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

                                    FORM 10-K

/X/  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES  EXCHANGE
     ACT OF 1934
                   For the fiscal year ended December 31, 2002

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

              For the transition period from ________ to _________

                        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. [ ]

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant on June 28, 2002,  was  approximately  $160,000  (based upon the last
sale price of $0.03 per share on June 28, 2002, on the National  Association  of
Securities Dealers Automated Quotation System).

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<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., herein referred to as
"NCT Hearing," a wholly-owned  subsidiary of NCT Group, Inc., herein referred to
as "NCT," in exchange for exclusive  rights to certain NCT  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
Divisions 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 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  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.

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<PAGE>

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  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 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.

                                       3
<PAGE>

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 Conference & Exposition held in February 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 a portion of 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 2003.

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.

                                       4
<PAGE>

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
also  supplement  the  marketing  efforts of our  employees by using  electronic
commerce  from our web site along with  independent  sales  representatives  and
strategic marketing agreements.

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  included sales to more than 3,500
McDonald's  restaurants.  Penetration  increased to more than 11,000 restaurants
during the fiscal year ending December 31, 2002.

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 minimal 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

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<PAGE>

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, 2002,  Pro Tech had an internal  sales and
marketing  force of 3 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.  Pro
Tech  will  continue  to  adhere to past  cost  reduction  policies  and will be
expanding  its  outsourced  Far East  manufacturing  operations  to support  the
current and future  projected sales volumes.  Pro Tech plans a full migration of
this  production  capacity from U.S.  operations  to offshore  operations as the
demand for its products increases.  An interruption in the supply of a component
for which Pro 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; however, in order to meet forecasted customer
requirements,  Pro Tech has under  contract  multiple  suppliers for several key
components in order to reduce the risk in a disruption  of the supply chain.  At
December 31, 2002, the value of our inventory was $592,536.

Pro Tech  believes  that its Fort Pierce,  Florida  office  presently  possesses
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 four largest customers  accounted
for approximately 46% of revenues during the fiscal year ended December 31, 2002
and 27% of gross  accounts  receivable  at December 31, 2002.  We do not require
collateral or other security to support customer receivables.

                                               As of December 31, 2002,
                                             And for the year then ended
                                       --------------------------------------
                                            Accounts
   CUSTOMER                                Receivable             Revenue
   -----------------------------       ----------------    ------------------
   Muzak                                 $     6,871         $     483,550
   McDonalds                                  12,754               137,004
   Ageis                                      13,284                70,928
   3M Corporation                             17,817                69,338
   All Other                                 137,544               888,129
                                       ----------------    ------------------
                          Total          $   188,270         $   1,648,949
                                       ================    ==================

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.

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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  $311
million for the fiscal year 2002. Our other major competitor is GN Netcom,  Inc.
In 1997, GN NetCom,  Inc.  purchased  UNEX  Corporation  and ACS Wireless and in
calendar  year 2000  announced  the purchase 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 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.

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<PAGE>

J.   Proprietary Protection

Pro Tech owns one technology patent which was granted in 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
(described  below) in the area of noise  reduction  which are owned by NCT,  its
ultimate parent company. NCT is highly experienced in noise reduction technology
and has developed  headphone,  headset and earmuff products  incorporating noise
reduction for a wide variety of applications.

Active Noise Reduction  ("ANR")  processes a correcting  signal that is equal to
but opposite from an offending  noise. The two sound fields cancel each other to
give a greatly reduced noise level.

ClearSpeech(TM) noise reduction algorithm electronically strips background noise
from speech, even when the noise is in the same frequency band as the speech and
where there is no independent measure of the interfering noise. This is achieved
by noting the unique characteristics of speech as compared to general noise and
adaptively adjusting a multitude of complex filters to let through only those
signal components that represent the wanted speech signal.

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.

K.   Employees

As of  December  31,  2002,  Pro Tech had 11  full-time  employees,  including 5
persons in administration  and shipping,  3 persons in sales and marketing and 3
persons in assembly and  production.  None of our employees are represented by a
collective  bargaining  unit,  and we  believe  that our  relationship  with our
employees is good.

L.   Business Divisions

Pro   Tech   operates   in   three   business   divisions:   headset   products,
telecommunication  integration, and call center operations. The headset division
encompasses the design, development,  manufacturing and marketing of lightweight
headsets for  commercial  use. The  telecommunication  integration  division 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 an  expertise  in a  specialized  niche of the medical  market.  In
December  2001,   management  suspended  call  center  operations  due  to  poor
performing  contracts.  Pro Tech  reorganized  this division and resumed limited
operations  during  the  third  quarter  2002.  All of these  divisions  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  room in
Washington,  D.C. Please call the SEC at 1-800-SEC-0330 for further  information
on the public  reference  room. Our SEC filings are also available to the public
from the SEC's Website at "http://www.sec.gov."

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<PAGE>

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.

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<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 fiscal year ended October 31, 2000;  the interim  two-month
period ended December 31, 2000; and the fiscal years ended December 31, 2001 and
2002. The market quotations reflect inter-dealer prices, without retail mark-up,
markdown, or commission and may not represent actual transactions.

     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

     Year ended December 31, 2002          High            Low
-------------------------------------    --------       --------
  First Quarter                           $0.070         $0.040
  Second Quarter                          $0.050         $0.020
  Third Quarter                           $0.035         $0.020
  Fourth Quarter                          $0.021         $0.010

On March 12, 2003, the last reported sale of Pro Tech's common stock as reported
by the NASD OTC Bulletin Board was $0.015.  As of March 12, 2003,  there were 56
record holders of the common stock,  representing  approximately  600 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 Notes to  Financial  Statements:  Note 8 - Series B  Redeemable  Convertible
Preferred  Stock and Note 9 - Capital  Stock for a  description  of our sales of
unregistered securities within the last three fiscal years.

                                       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,
                                         -------------------------------------------   ------------  ------------------------------
                                            1998            1999           2000           2000             2001           2002
                                         -------------   ------------  -------------   ------------  --------------  --------------
<S>                                       <C>             <C>           <C>             <C>            <C>            <C>
STATEMENTS OF OPERATIONS DATA:

Net sales                                 $ 1,142,482     $1,090,551    $ 1,562,484     $  307,902     $ 2,175,306    $  1,648,949

Cost of goods sold                            470,450        414,931        623,555        129,378         920,127         774,316
                                         -------------   ------------  -------------   ------------  --------------  --------------

      Gross profit                            672,032        675,620        938,929        178,524       1,255,179         874,633

Selling, general and administrative           882,385        893,384      1,275,290        545,586       3,655,711       2,703,425
Impairment charge on intangible assets              -              -              -              -               -      11,500,000
Provision for doubtful accounts                38,835          3,771          7,990          1,574           9,958          29,800
                                         -------------   ------------  -------------   ------------  --------------  --------------

      Loss from operations                   (249,188)      (221,535)      (344,351)      (368,636)     (2,410,490)    (13,358,592)
Other income (expense):
  Interest income (expense), net               24,719          9,181        (31,715)        (8,713)        (20,262)        (51,290)
  Miscellaneous income                             89            697          1,726          1,029           4,305           5,004
  Loss on disposal of fixed assets                  -         (9,408)             -              -          (2,945)              -
                                         -------------   ------------  -------------   ------------  --------------  --------------

      Loss before income taxes               (224,380)      (221,065)      (374,340)      (376,320)     (2,429,392)    (13,404,878)
Income tax expense (benefit)                     (964)             -              -              -               -                -
                                         -------------   ------------  -------------   ------------  --------------  --------------

      Net loss                               (223,416)      (221,065)      (374,340)      (376,320)     (2,429,392)    (13,904,878)
Less:
Preferred stock beneficial conversion               -              -      3,569,000              -          79,190          45,810
Preferred stock embedded dividend                   -              -        375,000              -          62,661               -
Dividend accretion on preferred stock               -              -          5,425         10,027          24,085          22,000
                                         -------------   ------------  -------------   ------------  --------------  --------------

      Net loss attributable to common
           stockholders -
           as previously reported            (223,416)      (221,065)    (4,323,765)      (386,347)     (2,595,328)    (13,472,688)

Adjustment of beneficial conversion (3)             -              -      2,444,000              -               -               -
                                         -------------   ------------  -------------   ------------  --------------  --------------

      Net loss attributable to common
           stockholders - as adjusted     $  (223,416)    $ (221,065)    (1,879,765)    $ (386,347)    $(2,595,328)   $(13,472,688)
                                         =============   ============  =============   ============  ==============  ==============

Basic and diluted net loss per share
           attributable to common
           stockholders - as previously
           reported                             (0.05)         (0.05)         (0.57)         (0.01)          (0.08)          (0.41)

Adjustment of beneficial conversion (3)             -              -           0.32              -               -               -
                                         -------------   ------------  -------------   ------------  --------------  --------------

      Basic and diluted net loss per share
           attributable to commons
           stockholders - as adjusted     $     (0.05)    $    (0.05)   $     (0.25)    $    (0.01)    $     (0.08)   $      (0.41)
                                         =============   ============  =============   ============  ==============  ==============

Weighted average number
       of common shares outstanding (1)     4,254,000      4,254,000      7,537,855     28,248,438      32,281,034      33,200,311
                                         =============   ============  =============   ============  ==============  ==============


                                                         October 31,                                 December 31,
                                         -------------------------------------------   --------------------------------------------
                                            1998             1999           2000          2000             2001           2002
                                         -------------   ------------  -------------   ------------  --------------  --------------
BALANCE SHEET DATA:
 Total assets                               1,158,898        945,377     18,652,665     18,264,130      17,184,920       4,163,492
 Total current liabilities                    209,845        209,300        662,956        651,313       1,541,386         866,537
 Long-term debt                                     -          8,089          3,687          3,115          44,632       1,102,931
 Accumulated deficit                         (192,219)      (413,284)      (787,624)    (1,163,944)     (3,593,336)    (16,998,214)
 Stockholders' equity(2)                      949,053        727,988     17,986,022     17,609,702      14,965,464       1,540,586
 Working capital/(deficit)                    724,769        494,148      1,419,819      1,205,686        (320,525)        (19,543)

</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.
(3)  See Note 18 - Adjustment  included in October 2000 financial  statements in
     our Notes to Financial Statements.

                                       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.

Critical Accounting Policies

Our  financial  statements  have been  prepared in  accordance  with  accounting
principles  generally  accepted in the United States of America.  As such,  some
accounting  policies  have a  significant  impact  on  amounts  reported  in the
financial statements.  A summary of those significant accounting policies can be
found in Notes to Financial  Statements:  Note 1 -  Organization  and Summary of
Significant Accounting Policies. In

                                       12
<PAGE>

particular,  judgment is used in areas such as  determining  the  allowance  for
doubtful accounts,  adjustments to inventory  valuations,  asset impairments and
the accrual for warranty expense.

RESULTS OF OPERATIONS

The Year Ended  December  31, 2002 As Compared  To The Year Ended  December  31,
2001:

Net  loss  for  the  year  ended  December  31,  2002  increased   approximately
$10,975,000,  or 452%,  compared  to the year  ended  December  31,  2001.  This
increase was due mainly to the  recognition of a $11,500,000  intangible  assets
impairment  charge.   Also  included  is  the  net  effect  of  a  reduction  of
approximately $952,000 in selling, general and administrative  expenses,  offset
by a decrease of approximately $381,000 in gross profit margin.

Net  sales  generated   during  the  year  ended  December  31,  2002  decreased
approximately  $526,000,  or 24%,  compared to the year ended December 31, 2001.
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, 2002, we sold a total of 60,540 headsets and headset
related  products,  as compared to 70,803  during the same  period  2001,  a 14%
decrease.

Revenues from the fast food market decreased  approximately  $473,000 in 2002 as
compared  to the same  period  in 2001.  Net unit  sales of fast  food  headsets
decreased   23%  due  mainly  to  reduced   purchases  by  three  of  our  major
distributors. This decrease was primarily the result of slowed demand from their
customer  base.  In  addition,  a portion  of this  decrease  was  related  to a
component failure issue that we experienced with one of our suppliers during the
second  quarter  2001.  Although  this  component  issue has been  resolved,  we
continued to honor our customer  agreements  by  replacing  defective  headsets,
therefore  resulting in fewer new sales to these  customers.  These  replacement
agreements were completed as of September 30, 2002.

Revenues from the radio market decreased approximately $118,000 in 2002 compared
to the same period in 2001.  After  evaluating  the  revenues  and costs of this
market, we determined that it was not profitable for us and decided to exit this
market during the first quarter of 2002.

Revenues  from the  telephone  market  increased  approximately  $85,000 in 2002
compared  to the same  period in 2001.  We have  determined  that the  telephone
market is the growth market for our products and will focus our resources toward
expanding our presence in that market.  We have faced delays in  introduction of
new  products  for this  market  due to a lack of  working  capital.  We and NCT
Hearing are actively  pursuing new investments to utilize the  technologies  and
other  assets  available  to us to expand and improve our product  line for this
market.

Cost of goods sold for the year ended December 31, 2002 decreased  approximately
$146,000,  or 16%,  compared to the same period in 2001.  This  decrease was due
mainly to the  decrease in sales  volume for 2002,  offset by  additional  costs
incurred to replace  headsets in connection  with the component  issue mentioned
above.

Gross margin  percent  decreased from 57.7% for the year ended December 31, 2001
to 53.0% for the year ended  December 31, 2002.  This decline was a result of an
increase in  production  costs due to the  increase in  domestic  production  to
facilitate  smaller  production  runs,  along with the additional cost effect of
replacing headsets in connection with the component issue mentioned above.

Selling,  general and  administrative  expenses for the year ended  December 31,
2002  decreased  approximately  $952,000,  or 26%,  compared  to the year  ended
December 31, 2001. In the first quarter 2002, Pro Tech  implemented cost savings
to reduce  selling,  general and  administrative  expenses.  These cost  savings
included  a  reduction  of work force in all areas of the  products  operations,
tighter controls over expenditures and the continued  reorganization of the call
center  operation.  The  decrease  in  expenses  was

                                       13
<PAGE>

due mainly to a decrease  of  approximately  $636,000  in  payroll  and  related
expenses,  combined  with a decrease of  approximately  $253,000  in  marketing,
advertising and public relations.

Impairment  charge on  intangible  assets  was  $11,500,000  for the year  ended
December 31, 2002. We are required to test the  recoverability of our long-lived
assets  (which  include our  intangible  assets)  whenever  events or changes in
circumstances indicate that their carrying amount may not be recoverable.  As of
December 31, 2002, we have not been able to exploit the technologies  underlying
our intangible  assets due to the lack of available  working  capital during the
fiscal  year 2002.  Although  we and NCT  continue  to try to obtain  sufficient
working  capital to produce the new products we have  identified  and  developed
that use the technology  included in our intangible  assets, we determined that,
given our current situation,  recoverability testing was appropriate at December
31, 2002.  We  determined  that the carrying  amount of such assets were greater
than  their  fair  value.  Using the  estimated  discounted  future  cash  flows
attributable to the new products utilizing the technology,  or the fair value of
the assets,  we  determined  the  carrying  amount of the assets was impaired by
approximately $11,500,000.

Interest  expense for the year ended December 31, 2002  increased  approximately
$30,000,  or 119%,  from the  comparable  year ended  December  31,  2001.  This
increase was due to interest charges of approximately  $21,000 from NCT Hearing.
These charges were incurred on the outstanding note payable to NCT Hearing.  The
outstanding  note  payable  represents  amounts owed to NCT Hearing for services
provided  to Pro Tech by NCT Hearing and its  affiliated  companies,  as well as
cash  advances.  As of December 31, 2002,  the balance of the  outstanding  note
payable, including interest, was $1,064,703.

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 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 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 were selected to be a part of
the McDonald's  International  Owner  Operator's trade show in 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.

                                       14
<PAGE>

Gross margin percent  decreased 3.2% 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 $1,873,000, 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.

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.

                                       15
<PAGE>

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,  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.

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.

LIQUIDITY AND CAPITAL RESOURCES

During the current  fiscal  year ended  December  31,  2002,  we funded  working
capital requirements with continued use of our short-term factoring  arrangement
and advances  from NCT (our  ultimate  parent  company) and its  affiliates.  In
addition,  NCT paid expenses on behalf of Pro Tech,  which had been allocated to
them.  We have taken steps to reduce our  working  capital  requirements.  These
steps include the reorganization of the call center operations, the reduction of
work force levels in all areas of product  operations,  and the  institution  of
tighter  controls over all  expenditures.  Subsequent to December 31, 2002,  Pro
Tech  received  over  $190,000  in cash  advances  from NCT to fund our  working
capital  needs during 2003.  Management  believes Pro Tech will have  sufficient
funds to meet  anticipated  working capital  requirements  through  December 31,
2003.  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. We will seek to raise
additional financing as a result of our relationship with NCT and NCT Hearing.

On March  27,  2002,  we were  able to roll the  outstanding  loan  from  Westek
Electronics,  a  stockholder,  for $162,750 into a new note for $176,584,  which
included accrued interest payable from the old note. The new note became payable
on June 27, 2002.  We were able to roll this note plus accrued  interest  into a
$180,493  note with interest at 8.5% and payment terms of $3,500 due on the last
day of each month  starting  on August 31,  2002  through  May 31, 2003 with the
remaining balance due on June 27, 2003.

At December 31, 2002, cash and cash equivalents were $13,624.

The current ratio  (current  assets to current  liabilities)  was .98 to 1.00 at
December 31, 2002, as compared to .79 to 1.00 at December 31, 2001. Pro Tech had
a working  capital  deficit  of  $19,543 at  December  31,  2002 as opposed to a
deficit of $320,525 at December  31,  2001.  This  $300,982  decrease in working
capital  deficit  was  due  mainly  to  the  exchange  of  $556,142  of  current
liabilities,  representing  amounts  owed  to NCT  and  its  subsidiaries  as of
December 31, 2001, into noncurrent  liabilities in conjunction  with the signing
of a  secured  promissory  note due on April 1,  2004.  See  Notes to  Financial
Statements: Note 5 - Other Liabilities and Note 7 - Noncurrent Notes Payable Due
to Affiliates for further  details.  In addition,  we decreased our  outstanding
accounts  payable by  approximately  $120,000.  Offsetting  these  decreases  in
current liabilities was a decrease in inventories of approximately $353,000.


                                       16
<PAGE>

Cash  flows  used in  operating  activities  was  $10,276  during the year ended
December 31, 2002. This use of funds was driven  primarily by the 2002 generated
net loss (excluding the  $11,5000,000  impairment  charge) of $1,904,878 and the
decrease of approximately $120,000 in accounts payable. These uses of funds were
offset by depreciation  and amortization  expense of $1,093,778,  an approximate
$509,000 increase in notes payable for services received; a decrease in accounts
receivable  of   approximately   $56,000  and  a  decrease  in   inventories  of
approximately $353,000 (including a current provision of $10,000).

The net cash used by  financing  activities  was  $22,414  during the year ended
December  31,  2002,  due to payments  made on notes  payable and capital  lease
obligations.

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

Capital Expenditures

There were no material  commitments for capital  expenditures as of December 31,
2002, and no material commitments are anticipated in the near future.

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.


                                       17
<PAGE>

ITEM 8. FINANCIAL STATEMENTS

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

<TABLE>
<CAPTION>

                                                                                        Page
                                                                                        -----
<S>                                                                                        <C>
Independent Auditors' Report (Eisner LLP)                                                F-1
Independent Auditors' Report (Morgan, Jacoby, Thurn, Boyle & Associates, P.A.)           F-2
Balance Sheets as of December 31, 2001 and 2002                                          F-3
Statements of Operations for the year ended October 31, 2000; the two months
ended December 31, 2000; and the years ended December 31, 2001 and 2002                  F-4

Statements of Stockholders' Equity for the year ended October 31, 2000; the two
months ended December 31, 2000; and the years ended December 31, 2001 and 2002           F-5

Statements of Cash Flows for the year ended October 31, 2000; the two months
ended December 31, 2000; and the years ended December 31, 2001 and 2002                  F-6

Notes to Financial Statements                                                            F-7

</TABLE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

On June 4, 2002,  the Company  notified its  principal  independent  accountant,
Morgan,  Jacoby,  Thurn,  Boyle &  Associates,  P.A.  ("MJTB") that the auditing
services of MJTB would no longer be required.  MJTB's  dismissal was approved by
the Pro Tech's Board of Directors.

During Pro Tech's year ended  December 31, 2001;  the two months ended  December
31, 2000;  and the years ended October 31, 2000 and 1999, and for the subsequent
interim  period,  there  were  no  disagreements  with  MJTB on any  matters  of
accounting principles or practices,  financial statement disclosure, or auditing
scope or procedure,  which disagreement(s),  if not resolved to the satisfaction
of MJTB,  would have caused it to make  reference  to the subject  matter of the
disagreement(s)  in connection with its report.  The report of MJTB, dated March
1,  2002,  on Pro  Tech's  financial  statements  as of and for the  year  ended
December 31, 2001;  the two months ended  December 31, 2000; and the years ended
October  31, 2000 and 1999,  included  in Pro Tech's 2001 Annual  Report on Form
10-K, did not contain an adverse opinion and was not qualified or modified as to
audit scope or accounting principles.

On June 4, 2002, Pro Tech engaged the  accounting  firm of Eisner LLP ("Eisner")
as principal  independent  accountant to audit the  financial  statements of Pro
Tech for the fiscal year ending December 31, 2002. The engagement was authorized
by Pro Tech's Board of Directors.  During the year ended  December 31, 2001; the
two months ended December 31, 2000; and the year ended October 31, 2000, and the
subsequent interim period,  neither Pro Tech nor any person on Pro Tech's behalf
consulted Eisner regarding either the application of accounting  principles to a
specified  transaction,  either  completed  or  proposed,  or the  type of audit
opinion that might be rendered on Pro Tech's  financial  statements,  except for
consultations  regarding  consolidation  into  NCT  Group,  Inc.'s  (Pro  Tech's
ultimate parent company) financial statements audited by Eisner.

                                       18
<PAGE>

                                    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,
2003.

 Name                    Age              Positions and Offices
 ----------------------  -----   -----------------------------------------------
 Keith Larkin             79     Chairman of the Board
 Richard Hennessey        43     President, Chief Operating Officer and Director
 Michael J. Parrella      55     Director
 Irene Lebovics           50     Director
 Cy E. Hammond            48     Director
 Mark Melnick             44     Secretary
 Debra Kirven             38     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 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

                                       19
<PAGE>

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, 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. He
joined NCT as Controller  in January 1990 and was appointed a Vice  President in
February  1994. On September 4, 1997, Mr. Hammond was elected to serve as Acting
Chief  Financial  Officer,  Treasurer  and  Assistant  Secretary  of  NCT  Audio
Products,  Inc.  On  January 5, 2000,  he was  elected to serve as Acting  Chief
Financial  Officer,   Treasurer  and  Assistant  Secretary  for  Advancel  Logic
Corporation.  On August 20, 2002,  Mr. Hammond was elected to serve as President
and  Treasurer  of DMC New  York,  Inc.  He also  serves  as  Treasurer  for the
following NCT subsidiaries: Artera Group, Inc., Chaplin Patents Holding Company,
Inc.,  Distributed Media  Corporation,  DMC HealthMedia Inc.,  Midcore Software,
Inc., NCT Far East, Inc., NCT Hearing Products, Inc., NCT Muffler, Inc., and NCT
Video  Displays,  Inc. 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  various  NCT  subsidiaries,   as  follows:   Artera  Group,  Inc.,
ConnectClearly.com,  Inc.,  DMC  Cinema,  Inc.,  DMC New York,  Inc.,  NCT Video
Displays,  Inc.,  Artera Group  International  Limited,  and Noise  Cancellation
Technologies (Europe), 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

                                       20
<PAGE>

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, 2002 to December 31, 2002.

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 year ended October 31, 2000; the two months ended December 31,
2000 and the fiscal years ended December 31, 2001 and 2002.

<TABLE>
<CAPTION>

                                                                                              Securities
                                                                           Other              Underlying                All
Name and                                                                  Annual           Options/Warrants            Other
    Principal Position          Year       Salary            Bonus      Compensation             SARs(#)            Compensation
---------------------------   ---------  --------------     ---------  ---------------    -------------------    -----------------
<S>                            <C>   <C>  <C>
Keith Larkin
  Chairman of the Board        10/31/00   $  22,500               -               -                     -                 -
                               12/31/00   $   7,500               -               -                     -                 -
                               12/31/01   $  56,750               -               -               540,000                 -
                               12/31/02   $   7,500               -               -               250,000                 -
Richard Hennessey
  President                    10/31/00   $  77,000               -               -                     -                 -
                               12/31/00   $  16,000               -               -               250,000                 -
                               12/31/01   $ 142,896  (a)          -               -                     -                 -
                               12/31/02   $ 151,667  (a)          -               -                     -                 -

</TABLE>

(a)  The 2001  amount  includes  $21,250 of salary  accrued  but not paid during
     2001.  This amount was paid during  2002.  The 2002 amount does not include
     the $21,250 accrued for in 2001, but does include $62,500 of salary accrued
     but not paid during 2002.

Compensation Arrangements with Certain Officers and Directors

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.

                                       21
<PAGE>

In addition,  Messrs. Larkin and Hennessey have been granted stock options under
the 1998 Stock Option Plan as described below.

Compensation of Directors

On February 1, 2002, Pro Tech and Mr. Larkin entered into an agreement regarding
compensation  to Mr.  Larkin  for his  services  as  Chairman  of the  Board  of
Directors of Pro Tech. This agreement provides for the following:

     1.   Options to purchase 250,000 shares of Pro Tech common stock (described
          below)
     2.   Coverage  under the health  benefit plans then in effect for employees
          of Pro Tech
     3.   A nominal  salary of $4,550  per  annum  included  in the above  noted
          compensation table.

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


                                       22
<PAGE>


                2002 Aggregated Option and Warrant Exercises and
                   December 31, 2002 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, 2002 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
                                                                        Underlying                        Value of Unexercised
                         Number of                                 Unexercised Options                    In-the-Money Options
                          Shares                                     and Warrants at                        And Warrants at
                         Acquired                                   December 31, 2002                      December 31, 2002
                            On              Value       ----------------------------------------    ----------------------------
Name                    Exercise (#)       Realized       Exercisable (#)     Unexercisable (#)     Exercisable     Unexercisable
-----------------     ----------------    -----------   -------------------  -------------------    -----------     ------------
<S>                                                              <C>                                    <C>              <C>
Keith Larkin                      -                -             790,000                    -           $ -              $ -

Richard Hennessey                 -                -             437,500               62,500           $ -              $ -

</TABLE>

During the fiscal year ended October 31, 2000; the two months ended December 31,
2000; and the fiscal years ended December 31, 2001 and 2002,  neither Mr. Larkin
nor Mr.  Hennessey  exercised  any stock  options.  The fair market value of Pro
Tech's common stock as of December 31, 2002 was less than the exercise price for
both Mr. Larkin's and Mr. Hennessey's stock options. Accordingly, as of December
31, 2002,  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  provided  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 1996 Plan  terminated on April 15, 2002. As
of December 31, 2002, there were no options outstanding under this Plan.

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. The  authorized  shares for this plan was increased to
30,000,000 on April 12, 2002 at Pro Tech's annual meeting of stockholders.

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:

                                       23
<PAGE>

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.

On February 1, 2002,  the Board of Directors  granted  options to Mr.  Larkin to
purchase up to 250,000  shares of common stock at an exercise price of $0.06 per
share,  the fair market  value on the date of grant.  The options  vested on the
date of grant. The options expire on February 1, 2009.

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 12, 2003 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,  2002;  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.

                                                Amount and
                                                 Nature of          Approximate
                                                Beneficial          Percentage
  Name of Beneficial Owner                     Ownership (1)       Of Class (1)
  --------------------------------------  ---------------------  ---------------
  Keith Larkin                                1,550,000   (2)        4.5%
  Richard Hennessey                             437,500   (3)        1.3%
  Michael J. Parrella                                 -   (4)           -
  Irene Lebovics                                      -   (4)           -
  Cy E. Hammond                                       -   (4)           -
  NCT Hearing Products, Inc.                 27,102,174   (5)       81.6%
  Alpha Capital Aktiengesellschaft           67,458,985   (6)       67.0%
  Zakeni Limited                              9,105,535   (7)       21.5%
  All Executive Officers and Directors
     as a Group (7 persons)                   1,987,500              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
     Electronics,  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.

                                       24
<PAGE>

(3)  Includes shares of common stock from stock option  agreements,  as follows:
     (1) 250,000 shares of common stock underlying stock option agreements,  all
     of which are  presently  exercisable  (of such  options,  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
     187,500 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.  Mr. Parrella 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)  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 12, 2003.
     Such conversion  shares were determined using 80% of an assumed $0.01 price
     per share five-day  average  closing bid price of the 15-day trading period
     immediately  preceding  the assumed  conversion.  Pursuant to a contractual
     restriction between Pro Tech and Alpha Capital, Alpha Capital is prohibited
     from  holding  in excess of 4.99% of our  common  stock at any given  time,
     subject to certain exceptions.

(7)  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 12, 2003.  Such conversion
     shares  were  determined  using  80% of an  assumed  $0.01  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.

ITEM 14. CONTROLS AND PROCEDURES.

Pro Tech's President and the Chief Financial Officer, conducted an evaluation of
the effectiveness of Pro Tech's  disclosure  controls and procedures (as defined
in Exchange Act Rule 13a-14 and  15(d)-14)  within 90 days of the filing of this
report. Based on that evaluation,  the President and the Chief Financial Officer
concluded that the disclosure  controls and procedures are effective in ensuring
that all  material  information  required to be filed in this annual  report has
been made  known to them in a timely  fashion.  There  have been no  significant
changes in internal  controls,  or in factors  that could  significantly  affect
internal controls,  subsequent to the date the President and the Chief Financial
Officer completed their evaluation.

                                       25
<PAGE>

                                     PART IV

ITEM 15. 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 (Eisner LLP)

     Independent  Auditors' Report (Morgan,  Jacoby,  Thurn, Boyle & Associates,
     P.A.)

     Balance Sheets as of December 31, 2001 and 2002

     Statements of Operations  for the year ended October 31, 2000;  for the two
     months ended  December 31, 2000;  and for the years ended December 31, 2001
     and 2002

     Statements of Stockholders' Equity for the year ended October 31, 2000; for
     the two months ended  December 31, 2000;  and for the years ended  December
     31, 2001 and 2002

     Statements of Cash Flows for the year ended  October 31, 2000;  for the two
     months ended  December 31, 2000;  and for the years ended December 31, 2001
     and 2002

     Notes to Financial Statements

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

     (3) Exhibits including those Incorporated by Reference.

          10   (a) *Stock Option Agreement,  dated February 1, 2002, between the
               Company and Keith  Larkin,  incorporated  herein by  reference to
               exhibit 10(a) of Pro Tech's Form 10-Q filed on May 13, 2002.

          16   Change  in   certifying   accountants,   dated   June  4,   2002,
               incorporated  herein by reference to Pro Tech's current report on
               Form 8-K filed on June 7, 2002.

          99   (a) Certification of Form 10-K for the fiscal year ended December
               31, 2002 pursuant to 18 U.S.C.  Section 1350, as adopted pursuant
               to Section 906 of the Sarbanes-Oxley Act of 2002.

     *    Denotes a management contract or compensatory plan or arrangement.

(b)  Reports on Form 8-K.

     On June 7, 2002, the company filed a report on Form 8-K, dated June 4, 2002
     announcing a change in independent accountants.

                                       26
<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 31, 2003.

                          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.

<TABLE>
<CAPTION>

              Signature                                    Capacity                             Date
   ----------------------------------------  ----------------------------------------------------------------------------------
<S>                                                                                             <C> <C>


     /s/ RICHARD HENNESSEY                             Director and President             March 31, 2003
   ----------------------------------------
         Richard Hennessey


    /s/ KEITH LARKIN                                   Chairman of the Board              March 31, 2003
   ----------------------------------------
         Keith Larkin


    /s/ MICHAEL J. PARRELLA                            Director                           March 31, 2003
   ----------------------------------------
         Michael J. Parrella


    /s/ CY E. HAMMOND                                  Director                           March 31, 2003
   ----------------------------------------
         Cy E. Hammond


    /s/ IRENE LEBOVICS                                  Director                          March 31, 2003
   ----------------------------------------
         Irene Lebovics

</TABLE>

                                       27
<PAGE>


            CERTIFICATION OF PRESIDENT (Principal Executive Officer)
            Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Richard Hennessey, certify that:

1.   I have reviewed this annual report on Form 10-K of Pro Tech Communications,
     Inc.;

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

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

4.   The  registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during the period in which this annual report
          is being prepared;
     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation  Date");  and c) presented in this
          annual  report  our  conclusions   about  the   effectiveness  of  the
          disclosure  controls and procedures  based on our evaluation as of the
          Evaluation Date;

5.   The registrant's  other certifying  officer and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent  function):
     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and
     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

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

Date:  March 31, 2003

                                /s/ RICHARD HENNESSEY
                                -----------------------------------------
                                Richard Hennessey
                                President (Principal Executive Officer)

                                       28
<PAGE>


                    CERTIFICATION OF CHIEF FINANCIAL OFFICER
            Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Debra Kirven, certify that:

1.   I have reviewed this annual report on Form 10-K of Pro Tech Communications,
     Inc.;

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

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

4.   The  registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during the period in which this annual report
          is being prepared;
     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and
     c)   presented   in  this   annual   report  our   conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

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

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

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

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

Date:  March 31, 2003

                             /s/ DEBRA KIRVEN
                             ------------------------
                             Debra Kirven
                             Chief Financial Officer

                                       29
<PAGE>



                          INDEPENDENT AUDITORS' REPORT


Board of Directors and Stockholders
Pro Tech Communications, Inc.

We have audited the accompanying balance sheet of Pro Tech Communications,  Inc.
as of December 31, 2002 and the related  statements  of  operations,  changes in
stockholders'  equity and cash flows for the year then  ended.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Pro Tech Communications,  Inc.
as of December 31, 2002 and the results of its operations and its cash flows for
the year then ended in conformity with accounting  principles generally accepted
in the United States of America.



Eisner LLP

New York, New York
January 31, 2003

With respect to Note 1(a)
March 31, 2003
                                      F-1
<PAGE>

                          Independent Auditors' Report

The Board of Directors
Pro Tech Communications, Inc.:

We have audited the accompanying balance sheet of Pro Tech Communications,  Inc.
as of December 31, 2001 and the related statements of operations,  stockholders'
equity and cash flows for the year 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 December 31, 2001,  and the results of its  operations  and its cash flows
for the year 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-2
<PAGE>

<TABLE>
<CAPTION>

PRO TECH COMMUNICATIONS, INC.
BALANCE SHEETS

                                                                                                       December 31,
                                                                                        ---------------------------------------
                                                                                              2001                  2002
                                                                                        ------------------     ----------------
<S>                                                                                          <C>                   <C>
ASSETS
Current assets:
     Cash and cash equivalents                                                               $     46,881          $    13,624
     Accounts receivable, less allowance for doubtful accounts
        of $24,784; and $27,309, respectively                                                     219,434              160,961
     Inventories, net of reserves (Note 2)                                                        945,744              592,536
     Due from officer/stockholder and employees                                                     2,876               63,113
     Other current assets                                                                           5,926               16,760
                                                                                        ------------------     ----------------
                     Total current assets                                                       1,220,861              846,994

Property and equipment, net (Note 3)                                                              756,365              601,183

Intangible assets (at adjusted cost for 2002),
     net of accumulated amortization of
     $1,164,821 and $2,096,677, respectively (Note 1)                                          15,142,671            2,710,815

Due from officer/stockholder                                                                       59,670                    -
Other assets                                                                                        5,353                4,500
                                                                                        ------------------     ----------------
                                                                                             $ 17,184,920          $ 4,163,492
                                                                                        ==================     ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable                                                                        $    546,917          $   426,976
     Accrued expenses (Note 4)                                                                    199,526              222,980
     Current portion of capital lease obligations (Note 12)                                        10,083                9,662
     Due to factor (Note 11)                                                                       64,030               34,165
     Other liabilities due to affiliates (Notes 5 and 7)                                          556,142                    -
     Notes payable (Note 6)                                                                         1,938                2,150
     Notes payable to stockholder (Note 6)                                                        162,750              170,604
                                                                                        ------------------     ----------------
                     Total current liabilities                                                  1,541,386              866,537

Noncurrent notes payable (Note 6)                                                                   8,611                6,461
Noncurrent notes payable due to affiliates (Note 7)                                                     -            1,064,703
Capital lease obligations (Note 12)                                                                36,021               31,767
                                                                                        ------------------     ----------------

                     Total liabilities                                                          1,586,018            1,969,468
                                                                                        ------------------     ----------------

Commitments (Note 12)

Series B redeemable convertible preferred stock, $.01 par value, $1,000
     stated value, authorized, issued and outstanding 500 shares (Note 8)                         633,438              653,438
                                                                                        ------------------     ----------------

Stockholders' equity (Notes 9 and 10):
     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 50 shares                         52,521               54,521
     Common stock, $.001 par value, authorized 40,000,000 and 300,000,000
          shares, respectively; issued and outstanding 33,200,311 shares                           33,200               33,200
     Additional paid-in-capital                                                                18,473,079           18,451,079
     Accumulated deficit                                                                       (3,593,336)         (16,998,214)
                                                                                        ------------------     ----------------
                     Total stockholders' equity                                                14,965,464            1,540,586
                                                                                        ------------------     ----------------
                                                                                             $ 17,184,920          $ 4,163,492
                                                                                        ==================     ================
The accompanying notes are an integral part of the financial statements.

</TABLE>

                                      F-3
<PAGE>


<TABLE>
<CAPTION>

PRO TECH COMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS
                                                                                                            For the Year
                                                                  For the Year      Two Months                 Ended
                                                                     Ended            Ended                  December 31,
                                                                   October 31,     December 31,    --------------------------------
                                                                      2000             2000            2001              2002
                                                                 ---------------  --------------   --------------    --------------

<S>                                                               <C>              <C>              <C>               <C>
Net sales                                                         $   1,562,484    $    307,902     $  2,175,306      $  1,648,949

Cost of goods sold                                                      623,555         129,378          920,127           774,316
                                                                 ---------------  --------------   --------------    --------------

        Gross profit                                                    938,929         178,524        1,255,179           874,633

Selling, general and administrative expenses                          1,275,290         545,586        3,655,711         2,703,425
Impairment charge on intangible assets                                        -               -                -        11,500,000
Provision for doubtful accounts                                           7,990           1,574            9,958            29,800
                                                                 ---------------  --------------   --------------    --------------

       Loss before other income (expense)                              (344,351)       (368,636)      (2,410,490)      (13,358,592)

Other income (expense) :
    Interest income                                                       4,877             721            4,530             3,109
    Interest expense                                                    (36,592)         (9,434)         (24,792)          (54,399)
    Miscellaneous income                                                  1,726           1,029            4,305             5,004
    Loss on disposal of fixed assets                                          -               -           (2,945)                -
                                                                 ---------------  --------------   --------------    --------------

Net loss                                                          $    (374,340)   $   (376,320)    $ (2,429,392)     $(13,404,878)

Adjustments attributable to preferred stock (Notes 8 and 9):
   Preferred stock beneficial conversion feature                  $   3,569,000    $          -     $     79,190          $ 45,810
   Preferred stock embedded dividend requirement                        375,000               -           62,661                 -
   Preferred stock dividend (accretion)                                   5,425          10,027           24,085            22,000
                                                                 ---------------  --------------   --------------    --------------

Net loss attributable to common stockholders - as reported        $  (4,323,765)   $   (386,347)    $ (2,595,328)     $(13,472,688)

Adjustment of beneficial conversion (Note 18)                         2,444,000               -                -                 -
                                                                 ---------------  --------------   --------------    --------------

Net loss attributable to common stockholders - as adjusted        $  (1,879,765)   $   (386,347)    $ (2,595,328)     $(13,472,688)
                                                                 ===============  ==============   ==============    ==============

Basic and diluted loss per share attributable to common
   stockholders - as previously reported                          $       (0.57)   $      (0.01)    $      (0.08)     $      (0.41)

Adjustment of beneficial conversion (Note 18)                              0.32               -                -                 -
                                                                 ---------------  --------------   --------------    --------------

Basic and diluted loss per share attributable to common
   stockholders - as adjusted                                     $       (0.25)   $      (0.01)    $      (0.08)     $      (0.41)
                                                                 ===============  ==============   ==============    ==============

Weighted average common shares outstanding -
   basic and diluted                                                  7,537,855      28,248,438       32,281,034        33,200,311
                                                                 ===============  ==============   ==============    ==============

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

</TABLE>

                                      F-4
<PAGE>

<TABLE>
<CAPTION>

PRO TECH COMMUNICATIONS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY  (Note 9)

                                                   Series A
                                                   Preferred               Common
                                                     Stock                  Stock
                                            ----------------------    ---------------------
                                             Shares     Amount         Shares     Amount
<S>                <C> <C>                            <C>             <C>          <C>
Balance at October 31, 1999                      -    $       -       4,254,000    $ 4,254

Issue common stock under
     stock option plans (Note 10)                -            -          12,000         12

Issue common stock in exchange for certain
     intangible assets including 279,688
     shares issued as issuance costs
     net or related,
     issuance costs of $179,678                  -            -      23,982,438     23,982

Sale of preferred stock                      1,500    1,500,000               -          -

Dividend on preferred stock                      -        5,425               -          -

Net loss                                         -            -               -          -
                                            ---------------------    ---------------------
Balance at October 31, 2000                  1,500    1,505,425      28,248,438     28,248

Dividend on preferred stock                      -       10,027               -          -

Net loss                                         -            -               -          -
                                            ---------------------    ---------------------
Balance at December 31, 2000                 1,500    1,515,452      28,248,438     28,248

Exchange/conversion of preferred stock      (1,450)  (1,478,578)      4,951,873      4,952

Issuance costs on sale of Series B
     Preferred Stock (Note 8)                    -            -            -          -

Redemption adjustment on Series B
   Preferred Stock (Note 8)                      -            -            -          -

Dividend on preferred stock                      -       15,647            -          -

Net loss                                         -            -            -          -
                                            ---------------------    ---------------------
Balance at December 31, 2001                    50       52,521      33,200,311     33,200

Dividend on preferred stock                      -        2,000            -          -

Net loss                                         -            -            -          -

                                            ---------------------    ---------------------
Balance at December 31, 2002                    50    $  54,521      33,200,311   $ 33,200
                                            =====================    =====================

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


PRO TECH COMMUNICATIONS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY  (Note 9)

                                              Additional
                                               Paid in         Accumulated
                                               Capital            Deficit          Total
                                             --------------    --------------    ------------

Balance at October 31, 1999                   $  1,137,018       $  (413,284)     $   727,988

Issue common stock under
     stock option plans (Note 10)                    4,548                 -            4,560

Issue common stock in exchange for certain
     intangible assets including 279,688
     shares issued as issuance costs
     net or related,
     issuance costs of $179,678                 16,103,832                 -       16,127,814

Sale of preferred stock                                  -                 -        1,500,000

Dividend on preferred stock                         (5,425)                -                -

Net loss                                                 -          (374,340)        (374,340)
                                             ---------------    --------------    ------------
Balance at October 31, 2000                     17,239,973          (787,624)       17,986,022

Dividend on preferred stock                        (10,027)                -                -

Net loss                                                 -          (376,320)        (376,320)
                                             ---------------    --------------    ------------
Balance at December 31, 2000                    17,229,946        (1,163,944)      17,609,702

Exchange/conversion of preferred stock           1,473,626                 -                -

Issuance costs on sale of Series B
     Preferred Stock (Note 8)                      (81,408)                -          (81,408)

Redemption adjustment on Series B
   Preferred Stock (Note 8)                       (125,000)                -         (125,000)

Dividend on preferred stock                        (24,085)                -           (8,438)

Net loss                                                 -        (2,429,392)      (2,429,392)
                                             ---------------    --------------    ------------
Balance at December 31, 2001                    18,473,079        (3,593,336)      14,965,464

Dividend on preferred stock                        (22,000)                -          (20,000)

Net loss                                                 -       (13,404,878)     (13,404,878)

                                             ---------------    --------------    ------------
Balance at December 31, 2002                  $ 18,451,079      $(16,998,214)     $ 1,540,586
                                             ===============    ==============    ============

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

</TABLE>

                                      F-5
<PAGE>

<TABLE>
<CAPTION>

PRO TECH COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS                                               For the Year      For the             For the Year Ended
                                                                          Ended      Two Months Ended           December 31,
                                                                       October 31,      December 31,   -----------------------------
                                                                          2000            2000             2001             2002
                                                                      --------------  -------------    --------------  -------------
<S>                                                                    <C>             <C>              <C>            <C>
Cash flows from operating activities:
       Net loss                                                        $ (374,340)     $ (376,320)      $ (2,429,392)  $(13,404,878)
       Adjustments to reconcile net loss to net
              cash used in operating activities:
           Note payable issued for services received                            -               -                  -        508,561
           Depreciation and amortization                                  128,658         164,153          1,052,737      1,093,778
           Impairment charge on intangible assets                               -               -                  -     11,500,000
           Provision for doubtful accounts                                  7,990           1,574              9,958          2,524
           Provision for obsolete inventory                                     -               -                  -         10,000
           Loss on disposal of fixed assets                                     -               -              2,945              -
           Changes in operating assets and liabilities:
              (Increase) decrease in accounts receivable                 (223,439)         (2,007)           192,413         55,949
              (Increase) decrease in inventories, net                    (272,977)        (91,728)          (295,156)       343,208
              Decrease (increase) in other assets                           2,161          24,062              2,316        (10,683)
              Increase(decrease) in accounts payable                      116,703         (48,057)           378,167       (119,941)
              Increase in accrued expenses                                  1,777           8,235            101,876         41,071
              Increase (decrease) in other liabilities                    101,057         115,516            403,599        (29,865)
                                                                      --------------  ------------      -------------  -------------
                 Net cash used in operating activities                 $ (512,410)     $ (204,572)      $   (580,537)  $    (10,276)
                                                                      --------------  ------------      -------------  -------------
Cash flows from investing activities:
       Capital expenditures                                              (130,152)         (1,129)          (543,702)             -
       Proceeds on sale of fixed asset                                          -               -                350              -
       Net change in Due from officer/stockholder and employees               852            (417)            (4,940)          (567)
                                                                      --------------  ------------      -------------  -------------
                 Net cash used in investing activities                 $ (129,300)     $   (1,546)      $   (548,292)  $       (567)
                                                                      --------------  ------------      -------------  -------------
Cash flows from financing activities:
       Proceeds from:
           Notes payable                                                  536,145               -                  -              -
           Sale of preferred stock (net) (Notes 8 and 9)                1,020,347               -            500,000              -
           Sale of common stock (net)                                       4,560               -                  -              -
       Payment made on:
           Notes payable                                                        -         (86,170)              (797)       (11,701)
           Issuance/conversion costs on preferred stock                         -               -            (81,408)             -
           Capital lease obligations                                       (9,362)         (1,739)           (18,466)       (10,713)
                                                                      --------------  ------------     --------------  -------------
                 Net cash provided by (used in) financing activities   $1,551,690      $  (87,909)      $    399,329   $    (22,414)
                                                                      --------------   ------------    --------------  -------------
Net increase (decrease) in cash and cash equivalents                   $  909,980      $ (294,027)      $   (729,500)  $    (33,257)
Cash and cash equivalents - beginning of period                           160,428       1,070,408            776,381         46,881
                                                                      --------------  ------------     --------------  -------------
Cash and cash equivalents - end of period                              $1,070,408      $  776,381       $     46,881   $     13,624
                                                                      ==============  ============     ==============  =============

Supplemental disclosures of cash flow information:
   Cash paid during the year for interest                              $   36,592      $    2,072       $     10,883   $      26,293
                                                                      ==============  ============     =============== =============

Supplemental disclosures of non-cash investing and financing activities:

During the year ended October 31, 2000; the year ended December 31, 2001; and
     the year ended December 31, 2002, Pro Tech acquired assets under capital
     leases for $2,909; $55,865; and $6,038, 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;
     the year ended December 31, 2001; and the year ended December 31, 2002, Pro
     Tech adjusted the carrying value of preferred stock and additional
     paid-in-capital for a 4% dividend totaling $5,425; $10,027; $24,085; and
     $22,000, respectively.

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

</TABLE>

                                      F-6
<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. Our chief purpose is designing,  developing, producing and
          marketing lightweight  telephone headsets emphasizing  performance and
          durability  at a cost  below  that of our  competitors.  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.

          As a result of the  issuance of common  stock in  September  2000 (see
          Note 9 - 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,  2002,  NCT  Hearing  owned  approximately  81.6% of the
          outstanding common stock of Pro Tech.

          On December  28,  2000,  we changed our  year-end  from  October 31 to
          December  31 to  conform  to  NCT.  Accordingly,  we  reported  on the
          two-month transition period in our Form 10-K as of December 31, 2000.

          Pro Tech has experienced  recurring net losses from  operations  since
          its  inception,  aggregating  $16,998,214  through  December 31, 2002.
          These losses,  which include the cost for  development of products for
          commercial  use and an  impairment  charge  of  $11,500,000  (see Note
          1(o)),  have been funded  primarily  from product  sales,  the sale of
          common stock and preferred stock  convertible  into common stock,  and
          advances  directly  and  indirectly  from  NCT  (our  ultimate  parent
          company).

          In  addition,  Pro Tech had  negative  working  capital  of $19,543 at
          December  31,  2002.  Pro Tech has taken  steps to reduce its  working
          capital  requirements.  These steps include the  reorganization of its
          call center operations, the reduction of workforce levels in all areas
          of the products  operations,  and the institution of tighter  controls
          over all expenditures.

          Subsequent  to December 31, 2002,  Pro Tech  received over $190,000 in
          cash advances from NCT to fund our working  capital needs during 2003.
          In  addition,  as a result  of the  steps  that  Pro  Tech has  taken,
          management  believes  Pro  Tech  will  have  sufficient  funds to meet
          anticipated working capital requirements through December 31, 2003.

     (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.

                                           F-7
<PAGE>
     (d)  Revenue and Cost Recognition

          Pro Tech  recognizes  revenue as  products  are  shipped and title has
          passed. 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.  Freight charges are charged to
          expense  when  incurred.  Not all  customers  are billed for  shipping
          costs;  however, the amount of shipping costs collected from customers
          is netted  against our  incurred  freight  charges.  The net amount of
          freight  charges is included in  selling,  general and  administrative
          expenses in the statements of operations.

     (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  (including  assets  held  under  capital  leases).   Leasehold
          improvements are amortized over the term of the lease. Asset lives are
          3-10  years for  machinery  and  equipment  and 5 years for  leasehold
          improvements. Repair and maintenance costs are charged to expense when
          incurred.

     (f)  Intangible Assets

          Intangible  assets consist of licensed rights to certain  technologies
          acquired  from NCT Hearing  through the  issuance of common stock (see
          Note  9  -  Capital   Stock).   Amortization  is  computed  using  the
          straight-line  method over the initial  estimated  useful lives of the
          assets of 17.5 years.  Intangible assets are periodically reviewed for
          impairments  where the fair value is less than the carrying value. For
          the year ended  December  31,  2002,  we had an  impairment  charge of
          $11,500,000  (see  Note  1(o)).   Amortization  expense  was  $77,655;
          $155,309;  $931,857; and $931,857 for the year ended October 31, 2000;
          the two months ended  December 31, 2000;  and the years ended December
          31, 2001and 2002,  respectively.  Estimated  amortization  expense for
          each of the next five years is $180,721.

     (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. See Note 13 - Income Taxes.

     (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  $54,424;  $5,088;  $42,242;  and
          $17,638 for the year ended  October  31,  2000;  the two months  ended
          December  31,  2000;  and the years ended  December 31, 2001 and 2002,
          respectively.

     (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 $41,554; $11,517; $71,097;


                                      F-8
<PAGE>

          and $10,377 for the year ended October 31, 2000;  the two months ended
          December  31,  2000;  and the years ended  December 31, 2001 and 2002,
          respectively.

     (j)  Fair Value of Financial Instruments

          The estimated  fair value of Pro Tech's notes  receivable  and current
          liabilities  approximates  the carrying  amount due to the  short-term
          nature of such financial instruments.  The fair value of certain loans
          to or  from  stockholders  are  not  readily  determinable  due to the
          related party nature of those instruments.

     (k)  Use of Estimates

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

     (l)  Reclassifications

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

     (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." 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.  The potential common
          shares are as follows:
<TABLE>
<CAPTION>

                                   For the year         For the two                      For the year ended
                                     ended              months ended                        December 31,
                                   October 31,          December 31,      -----------------------------------------
                                      2000                 2000                   2001                    2002
                                 ----------------    -----------------     ------------------     -----------------
<S>                                    <C>                  <C>                    <C>                   <C>
Warrants                               4,500,000            4,500,000              5,500,000             5,500,000
Options                                  978,000            1,103,000              1,187,500             1,235,000
Convertible preferred stock            3,010,850            5,522,784             11,686,646            72,869,875
                                 ----------------    -----------------     ------------------     -----------------
                                       8,488,850           11,125,784             18,374,146            79,604,875
                                 ================    =================     ==================     =================

</TABLE>

          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," as amended by SFAS No. 148, "Accounting for Stock-Based
          Compensation   -  Transition  and  Disclosure  an  amendment  to  FASB
          Statement No. 123," and continues to apply Accounting Principles Board
          Opinion  No. 25 and  related  interpretations  in  accounting  for our
          stock-based compensation plans.

                                      F-9
<PAGE>

          No compensation expense was recorded during the year ended October 31,
          2000;  during the two months ended  December 31, 2000;  and during the
          years  ended  December  31,  2001 and 2002 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 No. 123, the net loss and loss
          per share attributable to common stockholders would have been adjusted
          to the pro forma amounts indicated below:

<TABLE>
<CAPTION>

                                       For the             For the two             For the year ended
                                     year ended            months ended                December 31,
                                     October 31,           December 31,       ----------------------------------
                                       2000                 2000                  2001                2002
                                    ----------------     ----------------     -------------     ----------------
<S>                                  <C>                  <C>                  <C>                <C>
Net loss attributable to
  common stockholders,
  as reported                        $   (1,879,765) (a)  $     (386,347)      $(2,595,328)       $ (13,472,688)
Stock-based employee costs
  based on fair value method,
  net of related taxes                      (17,867)             (57,295)         (188,793)             (14,596)
                                    ----------------     ----------------     -------------     ----------------
Net loss attributable to
  common stockholders,
  pro forma                          $   (1,897,632)      $     (443,642)      $(2,784,121)       $ (13,487,284)
                                    ================     ================     =============     ================
Loss per common share:
     As reported                     $        (0.25) (a)  $        (0.01)      $     (0.08)             $ (0.41)
                                    ================     ================     =============     ================
     Pro forma                       $        (0.25) (a)  $        (0.02)      $     (0.09)             $ (0.41)
                                    ================     ================     =============     ================

(a) See Note 18 - Adjustment included in October 2000 financial statements.

</TABLE>

          The fair value of each option grant on the date of grant was estimated
          using the Black-Scholes option-pricing model reflecting the following:

                               For the two              For the year ended
                              months ended                 December 31,
                              December 31,        ------------------------------
                                  2000                 2001              2002
                           -------------------    ---------------     ----------
Volatility                               100%               100%          100%
Expected life of options         4 to 7 years       5 to 7 years       7 years
Risk free interest rate                 5.54%              4.25%         3.65%
Dividend yield                             0%                 0%            0%

          There were no options granted during the fiscal year ended October 31,
          2000.  The weighted  average fair value of options  granted during the
          two months ended  December  31, 2000 and the years ended  December 31,
          2001 and 2002 was $0.34, $0.14 and $0.05, respectively.

     (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  undiscounted  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 year ended October 31,
          2000,  for the two months ended  December  31, 2000,  and for the year
          ended  December 31, 2001. As of December 31, 2002,  due to the lack of
          available  working capital,  we reviewed the impairment  testing under
          the  guidelines of SFAS No. 144. We estimated the future cash flows of
          those products identified as


                                      F-10
<PAGE>

          using the patent rights  included under our intangible  assets.  These
          future  cash flows were then  compared  to the  carrying  value of our
          intangible  assets on the books as of December 31, 2002. Based on this
          comparison, we determined an impairment was present. We calculated the
          impairment  loss by  comparing  the carrying  value of the  intangible
          assets to the fair value of the intangible  assets.  We determined the
          fair value of the intangible assets based on the discounted cash flows
          attributable  to  the  new  products  utilizing  the  technology.  The
          discount  rate used was based on cost of capital  associated  with our
          Series B convertible  preferred stock. The resulting impairment charge
          of $11,500,000 is included in our statement of operations for the year
          ended December 31, 2002.

     (p)  Concentrations of Credit Risk

          Cash and cash equivalents and trade  receivables  potentially  subject
          Pro Tech to  concentration  of credit risk.  We maintain cash and cash
          equivalents  in accounts  with one  financial  institution  in amounts
          which, at times,  may be in excess of the FDIC insurance  limit. As of
          December  31,  2002,  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  alternative means and, in effect,  increase our
          inventory to cover the anticipated returns under warranty.

     (q)  Recent Accounting Standards

          In June 2001, the Financial Accounting Standards Board ("FASB") issued
          SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and
          Other Intangible Assets." SFAS No. 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 No. 142, we are
          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 No. 142 became  effective  for fiscal years
          beginning  after  December 15, 2001 and required  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 were to be subsumed into goodwill upon adoption.  In
          addition, the useful lives of recognized intangible assets acquired in
          transactions  completed  before July 1, 2001 were to be reassessed and
          the remaining  amortization periods adjusted accordingly.  Adoption of
          SFAS  No.  141 did not  have a  significant  impact  on our  financial
          statements.  Adoption  of SFAS No. 142  required  us to  evaluate  the
          future  cash flows of those  products  identified  as using the patent
          rights included under our intangible  assets.  Using the guidelines in
          SFAS No. 142 for  intangible  assets with finite lives,  the estimated
          future cash flows were  determined  in  accordance  with SFAS No. 144,
          "Accounting for the Impairment or Disposal of Long-Lived  Assets." The
          estimated  future cash flows were then compared to the carrying  value
          of our  intangible  assets.  As of January 1, 2002, we did not have an
          impairment  on the  intangible

                                      F-11
<PAGE>

          assets.  Due to the lack of available working capital during the year,
          we repeated the impairment testing as of December 31, 2002. See Note 1
          (o) for a discussion of the  impairment  charge  taken.  In accordance
          with SFAS No. 142, we will continue to monitor  activities  associated
          with our intangible assets for possible future impairments.

          In April  2002,  the FASB issued  SFAS No.  145,  "Rescission  of FASB
          Statements No. 4, 44, and 64,  Amendment of FASB Statement No. 13, and
          Technical  Corrections."  SFAS No. 145 rescinds Statement No. 4, which
          required  all  gains and  losses  from  extinguishments  of debt to be
          aggregated and, if material,  classified as an extraordinary item, net
          of related income tax effect. Upon adoption of SFAS No. 145, companies
          will be  required  to  apply  the  criteria  in APB  Opinion  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"  in determining the
          classification of gains and losses resulting from the  extinguishments
          of debt.  SFAS No. 145 is effective for fiscal years  beginning  after
          May 15,  2002.  We  believe  adoption  of SFAS No.  145  will  have no
          material effect on our financial statements.

          In June 2002,  the FASB  issued SFAS No.  146,  "Accounting  for Costs
          Associated  with Exit or Disposal  Activities."  SFAS No. 146 requires
          companies  to  recognize  costs   associated  with  exit  or  disposal
          activities  when  they  are  incurred  rather  than  at the  date of a
          commitment to an exit or disposal plan.  SFAS No. 146 is to be applied
          prospectively to exit or disposal activities  initiated after December
          31, 2002. We believe SFAS No. 146 will have no material  effect on our
          financial statements.

          In  December  2002,  the FASB issued  SFAS No.  148,  "Accounting  for
          Stock-Based  Compensation  - Transition and Disclosure an amendment of
          FASB Statement No. 123." SFAS No. 148 amends SFAS No. 123, "Accounting
          for  Stock-Based  Compensation,"  to  provide  alternative  methods of
          transition  for a voluntary  change to the fair value based  method of
          accounting for stock-based employee  compensation.  In addition,  SFAS
          No. 148 amends the disclosure  requirements of SFAS No. 123 to require
          prominent  disclosures in both annual and interim financial statements
          about the method of accounting for stock-based  employee  compensation
          and the effect of the method used on reported results. SFAS No. 148 is
          effective  for fiscal years ending  after  December 15, 2002.  We have
          applied the additional disclosure requirements of SFAS No. 148 as they
          relate to options  granted to  employees  (see Note 10 - Stock  Option
          Plans).

(2)  Inventory

Inventory consisted of the following:

                                                      December 31,
                                         ----------------------------------
                                              2001               2002
                                         --------------     ---------------
Finished goods                               $ 609,852           $ 379,089
Raw materials                                  273,202             196,330
Work in progress                                62,690              27,117
                                         --------------     ---------------
    Gross inventory                            945,744             602,536
Less:  reserve for obsolete inventory                -              10,000
                                         --------------     ---------------
Total Inventory                              $ 945,744           $ 592,536
                                         ==============     ===============

                                      F-12
<PAGE>


(3)  Property and Equipment, Net

The following is a summary of property and equipment:

                                               December 31,
                                    -----------------------------------
                                         2001                2002
                                    --------------     ----------------
Production molds                        $ 454,076            $ 454,076
Office equipment                          146,556              146,556
Production equipment                       39,514               39,514
Leased equipment                           79,235               83,188
Leasehold improvements                    315,050              315,050
Vehicles                                   12,414               12,414
Marketing displays                         16,160               16,160
                                    --------------     ----------------
    Total cost                          1,063,005            1,066,958
Less accumulated depreciation
  and amortization                        306,640              465,775
                                    --------------     ----------------
Total Property and equipment, net       $ 756,365            $ 601,183
                                    ==============     ================

Total  depreciation  and  amortization  expense,  with  respect to property  and
equipment,  was $51,546, $8,844 $120,194 and $161,219 for the year ended October
31, 2000;  for the two months ended  December 31, 2000;  and for the years ended
December 31, 2001 and 2002, respectively.

(4)  Accrued Expenses

Accrued expenses consisted of the following:

                                               December 31,
                               --------------------------------------
                                    2001                    2002
                               ------------------     ---------------
Accrued warranty expense               $  96,391           $  69,486
Accrued payroll and vacation              69,554             115,070
Other accrued expenses                    33,581              38,424
                               ------------------     ---------------
Total Accrued expenses                 $ 199,526           $ 222,980
                               ==================     ===============

(5)  Other Liabilities

Other liabilities consisted of the following:

                                              December 31,
                                  ---------------------------------
                                       2001               2002
                                  ----------------     ------------
Due to NCT (see note 7)                 $ 195,298        $       -
Due to NCT Hearing (see note 7)           325,733                -
Due to NCT Europe (see note 7)             35,111                -
                                  ----------------     ------------
Total Other liabilities                 $ 556,142        $       -
                                  ================     ============

(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 entered into a new note which included
the original  principal amount plus accrued interest to date. This $162,750 note
matured  on March 27,  2002 and bore  interest  at 8.5% per  annum,  payable  at
maturity.  On the maturity  date, Pro Tech entered into a new note that included
the original principal plus accrued interest to date. This $176,584 note matured
on June 27, 2002 and bore  interest at 8.5% per annum,  payable at maturity.  On
the maturity date, Pro Tech  renegotiated this note plus accrued interest into a
$180,493  note with  interest at 8.5%.  Payment terms on the new note are $3,500
(including interest) due on the last day of each

                                      F-13
<PAGE>


month  starting  on August 31,  2002  through  May 31,  2003 with the  remaining
balance due on June 27, 2003. As of December 31, 2002,  the balance of this note
was $170,604.

On May 13, 2001, Pro Tech received a bank loan of $11,346. The loan provides for
equal monthly payments of $245,  including interest at prime plus 2.3% (6.55% at
December 31, 2002),  through May 13, 2006. The loan is secured by a vehicle with
a net book value of $5,662 at December  31, 2002.  As of December 31, 2002,  the
balance  outstanding was $8,611 and future maturities are: 2003,  $2,150;  2004,
$2,385; 2005, $2,646; and 2006 $1,430.

(7)  Noncurrent Notes Payable Due to Affiliates

On September 30, 2002, a promissory note due to NCT Hearing, bearing interest at
prime  (4.25% at  December  31,  2002) and due on April 1,  2004,  was issued in
exchange for $906,232,  the amount due to NCT and its  subsidiaries at September
30, 2002. The balance of this note payable plus accrued  interest as of December
31, 2002 was $916,437.

On December 31, 2002, a promissory note due to NCT Hearing,  bearing interest at
prime  (4.25% at  December  31,  2002) and due on April 1,  2004,  was issued in
exchange for $148,266,  the amount due to NCT and its  subsidiaries for services
provided  to Pro Tech during the fourth  quarter of 2002.  See Note 15 - Related
Party Transactions.

(8)  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 cumulative 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 in a manner similar to a dividend 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  statement  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 and
$20,000 for the years ended December 31, 2001 and 2002, respectively.

We have  classified  the  Preferred  Stock-B as  temporary  equity  rather  than
stockholders' equity because, at December 31, 2001 and 2002, respectively, 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.  Such  redemption  would not be within the sole
control of Pro Tech.

                                      F-14
<PAGE>

The  Preferred  Stock-B is carried on our balance  sheet as of December 31, 2001
and 2002 at $633,438 and $653,438,  respectively, the redemption value, which is
comprised of 125% of the stated value of $500,000; plus the accrued accretion of
$8,438 and $28,438, respectively.

(9)  Capital Stock

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

On April 12, 2002, Pro Tech's stockholders approved an amendment to the Articles
of  Incorporation  to increase the number of  authorized  shares of common stock
from 40 million to 300 million.  The increase in authorized shares was effective
as of August 5, 2002,  upon  acceptance  by the Secretary of State of Florida of
Articles of Amendment to the Amended and Restated  Articles of  Incorporation of
Pro Tech.

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 cumulative  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 statement 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;
$15,647;  and $2,000 for the year ended  October 31, 2000;  the two months ended
December 31, 2000; and the years ended December 31, 2001 and 2002, 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. No shares of Preferred
Stock-A were converted during the year ended December 31, 2002.

                                      F-15
<PAGE>

Common Stock

On  September  12,  2000,  Pro Tech  obtained  a license  for  rights to certain
technologies  from NCT Hearing 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, December 31, 2001 and December 31, 2002,
$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 107.3
million at December 31, 2002. This reserve  includes  amounts for the conversion
of  preferred  stock and for the exercise of options and  warrants.  On July 12,
2002, Pro Tech, NCT and the holder of eight  convertible notes payable issued by
NCT entered into an  agreement.  Under this  agreement,  the holder of the notes
payable waived her right to exchange such notes into Pro Tech common shares.  In
consideration  of these  waivers,  the holder was given a warrant for 20 million
shares of NCT common  stock.  Prior to this  agreement,  the  convertible  notes
payable were  exchangeable in Pro Tech common stock at prices ranging from $0.03
to $0.14 per share, or a total of approximately 215 million shares.

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.  See Note 18 - Adjustment  included in October
2000 financial statements.  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.

                                      F-16
<PAGE>


The following table summarizes warrants to purchase common stock during the year
ended October 31, 2000, during the two months ended December 31, 2000 and during
the years ended December 31, 2001 and 2002:

<TABLE>
<CAPTION>

                                              October 31, 2000                           December 31, 2000
                                ---------------------------------------     ------------------------------------------
                                                        Weighted                                       Weighted
                                                         Average                                       Average
                                 Shares              Exercise Price                Shares           Exercise Price
                                -------------     ---------------------     ------------------    --------------------
<S>                                <C>                           <C>
Warrants outstanding,
     beginning of period                   -             $           -              4,500,000                 $ 0.500
Warrants granted                   4,500,000                     0.500                      -                       -
Warrants terminated                        -                         -                      -                       -
                                -------------     ---------------------     ------------------    --------------------
Warrants outstanding,
     end of period                 4,500,000             $       0.500              4,500,000                 $ 0.500
                                =============     =====================     ==================    ====================


                                              December 31, 2001                         December 31, 2002
                                ----------------------------------------    ------------------------------------------
                                                         Weighted                                          Weighted
                                                          Average                                          Average
                                 Shares               Exercise Price                Shares              Exercise Price
                                -------------     ----------------------    ------------------    --------------------
Warrants outstanding,
     beginning of period           4,500,000             $        0.500              5,500,000                 $ 0.433
Warrants granted                   1,000,000                      0.130                      -                       -
Warrants terminated                        -                          -                      -                       -
                                -------------     ----------------------    ------------------    --------------------
Warrants outstanding,
     end of period                 5,500,000             $        0.433              5,500,000                 $ 0.433
                                =============     ======================    ==================    ====================

</TABLE>

As of December 31, 2002, the  outstanding  warrants have exercise prices ranging
from  $0.13  to $0.50  and a  weighted  average  remaining  contractual  life of
approximately 1 year.

(10) 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 Board of Directors determined in 2000 that no further grants would
be made under the 1996 Plan. The 1996 Plan terminated on April 15, 2002.

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 million  shares of common stock on August 11, 2000.
The  authorized  shares for this plan were  increased to 30 million on April 12,
2002 at Pro Tech's annual meeting of stockholders.

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.

                                      F-17
<PAGE>

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,  50,000 expired
during the year  ended  December  31,  2002 and 50,000  remain  outstanding  and
exercisable at December 31, 2002.

On April 13, 1999,  the remaining  1998 Plan options to purchase  200,000 shares
were  granted  to an  officer at an  exercise  price of $0.375  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 and
expire on June 1, 2008.  The  exercise  price of these  options was equal to the
fair market  value of the common  stock on the grant date.  On February 1, 2002,
Pro Tech  modified  the 540,000  options to exclude  the clause  under which the
options would expire upon termination of employment.  Although the change in the
termination  clause  was a  modification  of the  original  grant,  there was no
accounting consequence because the market price on the date of such modification
was lower than the exercise price of the grant.

On June 1, 2001,  Pro Tech  issued  options to two  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  expired in April 2002.  The exercise price of
these  options  was equal to the fair  market  value of the common  stock on the
grant date.

On February 1, 2002,  Pro Tech  issued  options to the  Chairman of the Board of
Directors  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. The exercise price of these options was
equal to the fair market value of the common stock on the grant date.

The following table  summarizes stock option activity for the year ended October
31, 2000;  for the two months ended  December 31, 2000;  and for the years ended
December 31, 2001 and 2002:

                                      F-18
<PAGE>


<TABLE>
<CAPTION>

                                           October 31, 2000                                     December 31, 2000
                             --------------------------------------------   ------------------------------------------------
                                                        Weighted                                          Weighted
                                                        Average                                           Average
                                 Shares                Exercise Price           Shares                 Exercise Price
                             ----------------    ------------------------   ----------------------    ---------------------
<S>                                <C>                      <C>                     <C>                        <C>
Options outstanding,
     beginning of the period       1,040,000                $ 0.441                 1,028,000                  $ 0.442
Options granted                            -                      -                   500,000                    0.438
Options exercised                    (12,000)                (0.380)                        -                        -
Options expired                            -                      -                         -                        -
                             ----------------    -------------------        ----------------------    ---------------------
Options outstanding,
     end of period                 1,028,000                $ 0.442                 1,528,000                  $ 0.440
                             ================    ===================        ======================    =====================
Options exercisable,
     end of period                   978,000                $ 0.445                 1,103,000                  $ 0.444
                             ================    ===================        ======================    =====================


                                         December 31, 2001                              December 31, 2002
                             --------------------------------------------    -------------------------------------------
                                                        Weighted                                          Weighted
                                                        Average                                           Average
                                Shares                 Exercise Price               Shares             Exercise Price
                             --------------------    --------------------    --------------------    -------------------
Options outstanding,
     beginning of the period           1,528,000                 $ 0.440               1,740,000                $ 0.283
Options granted                          940,000                   0.170                 250,000                  0.060
Options exercised                              -                       -                       -                      -
Options expired                         (728,000)                 (0.468)               (617,500)                (0.259)
                             --------------------    --------------------    --------------------    -------------------
Options outstanding,
     end of period                     1,740,000                 $ 0.283               1,372,500                $ 0.253
                             ====================    ====================    ====================    ===================
Options exercisable,
     end of period                     1,187,500                 $ 0.265               1,235,000                $ 0.232
                             ====================    ====================    ====================    ===================

</TABLE>

As of December 31, 2002,  Pro Tech's  outstanding  stock  options have  exercise
prices  ranging  from  $0.06  to  $0.4375  and  a  weighted  average   remaining
contractual life of approximately 4.7 years. As of December 31, 2002, 28,627,500
options were available for future grants under the 1998 Stock Option Plan.

(11) 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.

                                      F-19
<PAGE>

On March 26,  2001,  Pro Tech  entered  into a factoring  agreement.  Under this
agreement 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 4.25% at December 31,
2002.  In addition,  at December 31, 2002 we had $6,417 in reserve at the factor
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,
the  factor  may  charge an  additional  commitment  fee,  as  described  in the
agreement.  As of December 31, 2002, no such fees were  required.  Such factored
receivables  are subject to  acceptance  by the factor.  The factor 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.

At December 31, 2002,  accounts  receivable  factored  under this  agreement and
still  outstanding were $40,582,  of which,  $34,165 had been received under the
factoring  agreement  under the recourse  provisions.  Total fees incurred under
this arrangement  amounted to $13,008 and $6,346 during the years ended December
31,  2001  and  2002,   respectively.   Interest  expense  incurred  under  this
arrangement  amounted to $5,901 and $3,393  during the years ended  December 31,
2001 and 2002, respectively.

(12) 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, 2002 are:

Year ended December 31
----------------------                  Capital Leases       Operating Leases
                                        --------------       ----------------
     2003                                 $    13,298           $    99,942
     2004                                      13,109                95,924
     2005                                      13,109                96,563
     2006                                       9,992                16,184
     2007 and thereafter                          373                     -
                                        --------------       ----------------
Total minimum lease payments                   49,881          $    308,613
                                                             ================
Less amount representing interest               8,452
                                        --------------
Present value of net minimum capital
    lease payments                             41,429
Less current installments                       9,662
                                        --------------
Obligations under capital leases,
   exlcuding current installments         $    31,767
                                        ==============

Rent  expense  under lease  agreements  totaled  $41,696,  $6,421,  $127,099 and
$129,765 for the year ended October 31, 2000;  for the two months ended December
31, 2000; and for the years ended December 31, 2001 and 2002, respectively.

(13) Income Taxes

There was no provision for income taxes for the year ended October 31, 2000, for
the two months ended December 31, 2000, or for the years ended December 31, 2001
and 2002 due to operating losses incurred.

Pro Tech had a  deferred  tax asset of  approximately  $755,700  and  $6,523,000
available  to offset  future  federal  income tax,  subject to  limitations  for
alternative minimum tax, at December 31, 2001 and 2002, respectively. Pro Tech's
deferred tax assets have been fully reserved by a valuation  allowance since the
realization of its benefit is uncertain.  The  difference  between the statutory
federal income tax rate of 34%

                                      F-20
<PAGE>

and Pro  Tech's  effective  tax  rate  is due to an  increase  in the  valuation
allowance of $127,276 for the year ended October 31, 2000;  $127,949 for the two
months ended  December 31,  2000;  and $825,993 for the year ended  December 31,
2001.  Included  in the change in  valuation  of  $5,767,300  for the year ended
December  31,  2002 is  $680,000,  the net  effect  of a  change  in Pro  Tech's
effective rate to 34% from the rate used in the previous years of 15%.

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 10 - 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 such  compensation  was not  recognized  as an expense for financial
reporting  purposes in accordance  with APB 25. 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 SFAS 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 year ended  October 31,  2000;  the two
months ended December 31, 2000; and the years ended December 31, 2001 and 2002.

Pro Tech has net operating loss  carryforwards  for federal and state income tax
purposes  amounting to $6,233,000  and  $6,308,000,  respectively,  which expire
through the year 2022. 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
9 - 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:


                                                             December 31,
                                                    ---------------------------
                                                         2001           2002
                                                    -----------    ------------
Accounts receivable principally due to
   allowance for doubtful accounts                   $   4,900      $   10,000
Accrued warranty expense                                19,000          26,000
Net operating loss carryforwards                       787,600       2,345,000
Amortization and impairment on intangible assets             -       4,162,000
Contribution carryforwards                                 500           1,000
                                                    -----------    ------------
                                                       812,000       6,544,000
Less valuation allowance                               755,700       6,523,000
                                                    -----------    ------------
Total deferred tax assets                               56,300          21,000
                                                    -----------    ------------

Property and equipment principally due to
   differences in depreciaton                              300          21,000
Amortization and impairment on intangible assets        56,000               -
                                                    -----------    ------------
Total deferred tax liabilities                          56,300          21,000
                                                    -----------    ------------
Net deferred taxes                                   $       -      $        -
                                                    ===========    ============

                                      F-21
<PAGE>

(14) Business Division Information

During 2001, management identified two new business divisions that we have added
to our business focus.  These two new identifiable  business  divisions are: (1)
Telecommunications  Systems  Integration;  and (2) Call  Center  Operations.  At
December 31, 2001 and 2002 neither of these divisions is a separately reportable
segment in accordance with SFAS No. 131. Prior to establishment of these two new
business   divisions,   we  were  predominately  in  the  design,   development,
manufacture and marketing of lightweight  telecommunications headsets, currently
known as Product Business.  We evaluate division  performance based on net sales
and  operating  income.  Management  does not track  division  data or  evaluate
division performance on additional financial information.  As such, there are no
separately   identifiable   division   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  divisions.   Likewise,
depreciation  expense  and  capital  additions  are also not tracked by business
division.

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 division data is as follows:


<TABLE>
<CAPTION>

                                                                                     Division
                                              ------------------------------------------------------------------------------------
                                                                       Telecom
                                                    Product            Systems              Call Center             Total
                                                   Business          Integration            Operations            Divisions
                                              --------------------   -----------------     ----------------    -------------------
<S>                                             <C>                                                             <C>
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)

For the year ended December 31, 2002:
   Sales to external  customers                 $   1,500,883             131,378               16,688          $   1,648,949
   Loss from operations                         $ (13,321,985)               (657)             (35,950)         $ (13,358,592)

</TABLE>

Pro Tech is divided into the following three business divisions:

Product  Business:  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.

Telecommunications  Systems Integration  Business: 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 providing
telecommunications  system integration support to the small office and the large
corporate call center clients.

                                      F-22
<PAGE>


Call Center  Operations  Business:  During  2001,  we  launched  the Call Center
Operations Business.  utilized customer relationship management technologies and
strategies in order to achieve business division objectives.  As of December 21,
2001, we suspended operations in the Call Center Operations Business due to poor
performing contracts.  We resumed limited operations during the third quarter of
2002.

(15) 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 was 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 principal and
interest  amounted  to $59,670  and  $63,009 as of  December  31, 2001 and 2002,
respectively.

As of  December  31,  2001 and 2002,  Pro Tech  owed  $556,142  and  $1,064,703,
respectively, to NCT and its subsidiaries, for various research,  administrative
and  accounting  services  provided to Pro Tech.  See Note 7 - Noncurrent  Notes
Payable Due to  Affiliates.  During  2002,  NCT  charged Pro Tech  approximately
$203,000  for health  benefits  paid by NCT,  approximately  $120,000  for labor
provided by NCT  employees  and  approximately  $193,000 for Pro Tech's share of
parent company expenses allocated to each subsidiary.

As of January  1, 2001,  Pro Tech  began  participating  in the NCT Group,  Inc.
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 and 2002,  the total amount owed to NCT for benefit  claims
was approximately  $185,000 and $388,000,  respectively,  and 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 or 2002.

(16) Major Customers

During  the  year  ended  October  31,  2000,   two   customers   accounted  for
approximately  34% of net sales.  During the two months ended December 31, 2000,
one  customer  accounted  for  approximately  35% of net  sales.  Two  customers
accounted for  approximately  35% of net sales  generated  during the year ended
December 31, 2001. Two customers  accounted for  approximately  38% of net sales
generated during the year ended December 31, 2002.

(17) 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-23
<PAGE>


                               For the two            For the
                              months ended           year ended
                              December 31,          December 31,
                                  1999                  2000
                            -----------------      ---------------
Net Sales                      $     116,716          $ 1,729,875
                            =================      ===============
Gross profit                   $      77,838          $ 1,053,455
                            =================      ===============
Loss from operations           $     (67,581)         $  (738,484)
                            =================      ===============
Net loss                       $     (68,906)         $  (779,342)
                            =================      ===============
Net loss attributable to
     common shareholders       $     (68,906)         $(2,294,794)
                            =================      ===============
Net loss per share             $       (0.02)         $     (0.20)
                            =================      ===============
Weighted average number
     of shares outstanding         4,266,000           11,405,853
                            =================      ===============

(18) Adjustment included in October 2000 financial statements

The October  2000  financial  statements  include an  adjustment  to reflect the
allocation of proceeds to multiple equity instruments  (Series A preferred stock
and warrants) and to adjust the beneficial conversion feature. The net effect of
the adjustment is to decrease the beneficial conversion feature and the net loss
attributable to common  shareholders  by $2,444,000 to $1,879,765,  or $0.32 per
share to $0.25 per share.

(19) Selected Quarterly Financial Data (Unaudited)

The following tables contain selected quarterly  financial data for each quarter
of 2001 and 2002. Pro Tech believes that the following  information reflects all
normal  recurring   adjustments   necessary  for  a  fair  presentation  of  the
information for the periods presented. The operating results for any quarter are
not necessarily indicative of results for any future periods.

(Unaudited)

<TABLE>
<CAPTION>

                                                                     Year Ended December 31, 2001
                                          -------------------------------------------------------------------------------------
                                            1st Quarter     2nd Quarter      3rd Quarter     4th Quarter            Total
                                          -------------   --------------   --------------  -----------------   ----------------

<S>                                        <C>             <C>              <C>             <C>                 <C>
Net sales                                  $   618,021          634,949          462,034         460,302       $    2,175,306
Gross profit                               $   397,484          429,126          272,285         156,284       $    1,255,179
Loss attributable to common stockholders   $  (345,186)        (522,176)        (839,197)       (888,769)      $   (2,595,328)
Loss per share - basic and diluted         $     (0.01)           (0.02)           (0.03)          (0.02)      $        (0.08)

                                                                      Year Ended December 31, 2002
                                          -------------------------------------------------------------------------------------
                                            1st Quarter     2nd Quarter      3rd Quarter     4th Quarter            Total
                                          -------------   --------------   --------------  -----------------   ----------------

Net sales                                  $   443,796          439,212          407,357         358,584       $    1,648,949
Gross profit                               $   267,424          241,772          198,082         167,355       $      874,633
Loss attributable to common stockholders   $  (586,821)        (520,292)        (402,020)    (11,963,555)      $  (13,472,688)
Loss per share - basic and diluted         $     (0.02)           (0.02)           (0.01)          (0.36)      $        (0.41)

</TABLE>

                                      F-24