minimum  capital lease payments as
of December 31, 2001 are:


<TABLE>
<CAPTION>

Year ended December 31                               Capital Leases           Operating Leases
----------------------
                                                    ------------------        -----------------
<S>                                                               <C>                      <C>

     2002                                                    $ 14,594                $  93,469
     2003                                                      11,937                   99,942
     2004                                                      11,748                   95,924
     2005                                                      11,748                   96,563
     2006                                                       8,513                   16,184
                                                    ------------------        -----------------
Total minimum lease payments                                   58,540                $ 402,082
                                                                              =================
Less amount representing interest                              12,436
                                                    ------------------
Present value of net minimum capital
    lease payments                                             46,104
Less current installments                                      10,083
                                                    ------------------
Obligations under capital leases, excluding
   current installments                                      $ 36,021
                                                    ==================

</TABLE>

Rent  expense  under  lease  agreements  totaled  $32,559,  $41,696,  $6,421 and
$127,099 for the years ended October 31, 1999 and 2000; for the two months ended
December 31, 2000; and for the year ended December 31, 2001, respectively.

(12)       Income Taxes

There was no provision for income taxes for the years ended October 31, 1999 and
2000,  for the two  months  ended  December  31,  2000,  nor for the year  ended
December 31, 2001 due to operating losses incurred.

The tax benefit differs from the "expected" amount computed by applying the U.S.
federal corporate income tax rate of 34% to loss before income taxes as follows:


                                      F-18
<PAGE>


<TABLE>
<CAPTION>

                                                                                 For the two           For the year
                                                 For the year ended             months ended               ended
                                                    October 31,                  December 31,           December 31,
                                           -------------------------------
                                               1999             2000                2000                   2001
                                           --------------  ---------------  ----------------------  --------------------
<S>                                                  <C>              <C>                     <C>                   <C>

Computed "expected" tax benefit                $ (75,162)      $ (127,276)         $     (127,949)        $    (825,993)
Increase in income tax resulting from:
     Net operating loss not
       currently utilizable                       75,016          127,276                 127,949               825,582
     Other nondeductible expenses                    146                -                       -                   411
                                           --------------  ---------------  ----------------------  --------------------
                                               $       -       $        -          $            -         $           -
                                           ==============  ===============  ======================  ====================

</TABLE>


The exercise of stock options  during the years ended October 31, 1997 and 2000,
which had been  granted  under Pro Tech's 1996 and 1998 Stock  Option Plans (see
note 9 - Stock Option Plans),  gave rise to compensation  totaling  $225,000 and
$8,952, respectively,  that is includable in the taxable income of the employees
and  deductible  by Pro Tech for federal  and state  income tax  purposes.  Such
compensation  resulted  from  increases  in the fair market  value of Pro Tech's
common stock  subsequent to the date of grant of the applicable  exercised stock
options and,  accordingly,  in accordance with APB 25, such compensation was not
recognized  as an expense  for  financial  reporting  purposes.  The related tax
benefits will be reflected as contributions to additional paid-in capital in the
periods in which the  compensation  deduction  is  utilized  by Pro Tech and, in
accordance with APB 25 and Statement 109, such  compensation  deductions are not
considered to be temporary  differences.  Such deductions have not been utilized
by Pro Tech due to the net  operating  losses  generated  during the years ended
October 31, 1999 and 2000;  the two months ended December 31, 2000; and the year
ended December 31, 2001.

Pro Tech has net operating loss  carryforwards  for federal and state income tax
purposes  amounting to $4,216,000  and  $4,292,000,  respectively,  which expire
through the year 2021. In accordance with Internal Revenue Code Section 382, Pro
Tech's net  operating  loss  carryforwards  are  subject to certain  limitations
resulting from the issuance of common stock to NCT Hearing, as discussed in note
8 - Capital Stock.

In assessing  the  realizability  of deferred tax assets,  management  considers
whether it is more likely than not that some  portion or all of the deferred tax
assets will not be realized.  The ultimate realization of deferred tax assets is
dependent  upon the  generation  of future  taxable  income during the period in
which those temporary  differences become deductible.  Management  considers the
scheduled reversal of deferred tax liabilities,  projected future taxable income
and tax planning strategies in making this assessment.

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. Significant components of
Pro Tech's deferred tax assets and liabilities are as follows:


                                      F-19
<PAGE>


<TABLE>
<CAPTION>

                                                    October 31,     December 31,     December 31,
                                                       2000             2000             2001
                                                   --------------  ---------------  ----------------
<S>                                                          <C>              <C>               <C>
Accounts receivable principally due to
   allowance for doubtful accounts                   $     5,200     $      5,500     $       4,900
Accrued warranty expense                                  15,400           14,700            19,000
Net operating loss carryforwards                         124,900          199,200           787,600
Contribution carryforwards                                   500              500               500
                                                   --------------  ---------------  ----------------
                                                         146,000          219,900           812,000
Less valuation allowance                                 139,200          188,200           755,700
                                                   --------------  ---------------  ----------------
Total deferred tax assets                                  6,800           31,700            56,300
                                                   --------------  ---------------  ----------------

Property and equipment principally due to
   differences in depreciaton                              6,800            6,400               300
Intellectual property principally due to
    differences in amortization                                -           25,300            56,000
                                                   --------------  ---------------  ----------------
Total deferred tax liabilities                             6,800           31,700            56,300
                                                   --------------  ---------------  ----------------
Net deferred taxes                                   $         -     $          -     $           -
                                                   ==============  ===============  ================
</TABLE>

(13)       Business Segment Information

During 2001,  management identified two new business segments that we have added
to our business focus. These two new identifiable business segments are: (1) the
Telecommunications Systems Integration Business Segment; and (2) the Call Center
Operations  Business Segment.  At December 31, 2001 neither of these segments is
deemed  to be  reportable  segments  in  accordance  with  SFAS  131.  Prior  to
establishment of these two new business  segments,  we were predominately in the
design, development, manufacture and marketing of lightweight telecommunications
headsets,  currently known as the Product Business Segment.  We evaluate segment
performance based on net sales and operating  income.  Management does not track
segment  data  or  evaluate   segment   performance   on  additional   financial
information.  As such, there are no separately  identifiable  segment assets nor
are there any separately identifiable statements of income data (below operating
income).  Pro Tech  does not  track or  assign  assets  to  individual  business
segments.  Likewise,  depreciation  expense and capital  additions  are also not
tracked by business segments.

No geographic information for revenues from external customers or for long-lived
assets  is  disclosed  as  our  primary  market  and  capital  investments  were
concentrated in the United States.

Business segment data is as follows:


                                      F-20
<PAGE>



<TABLE>
<CAPTION>

                                                                                  Segment
                                                       ---------------------------------------------------------------
                                                                           Telecom
                                                           Product         Systems      Call Center       Total
                                                          Business       Integration    Operations       Segments
                                                       ---------------------------------------------------------------
<S>                                                             <C>              <C>           <C>                <C>

For the year ended October 31, 1999:
   Sales to external  customers                        $  1,090,551                -             -       $  1,090,551
    Loss from operations                               $   (221,535)               -             -       $   (221,535)

For the year ended October 31, 2000:
   Sales to external  customers                        $  1,562,484                -             -       $  1,562,484
    Loss from operations                               $   (344,351)               -             -       $   (344,351)

For the two months ended December 31, 2000:
   Sales to external  customers                        $    307,902                -             -       $    307,902
    Loss from operations                               $   (368,636)               -             -       $   (368,636)

For the year ended December 31, 2001:
   Sales to external  customers                        $  2,001,348           99,376        74,582       $  2,175,306
    Loss from operations                               $ (2,222,216)         (51,916)     (136,358)      $ (2,410,490)

</TABLE>


Pro Tech is divided into the following three business segments:

The Product Business  Segment:  We presently  design,  develop,  manufacture and
market lightweight telecommunications headsets. Our headsets employ new concepts
in advanced lightweight design, and our marketing strategies involve the sale of
our product  directly to the commercial  headset market as a replacement for our
competitors'  products.  We presently  sell our first design for the  commercial
headset  market  comprised of fast food companies and other large quantity users
of headset  systems.  We are also in the process of  completing  development  of
several  other  headsets for the  telephone  user market,  to include  telephone
operating  companies,  government  agencies,  business offices, and professional
telephone centers.

The  Telecommunications  Systems Integration Business Segment: On March 1, 2001,
we launched  the  Telecommunications  Systems  Integration  Business to sell and
install  simple to  sophisticated  analog,  digital and Internet  Protocol phone
systems.  This decision was made to take  advantage of increasing  market demand
for  telecommunications  system integration  support to the small office and the
large corporate call center clients.

The Call Center Operations  Business Segment:  During 2001, we launched the Call
Center Operations Business.  We have the expertise needed to develop and launch,
and the ability to sell and support,  a specialized niche of the medical market.
We have  adopted  and  installed  the latest  customer  relationship  management
technologies and strategies in order to achieve business segment objectives.  As
of December 21, 2001, we have suspended operations in the Call Center Operations
Business due to poor performing  contracts.  We have  reorganized  this business
segment and intend to resume  operations  by the third quarter of 2002 (see note
17 - Subsequent Events).

(14)     Related Party Transactions

During fiscal year 1996,  Pro Tech loaned  $28,882 to its Chairman.  Outstanding
principal and interest, at 5% per annum, are due August 2, 2003. During the year
ended October 31, 1998,  Pro Tech loaned an  additional  $3,650 to its Chairman,
which is due October 31,  2002,  with  interest at 5% per annum.  On October 19,
2001, the  outstanding  balance from the 1996 loan and the  outstanding  balance
from the 1998  loan  were  combined  into one  loan.  The new loan  included  an
additional amount of $10,594 loaned to the Chairman.  Outstanding  principal and
interest, at 5% per annum, are due October 19, 2003. Outstanding


                                      F-21
<PAGE>

principal and interest amounted to $56,824;  $57,206;  and $59,670 as of October
31, 2000; December 31, 2000; and December 31, 2001, respectively.

As of October 31, 2000;  December 31, 2000; and December 31, 2001, Pro Tech owed
$101,057; $216,573; and $556,142, respectively, to NCT and its subsidiaries, for
various research, administrative and accounting services provided to Pro Tech.

As of January 1, 2001, Pro Tech began  participating in NCT's Noise Cancellation
Employee  Benefit  Plan,  referred to as the  Benefit  Plan.  The  Benefit  Plan
provides,  among  other  coverage,  certain  health  benefits to  employees  and
directors of NCT's United  States  operations.  NCT  administers  this  modified
self-insured Benefit Plan through a commercial third-party administrative health
care provider.  NCT's maximum  aggregate  benefit  exposure in each Benefit Plan
fiscal  year is limited to  $1,000,000,  while  combined  individual  and family
benefit exposure in each Benefit Plan fiscal year is limited to $40,000. Benefit
claims in excess of these  individual or maximum  aggregate stop loss limits are
covered by a commercial  insurance  provider to which NCT pays a nominal premium
for such stop loss coverage.  NCT records benefit claim expense in the period in
which the benefit claim is incurred. Any benefit claims incurred by Pro Tech are
submitted to NCT for  payments and such claims are then charged to Pro Tech.  As
of December  31,  2001,  the total  amount  owed to NCT for  benefit  claims was
approximately  $185,000,  as is  included  in the  amount  due to  NCT  and  its
subsidiaries discussed above.

As of January  1,  2001,  Pro Tech began  participating  in NCT's  401(k)  Plan,
referred to as the 401(k)  Plan.  The 401(k)  Plan is  qualified  under  Section
401(k) of the Internal Revenue Code of 1986. Each eligible employee may elect to
contribute up to 15% of the employee's  annual  compensation to the 401(k) Plan.
NCT,  at  the  discretion  of  its  Board  of  Directors,   may  match  employee
contributions to the 401(k) Plan. There were no matching  contributions  for the
year ended December 31, 2001.

(15)     Major Customers

During  the  year  ended  October  31,  1999,   two   customers   accounted  for
approximately  30% of net sales generated during the year. During the year ended
October 31, 2000,  two customers  accounted for  approximately  34% of net sales
generated  during the year.  During the two months ended  December 31, 2000, one
customer  accounted  for  approximately  35% of net sales  generated  during the
period.  Two customers  accounted for  approximately  35% of net sales generated
during the year ended December 31, 2001 and approximately 27% of the outstanding
accounts receivable at December 31, 2001.

(16)     Prior Year Comparable Period Data (Unaudited)

The following sets forth the unaudited  results of operations for the two months
ended December 31, 1999 and for the year ended December 31, 2000:


                                      F-22
<PAGE>



                                    For the two             For the
                                   months ended            year ended
                                               December 31,
                                   -------------------------------------
                                         1999                2000
                                   -----------------   -----------------
Net sales                             $     116,716        $  1,729,875
                                   =================   =================
Gross profit                          $      77,838        $  1,087,592
                                   =================   =================
Loss from operations                  $     (67,581)       $   (738,484)
                                   =================   =================
Income taxes                          $           -        $          -
                                   =================   =================
Net loss                              $     (68,906)       $   (779,342)
                                   =================   =================
Net loss attributable to
     common shareholders              $     (68,906)       $ (4,738,794)
                                   =================   =================
Net loss per share                    $       (0.02)       $      (0.42)
                                   =================   =================
Weighted average number
     of shares outstanding                4,266,000          11,405,853
                                   =================   =================

(17)     Subsequent Events

On January 11, 2002,  NCT's  August 22, 2001 note payable plus accrued  interest
was rolled into a new note payable totaling $2,231,265, which is due January 11,
2003. The August 22, 2001 note gave the holder the right, among other rights, to
exchange such note into Pro Tech common stock (see note 8 - Capital Stock).  The
January 11, 2002 note also gives the holder the right,  among other  rights,  to
exchange such note into Pro Tech common stock at $0.06 per share,  or a total of
37,187,751 shares.

On January  25,  2002,  NCT issued a note  payable  for  $650,000,  which is due
January 25, 2003.  The note  agreement  gives the holder the right,  among other
rights,  to exchange such note into Pro Tech common stock at $0.06 per share, or
a total of 10,833,333 shares.

On January 25, 2002, NCT issued a note payable for $250,000, which became due on
February  8, 2002.  On  February  27,  2002,  this note,  accrued  interest  and
additional  advances of $550,000  were rolled into a new note  payable  totaling
$827,412,  which is due February 27, 2003.  The February 27, 2002 note gives the
holder the right, among other rights, to exchange such note into Pro Tech common
stock at $0.06 per share, or a total of 13,790,204 shares.

On February 1, 2002,  Pro Tech issued  options to Keith Larkin to purchase up to
250,000  shares at an  exercise  price of $0.06 per share  under the 1998  Stock
Option  Plan,  which  options  vested  immediately  upon  issuance and expire on
February 1, 2009.

On March 1, 2002, NCT issued a note payable for $350,000,  which is due March 1,
2003.  The note  agreement  gives the holder the right,  among other rights,  to
exchange such note into Pro Tech common stock at $0.06 per share,  or a total of
5,833,333 shares.

Beginning  in December  2001 and  continuing  through  February  2002,  Pro Tech
restructured  its  organization  by  temporarily   suspending  its  call  center
operations and reducing its workforce  levels in other areas.  Costs incurred in
2002 associated with this restructure were approximately  $7,000, which were not
accrued for as of December 31, 2001 in accordance with EITF 94-3.


                                      F-23
<PAGE>