<PAGE>   1

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

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

                   For the fiscal year ended October 31, 1998

                                       OR

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

                         PRO TECH COMMUNICATIONS, INC.
--------------------------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)


           FLORIDA                                        59-3281593
-------------------------------                 -------------------------------
(State or other jurisdiction of                 (I.R.S. Employer Identification
 incorporation or organization)                             Number)


             3311 INDUSTRIAL 25TH STREET, FORT PIERCE, FLORIDA 34946
--------------------------------------------------------------------------------
                    (Address of principal executive offices)


                                 (561) 464-5100
--------------------------------------------------------------------------------
                           (Issuer's telephone number)


SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT: NONE

Securities registered under Section 12(g) of the Exchange Act: Common Stock, par
value $.001 per share

Transitional Small Business Disclosure Format (check One): Yes [ ]  No [X]

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.  Yes [X]  NO [ ]

Check if there is no disclosure of delinquent filers in response to item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [X]

The registrant's revenues for its most recent fiscal year: $1,142,482

As of January 29, 1999, the aggregate market value of shares of the registrant's
voting stock (based upon the average bid and asked price of such stock as
reported by the NASDAQ System of $0.50) held by non-affiliates of the registrant
was approximately $2,127,000. For the purposes of this computation, all
executive officers, directors and persons who beneficially own more than five
percent of the registrant's securities are deemed affiliates. Such determination
should not be an admission that such directors, officers or beneficial owners
are, in fact, affiliates of the registrant.

As of January 29, 1999, there were 4,254,000 shares of the registrant's common
stock outstanding.

Documents Incorporated by Reference: Yes


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TABLE OF CONTENTS
Form 10-K
Item Number

<TABLE>

PART I
<S>                                                                                    <C>
     1.  Description of Business .....................................................  1
     2.  Description of Property .....................................................  5
     3.  Legal Proceedings ...........................................................  5
     4.  Submission of Matters to a Vote of Security Holders .........................  5

PART II

     5.  Market for Common Equity and
         Related Stockholder Matters .................................................  6
     6.  Management's Discussion and
         Analysis or Plan of Operation ...............................................  7
     7.  Financial Statements ........................................................ F-1
     8.  Changes in and Disagreements with Accountants................................ F-1

PART III

     9.  Directors, Executive Officers, Promoters
         and Control Persons; Compliance with Section
         16(a) of the Exchange Act ................................................... 10
     10. Executive Compensation ...................................................... 11
     11. Security Ownership of Certain Beneficial Owners
         and Management .............................................................. 12
     12. Certain Relationships and Related Transactions .............................. 12 
     13. Exhibits and Reports on Form 8-K ............................................ 13


</TABLE>

<PAGE>   3


PART I

ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

Pro Tech Communications, Inc. (the "Company") was incorporated in the State of
Florida on October 5, 1994. From August 30, 1991 to October 31, 1994, the
Company's business was conducted by Pro Tech Systems, a limited partnership
organized under the laws of the State of California. Keith Larkin, the
President, Treasurer and Chairman of the Board of the Company, was general
partner of Pro Tech Systems and there were 12 limited partners in the limited
partnership. From the formation of Pro Tech Systems in 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 product. From June 1993 until October 1994, Pro Tech Systems was engaged
in limited manufacturing and marketing activities for its product. On November
1, 1994, all of the assets of Pro Tech Systems were transferred to the Company
as consideration for the issuance of 2,000,000 shares of the Company's common
stock, par value $.001 per share (the "Common Stock"), which were subsequently
distributed on a pro rata basis to each of the partners of the partnership. As
of December 13, 1994, Pro Tech Systems was formally dissolved.

The Company presently designs, develops, manufactures and markets lightweight
telecommunications headsets employing what the Company believes are new concepts
in advanced light weight design and marketing strategies involving the sale of
the Company's product directly to the commercial headset market as a replacement
for its competitors' products. The Company presently manufacturers and markets
its first design for the commercial headset market comprised of fast food
companies and other large quantity users of headset systems, and is in the
process of completing development of two other headsets for the telephone user
market, which includes telephone operating companies, government agencies,
business offices, and professional telephone centers. The Company delayed its
product introduction six months due to changes made in the final design and
consequently will commence testing on the Trinity (PRODUCTS) and will introduce
the APEX in the second quarter of 1998. The Company plans to introduce several
versions of these telephone headsets in the second quarter of this fiscal year.
In addition, the Company plans on introducing several new products this fiscal
year through marketing agreements and joint ventures with certain strategic
partners. The Company's business strategy is to continually offer lightweight
headsets and telephony products that employ cutting edge sound technologies with
an emphasis on price/performance.

In addition, the Company will continue to concentrate its efforts on the
production of that portion of the telephone headset that the user wears. 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, the electronic amplifier is relatively more complex, time consuming and
costly to produce as its requires many Component variations to interface with
the wide variety of telephone systems in the market. The electronic amplifier
also generally offers lower profit margins than the headset component. As a
result, the Company presently has out-sourced the first of several amplifiers
engineered to the Company's specifications.

The Company will also continue to concentrate its efforts on the production and
distribution of new headset designs having the capability of connecting to and
interfacing with various electronic amplifiers and telephone systems currently
in use. In addition, the Company has adopted a co-engineering product
development strategy through the use of joint engineering agreements with
companies with complimentary engineering patents. The Company projects that this
change strategy will greatly increase the product development cycle while
offering far superior products to its customers. At the current date there are
no signed agreements in place.


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The Company has continued to make substantial investments in technology and had
incurred development costs with respect to engineering prototypes,
pre-production models and field testing of several new products. Management
believes that the Company's investment in technology will result in the
improvement of the functionality, speed and cost of components products.

INDUSTRY BACKGROUND

The lightweight telephone headset industry commenced in 1961 when Plantronics,
Inc.("Plantronics"), a company founded by Keith Larkin, the Company's President,
Treasurer and Chairman of the Board, began marketing and selling the first
lightweight telephone headset under a patent issued to Mr. Larkin. Mr. Larkin
remained with Plantronics until May 1967, at which time Plantronics was the
principal manufacturer of lightweight telephone headsets in the world, and its
products were standard on the National Aeronautics and Space Administration's
Mercury, Gemini, and Apollo moon flights. See "DIRECTORS, EXECUTIVE OFFICERS,
PROMOTORS AND CONTROL PERSONS." Today, Plantronics is the world's largest
lightweight telephone headset manufacturer, with approximately $230 million of
net sales for the 1998 fiscal year.

The Company estimates that sales of lightweight telephone headsets exceeded $500
million in 1998 as per an Internal Marketing Study, with the market dominated by
two companies - Plantronics and GN Netcom. The product lines of these companies,
generally share similar configurations and are marketed at higher prices than
the products offered by the Company.

Designed specifically for air traffic controllers and other aerospace
applications, the first headsets were intended as a replacement for the heavy,
bulky headsets in use. While lightweight telephone headsets continue to be used
for such purposes, today telephone headsets are predominantly used as a
substitute to telephone handsets used by a wide variety of users, including
telephone operating companies and telephone call centers (such as airline
reservations, catalog sales and credit collection operations) and to a lessor
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 communications clarity and
security. The Company believes that these advantages will lead to increased
demand for telephone headsets.

Telephone headsets also have 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.

PRODUCTS

THE PROCOM. The Company's initial entry into the lightweight fast-food headset
market is the "ProCom." Weighing less than 2 ounces, the ProCom is worn by users
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 several various plug types offered
by the wireless belt-pack providers sold in many fast-food franchises around the
world. See "DESCRIPTION OF BUSINESS - Competition." The Company is presently
selling the ProCom to distributors at prices ranging from $28.00 to $49.00 per
headset, and the product is sold by the Company to retailers for $54.00 per
headset.

THE FREEDOM. The Freedom is an adaptation of the ProCom headset to allow for it
to be worn without a headband. Through the use of a Company engineered clip,
this headset attaches to the standard hat or visor being worn in the fast-food
franchise. The electronics in the Freedom are virtually the same as the ProCom
headset providing the same market acceptance. Through its own research, the
Company found the need for user comfort from the use of headsets over very long
time periods. The Company introduced this product in April 1998.

THE APEX. The Company has renamed the ASTRA headset and intends to introduce the
APEX headset for sale in the second quarter of 1999. After conducting its own
market research, the Company determined that there is a demand for a headset
which combines both over-the-head and over-the-ear features. As a result, the
Company designed the APEX to incorporate both of these features, which should
enhance the Company's ability to market the product to cellular, personal
computer and small office telephone users. The Company plans to offer the
headset version first with the interchangeable version later in the current
fiscal year. The APEX is a commercial adaptation of the headset that the Company
has designed for use by the National Aeronautics and Space Administration
("NASA"). The Boeing Company ("Boeing") is a prime contractor for NASA, and as
such has the responsibility to choose certain components and products used in
NASA's space program. The Company was chosen by Boeing as a supplier of
telephone headsets for NASA projects after the Company provided Boeing with
product specifications which met NASA's requirements for the product. Boeing
also subjected the Company's product to various tests in order to ensure that
the product would function under conditions for space travel. See "DESCRIPTION
OF BUSINESS - Marketing and Sales.

The APEX is a smaller design of the Trinity, with components reduced by 20% in
order to create a lightweight headset. The speaker and microphone positioning
can be easily adjusted by the user for the headset thereby allowing the product
to fit numerous head and ear sizes. In addition, the APEX has a detachable
headband allowing the users the choice of wearing the headset over the head or
over the ear. The Company presently intends to sell the APEX to distributors at
prices ranging from $28.00 to $49.00 per headset, and this product is planned to
be sold by the Company to retailers for $54.00 per headset.

THE A-10 AMPLIFIER. The A-10 amplifier is the first in a series of multi-line
amplifiers being offered with each of the Company's headsets. It is designed for
the SOHO market (small office/home office) and has been engineered to work with
over 90% of all existing phone systems in the world. The size is very small and
engineered to plug and play with most phone systems.

THE TRINITY. The Trinity has been designed for users in noisy environments. The
Company is currently in the process 


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of developing the Trinity for manufacture and sale. The Company anticipates
completing the development of the product by the first quarter of the 1999
calendar year. Unlike other headsets currently available, the Trinity will
employ a light (1/2 ounce) "acoustical ear cup" which completely surrounds the
users' 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 the Company
believes 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 headsets available to users operating in noisy
office environments. The Trinity headset can be worn in one of two mounting
methods: (i) over the ear (without a headband) by means of a contoured ear piece
inserted within the acoustical ear cup for positioning on either the left or
right ear; or (ii) over the head, by means of a detachable headband which can
support either one or two earcups. Like the ProCom, the Trinity will be produced
with a choice of adapters capable of interfacing with the electronic amplifiers
and telephone systems of most major manufactures. The Company presently intends
to sell the Trinity to distributors at prices ranging from $40.00 to $54.00 per
headset, and the product is planned to be sold by the Company to retailers for
$68.00 per headset.

The disparity in price between the cost to distributors and retailers for each
product described in this section is primarily a result of a shifting of direct
selling expenses from the Company to distributors. These expenses average
approximately $10.26 of the individual unit retail price, have been accepted by
distributors in return for a lower average purchase price. The Company offers
lower prices for its products to distributors who purchase certain quantities of
products to increase sales and gain market share for the Company's products.

MARKETING AND SALES

The Company presently intends to market its product primarily through its
officers and staff, utilizing industry contacts and calling upon potential
purchasers. The Company plans on supplementing the marketing efforts of its
employees by using electronic commerce from the Company's web site along with
independent sales representatives and strategic marketing agreements.

The Company markets and will continue to market its headsets directly to the
commercial headset market as a replacement for its competitors' headsets.
Examples of such purchasers include fast food companies and franchisees and
other large quantity users of commercial headset systems. The Company has
entered into a non-binding business relationship agreement with McDonald
Corporation ("McDonald") which allows the Company to sell its products on a
non-exclusive basis to McDonald franchises and company-owned restaurants.
Initial test sales to McDonald and its franchisees by the Company totaled
$424,300 in 1994, which included sales over 8,000 headsets to more than 3,500
McDonald restaurants. These numbers increased to over 18,600 headset sales to
more than 7,000 restaurants during fiscal year 1995 and 29,736 headset sales to
more than 8,000 restaurants during fiscal year 1998. The sale of the Company's
products to McDonald-owned restaurants and franchisee restaurants represented
approximately 21% and 17% of the Company's net sales for the fiscal year 1997
and fiscal 1998, respectively.

As the Company expands, it will direct its marketing and sales efforts at: (i)
telephone operating companies; (ii) telephone system manufacturers; (iii)
personal computer manufacturers; and (iv) government agencies. In addition;
manufacturers of new telephone systems and other telecommunication equipment
that utilize headsets have been targeted by the Company as a developing market
for telephone headsets. The Company will also supplement the above strategies
with joint ventures and marketing agreements with Companies with complimentary
technologies. Although the Company presently intends to attempt to sell its
products to several large telephone users, there can be no assurance that the
Company will be successful in such efforts. Another potential large volume
purchaser of headsets are manufacturers of personal computers, especially when
headsets become a standard telephone accessory. In addition, the Company plans
to market its products to government agencies. The Company's headset has been
approved for sale to Boeing, a prime contractor of NASA, for use by astronauts
in space travel. To date, the Company has had $5,515 of sales to Boeing for two
prototype headsets. While profits from government contracts are anticipated to
be minimal, such sales enhance the credibility and reputation of the selected
headset and manufacturer, especially with in the telephone industry.

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



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MANUFACTURING

The Company purchases the components for its headsets from four suppliers in the
Far East and 12 in the United States, who produce the components to the
Company's specification based upon the molds designed by the Company. The firms
that supply 90% of the component parts of the Company's products are Whitney
Blake Company of Vermont, Inc., Bellows Falls, Vermont; Primo Microphones Inc.,
McKenny, Texas; Globe Electronic Plug Connector, Inc., Taiwan; Chen Shing Spring
Co., Ltd., Taiwan, and Fine Acoustics Company, Ltd., Korea. An interruption in
the supply of a component for which the Company is unable to readily procure a
substitute source of supply could temporarily result in the Company's inability
to deliver products on a timely basis, which in turn could adversely affect its
operations. To date, the Company has not experienced any shortages of supplies.
Since such manufacturing occurs prior to the receipt of purchase orders, the
Company maintains an inventory of finished headsets as well as components. At
October 31, 1998 and 1997, the amount of the Company's inventory was $245,610
and $160,609 respectively. The increase in inventory is attributed to two
factors. First; the Company benefited from an individual headset component price
reduction for larger purchases made from its suppliers. Second, the additional
component parts purchased will be interchangeable on both of the new headsets
planned for market introduction later in fiscal year 1999.

Production of the Company's headsets consists of assembly operations conducted
at the Company's principal offices in Fort Pierce, Florida. The Company believes
that the Fort Pierce office presently possesses sufficient production capacity,
or could easily be expanded to accommodate up to $4 million of annual sales of
the Company's products. See "DESCRIPTION OF PROPERTY." In the event that
purchase orders were to exceed the production capabilities of the Fort Pierce
location, the Company would be required to enter into subcontracting
arrangements for the manufacturer of the products by third parties. A delay in
establishing such arrangements, if necessary, could adversely affect the
Company's ability to deliver products on a timely basis to its customers, which
in turn could adversely affect the Company's operations. The Company, however,
believes that subcontracting the manufacture of the Company's products could be
accomplished on short notice given the simple design of the Company's products.

COMPETITION

The lightweight telephone headset industry is highly competitive and
characterized by a few dominant manufacturers. The Company is aware of several
companies who manufacture telephone headsets, each of which possesses greater
financial, manufacturing, marketing and other resources than the Company.
Primary among the Company's competitors is Plantronics, the world's largest
manufacturer of lightweight telephone headset. The Company estimates Plantronics
share of the market to be 65% in North America and 60% worldwide and reported
net sales from all of its products (including electronic amplifiers and other
headset accessories and services) of approximately $200 million for the fiscal
year 1997. Other competitors include GN Netcom, Inc. and Hello Direct. This past
year, GN NetCom, Inc. purchased both UNEX Corporation and ACS Wireless in an
attempt to grow its market share through acquisitions. ACS Wireless was founded
by Mr. Larkin and the Company believes ACS Wireless previously retained a market
share of approximately 15%. See "DIRECTORS, EXECUTIVE OFFICERS, PROMOTORS AND
CONTROL PERSONS."

The Company believes that in selecting telephone headsets, user primarily
consider price, product quality, reliability, product design and features, and
warranty terms. The Company believes that its headsets are superior in design
and construction and substantially lower in price than the models currently
available from the Company's competitors. No assurances can be given, however,
that the Company's products will be perceived by users and distributors as
providing a competitive advantage over competing headsets. In addition, no
assurance can be given 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 with substantially
greater resources than the Company.

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

PROPRIETARY PROTECTION

The Company does not presently own any patents for any of its products or
technologies. Under the employment agreement of Keith Larkin, the Company's
President, Treasurer, and Chairman of the Board. Mr. Larkin has, however,
transferred to the Company any and all patentable rights he may have in the
ProCom, Trinity, Freedom and the APEX, and any feature thereof, as well as all
patent rights Mr. Larkin may conceive in the course of his employment with the
Company. See "EXECUTIVE COMPENSATION - Employment Agreement." The Company
intends to seek patent protection on its inventions at the appropriate time in
the future. The process of seeking patent protection can be lengthly and
expensive, and there can be no assurance that patents will issue from any
applications filed by the Company or that any patent issued will be of
sufficient scope or strength or provide meaningful protection or any commercial
advantage to the Company. The Company 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 the Company's operations.

Certain of the Company's employees involved in engineering and technical
programs will be required to enter into confidentially agreements as a condition
of employment. The Company does not currently own any registered trademarks,
although the Company intends to file trademark applications in the future with
respect to distinguishing marks.

Research and development costs are expensed when incurred and are included in 
selling, general and administrative expenses. The amount charged to expense 
during 1998 and 1997 was $40,815 and $21,400, respectively.


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EMPLOYEES

The Company currently has 13 full-time employees and 3 part-time employees,
including 3 persons in management, 4 persons in administration, 4 persons in
marketing and 5 persons in assembly and production. The Company intends to hire
up to 3 additional employees within calendar year 1999, 1 of whom will work in
production, 2 in marketing. None of the Company's employees are represented by a
collective bargaining unit and the Company believes that its relationship with
its employees is good.

ITEM 2.  DESCRIPTION OF PROPERTY

The Company's executive, sales and manufacturing offices occupy approximately
3,200 square feet of space located at 3309 and 3311 Industrial 25th Street, Fort
Pierce, Florida 34946, pursuant to two leases expiring on November 30, 1998. The
Company also has the option of renewing the leases expiring November 1999 for an
additional one-year period on the same terms and conditions. The monthly rental
rate will increase by approximately $100.00 per month. The Company's aggregate
monthly rent under both leases is $1,644.25. The Company considers its rental
space adequate for its present operations, and believes additional space is
available near its present location, if needed.

ITEM 3. LEGAL PROCEEDINGS

The Company is not party to any legal proceeding.

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

No matter was submitted during the fourth quarter of the fiscal year covered by
this Report to a vote of security holders.


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PART II

ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON

EQUITY AND OTHER SHAREHOLDER MATTERS

The Common stock began trading on the National Association of Securities
Dealers, Inc. Electronic Bulletin Board on March 22, 1996. The Company's 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 Electronic Bulletin Board for each of the fiscal quarters during which
the common stock has been traded.

Year ended

         OCTOBER 31, 1998           HIGH              LOW
         ----------------           ----              ---

         First Quarter              $4.49            $4.20
         Second Quarter             $2.86            $2.60
         Third Quarter              $0.97            $0.94
         Fourth Quarter             $0.36            $0.26

Year ended

         OCTOBER 31, 1997           HIGH              LOW
         ----------------           ----              ---

         First Quarter              $5.75            $0.875
         Second Quarter             $6.375           $3.50
         Third Quarter              $5.50            $2.875
         Fourth Quarter             $6.6875          $2.875

         Source of information, Dreyfus Brokerage Services, Inc.

         The market quotation reflects inter-dealer prices, without retail
mark-up, markdown, or commission and may not represent an actual transaction.

         As of January 25, 1999, there were 47 record holders of the Common
stock.

         On March 5, 1998, the Board of Directors adopted the 1998 Stock Option
Plan for the benefit of Directors, Officers, Employees and Consultants to the
Company. This plan authorized the issuance of up to 500,000 shares of common
stock. On August 4, 1998, 200,000 were granted to its officers, of which 150,000
were offered to Mr. Richard Hennessey, Director, Secretary and Vice President of
Marketing of which 50,000 options can be immediately exercised at an exercised
price of $.375 per share. The remainder would be vested over a two-year period.
Mr. Kenneth Campbell, Vice President of Operations options can be immediately
exercised at an exercise price of $.375 per share. An additional 100,000 option
shares were offered to the Company's 13 full time employees at an exercise price
of $.375 per share. These shares are immediately exerciseable. The stock option
exercise price was the fair market value of a share of common stock at the date
of the grant.

         The Company has not declared a cash dividend on its outstanding Common
Stock since its incorporation in October 1994 and does not anticipate declaring
a cash dividend in the reasonable foreseeable future.


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

RESULTS OF OPERATIONS

YEAR ENDED OCTOBER 31, 1998 AS COMPARED TO THE YEAR ENDED OCTOBER 31, 1997:

         For the year ended October 31, 1998, the Company realized a net loss of
$(223,416) compared to a net loss of $(12,241) for the year ended October 31,
1997. This difference is attributed to the following adjustments: (1) an
additional accrued warranty expense of approximately $97,000, (2) the write-off
of $36,062 owed to the Company from the closing of the Company's investment
banker firm under retainer, (3) a one time charge of approximately $50,000 to
the Company's production dept. as a result of a product re-call (4) the payment
of $25,000 due to the result of a mediated settlement with the Company's public
relations firm.

         Net sales for the year ended October 31, 1998 totaled $1,142,482 versus
$996,993 representing an increase of $145,489 or 14.6% over last year. The
Company continued the sale of its products through distributors augmenting these
sales with direct sales from the Company's own outbound telemarketing operation.
At the completion of fiscal year 1998, the Company sold a total of 29,673
headsets, as compared to 24,779 headsets in the previous year. This difference
represents an increase in sales of 4,894 headsets or 19.7% more than the
comparable twelve month period. Net unit sales of the ProCom headset increased
8% primarily from the expansion of sales into international markets. Consistent
with the Company's objectives, the indirect distribution channel accounted for
64% of net revenues and 74% unit volumes versus 63% of net revenues and 70% of
unit volumes in the comparable 1997 period. Sales from the Freedom headset, an
adaptation of the ProCom headset, increased to 10% of sales as the fast-food
market as this headset begins to receive market acceptance.

         Gross margin percent decreased 8% to 58% versus 66% in comparable 1997
period partially as a result of the above mentioned non-recurring recall expense
of approximately $50,000. The Company has since received customer assurances of
the acceptance of the changes made in the product recall. Selling, general and
administrative expenses for the fiscal year were $882,385 versus $698,785 in the
comparable 1997 period. This increase was the result of several factors. 
First, the Company incurred a $97,000 charge in accrued warranty expense to
support the continual increase in sales of its products and warranty activity.
Second, the Company has continued its investment in Research and Development and
new product development accounting for investments mold designs and component
testing. The Company intends to and is currently reviewing the feasibility of
adapting new sound technologies into its current and all future products. The
adaptation may result in several alliances with companies that have these
patented technologies. Although this is the Company's intention there is no
formal agreements in place and no assurances that that they will occur in the
future. Finally, the Company has increased its investment in marketing and
advertising expenses to support the introduction of several new products in
fiscal year 1999. In addition, in fiscal year 1997, an unaffiliated investment
banking firm was retained in order to proceed with the structuring of a
potential purchase of another business. The acquisition did not occur therefore
requiring the balance of the retainer, $36,062 to be repaid to the Company. The
firm did not honor its agreement and in fiscal year 1998 announced that it
closed its business. The Company, consequently assumed this loss. 

         The Company generated interest income of $24,719 for fiscal year 1998
as compared to $28,688 for the comparable 1997 year. The interest income
resulted from the Company's investment of the net proceeds from the 1996 private
placement of securities into short-term certificates of deposits.


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YEAR 2000 COMPLIANCE

         Many existing electronic systems, including computer systems, use only
the last two digits to refer to a year. Therefore, these systems may recognize a
date using "00" as 1900 rather than the year 2000. If not corrected, many
computers and other electronic applications and systems could fail or create
erroneous results when addressing dates on and after January 1, 2000. The
Company's products do not address or utilize dates in their operation, and,
accordingly, the Company's products should not fail due to the year 2000
problem. However, the Company uses and depends on information technology systems
(including business information computer systems and design and manufacturing
computer systems) and other machinery and equipment that includes embedded date
sensitive technology. The Company also depends on the proper functioning of date
sensitive electronic systems of third parties, such as customers and suppliers.
The failure of any of these systems to appropriately interpret the year 2000
could have a material adverse effect on our business, financial condition and
results of operations. The Company is undertaking efforts to ensure that its
business systems and those of our suppliers and customers are compliant with the
requirements of the year 2000. However, the Company's year 2000 program may not
be effective or the Company may not be able to implement it in a timely and
cost-effective manner. Our year 2000 efforts may not, therefore, ensure against
disruptions caused by the approach or advent of the year 2000. The year 2000
problem is potentially very widespread, and it is not possible to determine all
the potential risks that the Company may face. The Company's inability to remedy
its own year 2000 problems or the failure of third parties to do so may cause
business interruptions or shutdowns, financial loss, regulatory actions, harm to
the Company's reputation and exposure to liability.

         The Company believes the cost of administering its Year 2000 Compliance
program will not have a material adverse impact on future earnings. However,
potential costs and uncertainties associated with any Year 2000 Compliance
program depend on a number of factors, including software, hardware and the
nature of the industry in which the Company and its suppliers operate. In
addition, companies must coordinate with other entities with which they
electronically interact, such as customers, suppliers, financial institutions,
etc. The Company estimates that potential costs will not exceed $100,000. The
Company has incurred $2,000 in fiscal year 1998 costs in administering year 2000
compliance.

         Although the Company's evaluation of its systems is still in process,
there has been no indication that the Year 2000 Compliance issue, as it relates
to internal systems, will have a material impact on future earnings. After a
survey of its suppliers, the Company has determined that there are no material
Year 2000 Compliance supplier issues. The Company is currently implementing a
survey to its customers to determine if material Year 2000 Compliance issues
exist. Although unlikely, such potential problems remain a possibility and could
have a material adverse impact on the Company's future results. The Company
estimates completion of the evaluation process by June 30, 1999.


                                       8
<PAGE>   11


LIQUIDITY AND CAPITAL RESOURCES

         The current ratio (current assets to current liabilities) of the
Company was 4.45 to 1.00 at October 31,1998, as compared to 13.20 to 1.00 for
the same comparable 1997 fiscal year. At October 31, 1998, the Company's current
assets exceeded its current liabilities by approximately $724,769.

         During the fiscal year ended October 31, 1998 and thereafter, the
Company has funded its working capital requirements with cash flow from
operations. Management believes that the Company has sufficient funds to meet
the Company's anticipated working capital requirements for at least 12 months.
However, in order for the Company to maximize the potential of the telephone
user market and to enable the Company to expand into additional markets,
including government agencies and personal computers, the Company will require
additional capital. It is anticipated that the Company will seek to raise such
additional financing through a private offering of equity, or a joint venture
with a strategic partner although there are no agreements, understandings or
arrangements with respect to any additional financing and no assurances can be
given that the Company will be able to obtain such additional financing. The
Company presently does not intend to finance, to any significant extent, its
growth through debt financing.

Effective December 9, 1994, the Company entered into an amended and restated
employment agreement with Keith Larkin, the President, Chairman of the Board and
Treasurer of the Company. Under the agreement, Mr. Larkin will be entitled to
receive an annual salary of a maximum of $90,000 (as adjusted each year by at
least the percentage increase in the Consumer Price Index). The Company,
however, is only required to pay Mr. Larkin such a maximum annual salary if the
Company generates annual sales for a fiscal year of at least $2 million and has
pre-tax income equal to at least 20% of the Company's annual sales. In all other
cases, the Board of Directors sets Mr. Larkin's salary, taking into account the
Company's projected financial performance and cash required to satisfy the
Company's anticipated operating expenditures. See "EXECUTIVE COMPENSATION-
Employment Agreement."

ITEM 7. FINANCIAL STATEMENTS

     The financial statements and notes thereto are included herein beginning at
page F-1.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

     Not Applicable.


                                       9
<PAGE>   12


PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTORS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information with respect to the executive
officers and directors of the Company:

          NAME                  AGE       POSITION WITH THE COMPANY
          ----                  ---       -------------------------

          Keith Larkin          75       Chairman of the Board, President and
                                         Treasurer

          Rich Hennessey        39       Director, Secretary and Vice President


          Kenneth Campbell      57       Vice President of Operations

Keith Larkin is the founder, Chairman of the Board, President and Treasurer of
the Company. Mr. Larkin's 30 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 1995 of approximately $170 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 which 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, President
and Treasurer of the Company, positions which he has held until this time.



                                       10
<PAGE>   13


Richard Hennessey joined the Company 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 to Secretary and Director of the Company. 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 ("Digital"). From January 1995
until Mr. Hennessey joined the Company, he was engaged in voluntary missionary 
work.

Kenneth Campbell has held the position of Vice President-Operations, Secretary,
and a director of the Company since November 9, 1994. On August 4, 1998, Mr.
Campbell resigned as Secretary and Director to the Company. As Vice
President-Operations, Mr. Campbell is responsible for all aspects of
manufacturing including materials management, production, quality control, and
all related accounting. From 1967 through 1979, he served as the President of
the Boathouse of Lexington, Inc., a corporation dealing in a line of pleasure
boats manufactured by the Sea-Ray Corporation. From 1980 through 1989, Mr.
Campbell owned several retail businesses specializing in consumer product sales,
including Campbell Distributors, Inc. and Campbell & Associates of Fort Pierce,
Florida. Mr. Campbell was employed as a real estate broker for Prudential Real
Estate in 1990/1991 and as a sales manager for Pace Homes, Inc. and Versa
Development, Inc. from 1992 to 1993.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

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

To the Company's knowledge, based solely on review of the copies of such reports
furnished to the Company and representations that no other reports were
required, during the fiscal year ended October 31, 1998, all of such executive
officers, directors and persons who own more than 10% of a registered class of
the Company's equity securities complied with all Section 16(a) filing
requirements.

ITEM 10. EXECUTIVE COMPENSATION

Set forth below is certain information concerning the compensation paid to the
Company's chief executive officer for the fiscal year ended October 31, 1998. No
other executive officer of the Company received compensation in excess of
$100,000 for such fiscal year.

SUMMARY COMPENSATION TABLE

The following table provides the cash and other compensation paid or accrued by
the Company to its chief executive officer for the fiscal years ended October
31, 1998, 1997 and 1996:

<TABLE>
<CAPTION>
                         ANNUAL COMPENSATION                        LONG TERM COMPENSATION

                                                                    SECURITIES
                                                        RESTRICTED  UNDERLYING
                                  OTHER      ANNUAL       STOCK       STOCK        LTIP     ALL OTHER
NAME/POSITION   YEAR     SALARY   BONUS   COMPENSATION    AWARDS      OPTIONS      PAYOUTS  COMPENSATIONS
-------------   ----     ------   -----   ------------  ----------  -----------    -------  -------------
<S>             <C>     <C>       <C>     <C>           <C>         <C>            <C>      <C>         

KEITH LARKIN    1998    $45,000     0          0             0           0            0           0

                1997    $42,500

                1996    $42,500                                      540,000

</TABLE>

*For a description of such stock options, see "EXECUTIVE COMPENSATION - Stock
 Option Plan."

EMPLOYMENT AGREEMENT

Effective December 9, 1994, Keith Larkin entered into a five-year amended and
restated employment agreement with the Company, pursuant to which he has the
duties of President and Treasurer of the Company and has a right to receive an
annual salary of up to $90,000, which may increase each year by an amount not
less than the percentage increase in the United States Consumer Price Index.
Under the agreement, Mr. Larkin will only be entitled to receive an annual
salary of $90,000 if the Company generates annual sales for a fiscal year of $2
million and has pre-tax income equal to at least 20% of the Company's annual
sales. In all cases, the Board of directors sets Mr. Larkin's salary, taking
into account the Company's projected financial performance and cash required to
satisfy the Company's anticipated operating expenditures. As part of the
consideration Mr. Larkin provided to the Company in exchange for the Company's
obligations under the employment agreement, Mr. Larkin assigned 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 conceived during the five years prior to the date of
the agreement. This provision covers the patent rights, if any, associated with
the ProCom, Trinity and Freedom lightweight telephone headsets. During the year
ended October 31, 1998, the Company's President was paid a salary in cash of
$30,000. In addition the Company recorded compensation expense of $15,000, with
a corresponding credit to additional paid-in capital, to reflect the estimated
fair value of the unpaid services provided by the President to the Company.

The Company does not have written employment agreements with Kenneth Campbell or
Richard Hennessey. During each of the fiscal years ended October 31, 1998, 1997
and 1996 Mr. Campbell received a salary of $45,000, $40,000 and $40,000
respectively and Mr. Hennessey received a salary of $51,000 and $45,000 and
$31,733 respectively.




                                       11
<PAGE>   14


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

STOCK OPTION PLAN

On April 15, 1996, the Board of Directors of the Company adopted the Company's
1996 Stock Option Plan (the "Plan"). The Plan provides for the grant by the
Company of options to purchase up to an aggregate of 590,000 of the Company's
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 the
Company.

The purposes of the Plan are to provide incentive to employees, including
officers, directors and consultants of the Company, to encourage such persons to
remain in the employ of the Company and to attract to the Company persons of
experience and ability. The Plan terminates on April 15, 2006.

Options granted under the Plan may be either incentive stock options within the
meaning of the Internal Revenue Code of 1986, as amended ("incentive options"),
or options that do not qualify as incentive options ("nonqualified options").
The exercise price of incentive options must be at least equal to the fair
market value of the shares of Common Stock on the date of grant; provided,
however, that the exercise price of any incentive option granted to any person
who, at the time of the grant of the option, owns stock aggregating 10% or more
of the total combined voting power of the Company or any parent or subsidiary of
the Company ("Ten Percent Shareholder"), must not be less 110% of the fair
market value.

On April 15, 1996, 540,000 and 50,000 shares were granted to the Company's
President and officers, respectively, at an option price of $.50 per share. The
stock option exercise price was the fair value at the date of the grant, which
was determined from the price paid per share during the Company's stock offering
carried out in 1996. The stock options are exercisable upon the grant date,
extending over a period of three years. Prior to November 1, 1997, the Company
had issued options to purchase 200,000 shares of common stock at $0.60 per
share. 

During 1997, the Company received $25,000 upon issuance of 50,000 shares of
common stock upon the exercise of 50,000 options by the Company's officers and
$140,000 upon the issuance of 240,000 shares of common stock to others.

On March 5, 1998, the Board of Directors adopted the 1998 Stock Option Plan for
the benefit of directors, officers, employees and consultants to the Company.
The plan authorized the issuance of up to 500,000 shares of common stock. On
August 4, 1998, 200,000 were granted to its officers, of which 150,000 were
offered to Mr. Richard Hennessey, Director, Secretary and Vice President of
Marketing, of which 50,000 options shares can be immediately exercised at an
exercised price of $.375 per share. The remainder would be vested over a
two-year period. The options granted to Mr. Kenneth Campbell, Vice President of
Operations, can be immediately exercised at an exercise price of $.375 per
share. An additional 100,000 option shares were granted to the Company's 13 full
time employees at an exercise price of $.375 per share. These shares are
immediately exercisable. The stock option exercise price was the fair market
value of a share of common stock at the date of the grant.


                                       12
<PAGE>   15


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

     The financial statements and notes thereto are included herein beginning at
page F-1.

(a) 1. Index to Financial Statements                                    Page

         Report of Independent Certified Public Accountants             F-1

     Balance Sheets for the years
     ended October 31, 1998 and 1997                                    F-2

     Statements of Operations for the years
     ended October 31, 1998 and 1997                                    F-3

     Statements of Stockholder's Equity for the years
     ended October 31, 1998 and 1997                                    F-4

     Statements of Cash Flows for the years
            October 31, 1998 and 1997                                   F-5

         Notes to Financial Statements                                  F-6

(a) 2.  Exhibit

          3.1   Articles of Incorporation of the Company, dated October 5,
                1994, and the Amendments thereto, dated January 31, 1995*.

          3.2   By-Laws of the Company.*

         10.1   Amended and Restated Employment Agreement, dated as of
                December 9, 1994, between the Company and Keith Larkin**(1)

         10.2   The company's 1996 Stock Option plan.*(1)

         10.3   Stock Option, dated April 15, 1996, issued by the Company to
                Keith Larkin.*(1)

         10.4   Lease, dated December 1, 1998, between the Company and Karen
                Development Co.*(1)

         10.5   Promissory Note, dated August 2, 1998, in favor of the 
                Company.(1)

         10.6   The Company's 1998 Stock Option Plan.*(1)

         10.7   Stock Option, dated August 4, 1998, issued by the Company
                to Richard Hennessey.*(1)

         10.8   Stock Option, dated August 4, 1998, issued by the Company to
                Kenneth Campbell.*(1)

         27     Financial Data Schedule (for SEC use only)

  (b)    No reports on From 8-k were filed by the Company during the last
         quarter of the period covered by this Report.


   *     Incorporated by reference to the initial filing with the SEC of the
         Company's Form 10-SB on July 5, 1996.
  **     Incorporated by reference to Amendment No. 1 to the Company's 
         Form 10-SB which was filed with the Commission on October 4, 1996.
 *(1)    Denotes a management contract or compensatory plan or arrangement.


                                       13
<PAGE>   16




                          Independent Auditors' Report
--------------------------------------------------------------------------------


THE BOARD OF DIRECTORS

Pro Tech Communications, Inc.:

We have audited the accompanying balance sheets of Pro Tech Communications, Inc.
as of October 31, 1998 and 1997 and the related statements of operations,
stockholders' equity and cash flows for the years 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 audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Pro Tech Communications, Inc.
as of October 31, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.

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

Vero Beach, Florida
December 16, 1998




                                       F-1


<PAGE>   17


                          PRO TECH COMMUNICATIONS, INC.

                                 BALANCE SHEETS

                            OCTOBER 31, 1998 AND 1997


<TABLE>
<CAPTION>
                                                                                       1998              1997
                                                                                       ----              ----
<S>                                                                                <C>                   <C>    
                                     ASSETS

Current assets:
     Cash and cash equivalents                                                     $   198,797           356,327
     Short-term investments                                                            254,545           257,936
     Accounts receivable less allowance for doubtful accounts of $14,868
        in 1998 and $12,095 in 1997                                                    200,235           230,754
     Inventory (note 2)                                                                245,610           160,609
     Due from officers and employees (note 9)                                           14,591            35,418
     Other current assets                                                               20,836            37,088
                                                                                   -----------       -----------
           Total current assets                                                        934,614         1,078,132

Net property and equipment (note 3)                                                    181,269           155,400
Due from officer (note 9)                                                               42,860                --
Other assets                                                                               155             5,611
                                                                                   -----------       -----------
                                                                                   $ 1,158,898         1,239,143
                                                                                   -----------       -----------

                      LIABILITIES AND STOCKHOLDERS' EQUITY


Current liabilities:
     Accounts payable                                                                   36,380            22,739
     Accrued expenses (note 4)                                                         173,465            58,935
                                                                                   -----------       -----------
           Total current liabilities                                                   209,845            81,674

Stockholders' equity (notes 5 and 6):
     Common stock, $.001 par value, authorized 10,000,000 shares, issued
        and outstanding 4,254,000                                                        4,254             4,254
     Additional paid-in capital                                                      1,137,018         1,122,018
     Retained earnings (deficit)                                                      (192,219)           31,197
                                                                                   -----------       -----------
           Total stockholders' equity                                                  949,053         1,157,469

Commitments (note 7)
                                                                                   -----------       -----------
                                                                                   $ 1,158,898         1,239,143
                                                                                   -----------       -----------

</TABLE>


See accompanying notes to financial statements.


                                       F-2


<PAGE>   18



                          PRO TECH COMMUNICATIONS, INC.

                             STATEMENT OF OPERATIONS

                      YEARS ENDED OCTOBER 31, 1998 AND 1997

<TABLE>
<CAPTION>
                                                           1998              1997
                                                       -----------       -----------
<S>                                                    <C>                   <C>    
Net sales                                              $ 1,142,482           996,993

Cost of goods sold                                         470,450           333,755
                                                       -----------       -----------

           Gross profit                                    672,032           663,238

Selling, general and administrative expenses               882,385           698,785
Provision for doubtful accounts                             38,835             3,924
                                                       -----------       -----------

           Loss from operations                           (249,188)          (39,471)

Other income (expense):
     Interest income                                        24,719            28,688
     Miscellaneous income                                       89                58
     Loss on disposal of fixed assets                           --            (1,116)
                                                       -----------       -----------
           Loss before income taxes                       (224,380)          (11,841)

Income tax expense (benefit) (note 8)                         (964)              400
                                                       -----------       -----------
           Net loss                                    $  (223,416)          (12,241)
                                                       -----------       -----------

Basic loss per common share                            $     (0.05)            (0.00)
                                                       -----------       -----------
Weighted average shares outstanding                      4,254,000         4,122,795
                                                       -----------       -----------

</TABLE>

See accompanying notes to financial statements.


                                       F-3


<PAGE>   19



                          PRO TECH COMMUNICATIONS, INC.

                       STATEMENTS OF STOCKHOLDERS' EQUITY

                      YEARS ENDED OCTOBER 31, 1998 AND 1997


<TABLE>
<CAPTION>
                                                                               ADDITIONAL       RETAINED
                                                                                PAID-IN         EARNINGS
                                                              COMMON STOCK      CAPITAL         (DEFICIT)         TOTAL
                                                              ------------     ----------      ----------       ----------
<S>                                                            <C>                <C>              <C>           <C>      
Balance, October 31, 1996                                      $    3,964         963,953          43,438        1,011,355

Issuance of 290,000 shares of common stock
     (notes 5 and 6) (net of issue costs of $46,645)                  290         118,065              --          118,355
Executive compensation contributed by an officer
     (note 5)                                                          --          40,000              --           40,000

Net loss                                                               --              --         (12,241)         (12,241)
                                                               ----------      ----------      ----------       ----------
Balance, October 31, 1997                                           4,254       1,122,018          31,197        1,157,469

Executive compensation contributed by an officer
     (note 5)                                                          --          15,000              --           15,000

Net loss                                                               --              --        (223,416)        (223,416)
                                                               ----------      ----------      ----------       ----------
Balance, October 31, 1998                                      $    4,254       1,137,018        (192,219)         949,053
                                                               ----------      ----------      ----------       ----------

</TABLE>
See accompanying notes to financial statements.


                                       F-4


<PAGE>   20



                          PRO TECH COMMUNICATIONS, INC.

                            STATEMENTS OF CASH FLOWS

                      YEARS ENDED OCTOBER 31, 1998 AND 1997


<TABLE>
<CAPTION>
                                                                                   1998              1997
                                                                               -----------       -----------
<S>                                                                            <C>                   <C>    
Cash flows from operating activities:
     Cash received from sale of merchandise                                    $ 1,219,426           907,839
     Cash paid to employees and vendors                                         (1,340,569)         (980,148)
     Interest received                                                              24,719            28,688
                                                                               -----------       -----------

           Net cash used by operating activities                                   (96,424)          (43,621)
                                                                               -----------       -----------

Cash flows from investing activities:
     Purchase of short-term investments                                           (523,905)         (260,764)
     Proceeds on maturity of short-term investments                                527,296           300,103
     Purchase of property and equipment                                            (64,497)          (57,176)
                                                                               -----------       -----------

           Net cash used by investing activities                                   (61,106)          (17,837)
                                                                               -----------       -----------

Cash flows from financing activities:
     Proceeds from issuance of common stock                                             --           118,355
                                                                               -----------       -----------

           Net cash provided by financing activities                                    --           118,355
                                                                               -----------       -----------

           Net increase (decrease) in cash and cash equivalents

                                                                                  (157,530)           56,897

Cash and cash equivalents at beginning of year                                     356,327           299,430
                                                                               -----------       -----------

Cash and cash equivalents at end of year                                       $   198,797           356,327
                                                                               ===========       ===========

Reconciliation of net loss to net cash used by operating activities:

Net loss                                                                          (223,416)          (12,241)
Adjustments to reconcile net loss to net cash used by operating
     activities:
     Depreciation and amortization                                                  38,783            29,695
     Allowance for doubtful accounts                                                 2,773             2,954
     Loss on disposal of fixed assets                                                   --             1,116
     Executive compensation contributed by an officer                               15,000            40,000
     (Increase) decrease in accounts receivable                                     27,746           (78,248)
     (Increase) decrease in inventory                                              (85,001)           15,838
     Increase in receivables from officers and employees                           (22,033)             (762)
     (Increase) decrease in other assets                                            21,553           (24,494)
      Increase (decrease) in accounts payable                                       13,641           (30,924)
     Increase in accrued expenses                                                  114,530            13,445
                                                                               -----------       -----------
           Total adjustments                                                       126,992           (31,380)
                                                                               -----------       -----------

           Net cash used by operating activities                               $   (96,424)          (43,621)
                                                                               ===========       ===========

</TABLE>


See accompanying notes to financial statements.



                                       F-5


<PAGE>   21


(1)      DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         (a)      BUSINESS

                Pro Tech Communications, Inc. (the "Company") was organized and
                incorporated under the laws of the State of Florida for the
                purpose of designing, developing, producing and marketing
                lightweight telephone headsets. The Company presently
                manufactures and markets its headsets primarily for fast food
                companies and other large quantity users of headset systems. The
                Company is in the process of completing the development of a
                second design for the telephone user market, which includes
                telephone operating companies, government agencies and business
                offices. The Company's business strategy is to offer lightweight
                headsets with design emphasis on performance and durability at a
                cost below that of its competitors.

         (b)      CASH AND CASH EQUIVALENTS

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

         (c)      SHORT-TERM INVESTMENTS

                Short-term investments consist of certificates of deposit with
                maturities in excess of three months. In accordance with
                Statement of Financial Accounting Standards (SFAS) No. 115, such
                investments are classified as held-to-maturity and are recorded
                at amortized cost, which approximates fair value.

         (d)      INVENTORY

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

         (e)      REVENUE AND COST RECOGNITION

                The Company recognizes revenues as products are shipped. New
                customers are extended a 30-day trial period during which the
                product may be returned. Additionally, each headset carries a
                one to two year warranty. The Company provides, by a current
                charge to income, an amount it estimates will be needed to cover
                future warranty obligations for products sold during the year.
                The accrued liability for warranty costs is included in accrued
                expenses in the balance sheet.

         (f)      PROPERTY AND EQUIPMENT

                Property and equipment is carried at cost. Depreciation is
                computed using the straight-line method over the estimated
                useful lives of the assets which are generally 5-10 years.
                Repair and maintenance costs are charged to expense when
                incurred.

         (g)      INCOME TAXES

                Income taxes are accounted for under the asset and liability
                method prescribed by SFAS No. 109. Deferred tax assets and
                liabilities are recognized for the future tax consequences
                attributable to differences between the financial statement
                carrying amounts of existing assets and liabilities and their
                respective tax bases. Deferred tax assets and liabilities are
                measured using enacted tax rates expected to apply to taxable
                income in the years in which those temporary differences are
                expected to be recovered or settled. The effect on deferred tax
                assets or liabilities of a change in tax rates is recognized in
                income in the period that includes the enactment date.

         (h)      ADVERTISING

                The costs of advertising, promotion and marketing programs are
                charged to operations in the year incurred. Advertising costs
                approximated $43,143 and $20,817 for the years ended October 31,
                1998 and 1997, respectively, and were included in selling,
                general and administrative expenses in the accompanying
                statements of operations.

         (i)      RESEARCH AND DEVELOPMENT

                Research and development costs are expensed when incurred and
                are included in selling, general and administrative expenses.
                The amount charged to expense during 1998 and 1997 was $40,815
                and $21,400, respectively.

         (j)      FAIR VALUE OF FINANCIAL INSTRUMENTS

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

         (k)      USE OF ESTIMATES

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

         (l)      LOSS PER SHARE

                Earnings per share is accounted for by using the basic and
                diluted earnings per share method prescribed by SFAS No 128,
                which became effective for years ending after December 15, 1997.
                Basic loss per share is based on the weighted average number of
                shares of common stock outstanding during the year. Diluted loss
                per share is based on shares of common stock and dilutive
                potential common stock (stock options and stock warrants)
                outstanding during the year. Diluted loss per share was



                                      F-6
<PAGE>   22


                antidilutive due to the net loss generated by the Company during
                1998 and 1997 and is therefore not reported.

         (m)      STOCK OPTIONS

                On October 23, 1995, the Financial Accounting Standards Board
                (FASB) issued Statement No. 123, ACCOUNTING FOR STOCK-BASED
                COMPENSATION (Statement 123). This Statement applies to all
                transactions in which an entity acquires goods or services by
                issuing equity instruments or by incurring liabilities where the
                payment amounts are based on the entity's common stock price.
                The Statement covers transactions with employees and
                non-employees. Effective November 1, 1996, the Company adopted
                Statement 123, which permits entities (1) to continue to use the
                Accounting Principles Board Opinion No. 25 (APB 25) method, or
                (2) to adopt the Statement 123 fair value based method. Once the
                method is adopted, an entity cannot change the method and the
                method selected applies to all of an entity's compensation plans
                and transactions. For entities not adopting the Statement 123
                fair value based method, Statement 123 requires pro forma net
                income and earnings per share information as if the fair value
                based method had been adopted. Management has determined that
                the Company will account for stock-based compensation under the
                APB 25 method and will disclose the pro forma impact of
                Statement 123.

         (n)      LONG-LIVED ASSETS

                The Company accounts for long-lived assets in accordance with
                the provisions of SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF
                LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF.
                This Statement requires that long-lived assets and certain
                identifiable intangibles be reviewed for impairment whenever
                events or changes in circumstances indicate that the carrying
                amount of an asset may not be recoverable. Recoverability of
                assets to be held and used is measured by a comparison of the
                carrying amount of an asset to future net cash flows expected to
                be generated by the asset. If such assets are considered to be
                impaired, the impairment to be recognized is measured by the
                amount by which the carrying amount of the assets exceed the
                fair value of the assets. Assets to be disposed of are reported
                at the lower of the carrying amount or fair value less costs to
                sell. There were no such impairments for the years ending
                October 31, 1998 and 1997.

         (o)      NEW PRONOUNCEMENTS

                In June 1997, the FASB issued Statement No. 130, REPORTING
                COMPREHENSIVE INCOME (Statement 130), which establishes
                standards for reporting and display of comprehensive income and
                its components in a financial statement having the same
                prominence as other financial statements. Statement 130 is
                effective for years beginning after December 15, 1997 (fiscal
                year 1999 for the Company). As of October 31, 1998, the Company
                had no components considered to be other comprehensive income.

                In June 1997, the FASB issued Statement No. 131, DISCLOSURES
                ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
                (Statement 131), which establishes new standards for the way
                enterprises disclose information about operating segments.
                Statement 131 is effective for years beginning after December
                15, 1997 (fiscal year 1999 for the Company).

                In February 1998, the FASB issued Statement No. 132, EMPLOYERS'
                DISCLOSURES ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS
                (Statement 132), which revises and standardizes certain
                disclosures regarding pension and postretirement benefit plans.
                Statement 132 does not modify the measurement or recognition of
                those plans. Statement 132 is effective for years beginning
                after December 15, 1997 (fiscal year 1999 for the Company). As
                of October 31, 1998, the Company had no such plans.

                In June 1998, the FASB issued Statement No. 133, ACCOUNTING FOR
                DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Statement 133),
                which establishes accounting and reporting standards for
                derivative instruments and hedging activities. Statement 133
                requires recognizing derivatives as assets or liabilities at
                fair value and defines certain conditions when such derivatives
                may be considered hedges. Statement 133 is effective for fiscal
                years beginning after June 15, 1999 (fiscal year 2000 for the
                Company). As of October 31, 1998, the Company had no such
                derivatives.

                The Company does not expect these new pronouncements will have a
                significant impact on the reporting of its financial results.


                                      F-7
<PAGE>   23
(2)    INVENTORY

       Inventory at October 31, 1998 and 1997 consists of the following:

                                         1998          1997
                                       --------      --------
                  Raw materials        $150,627        63,802
                  Work in process        54,133        25,451
                  Finished goods         40,850        71,356
                                       --------      --------

                                       $245,610       160,609
                                       ========      ========

(3)    NET PROPERTY AND EQUIPMENT

       The following is a summary of property and equipment at October 31, 1998
       and 1997:

                                                       1998           1997
                                                     --------      --------

                  Production molds                   $176,553       121,845
                  Office equipment                     60,509        56,158
                  Production equipment                 35,049        29,611
                  Leasehold improvements               10,174        10,174
                  Vehicles                              5,557         5,557
                  Marketing displays                    5,430         5,430
                                                     --------      --------

                     Total cost                       293,272       228,775
                  Less accumulated depreciation       112,003        73,375
                                                     --------      --------

                     Total                           $181,269       155,400
                                                     ========      ========

       Total depreciation expense was $38,628 and $29,540 for the years ended
       October 31, 1998 and 1997, respectively.

(4)    ACCRUED EXPENSES

       Accrued expenses consisted of the following at October 31, 1998 and 1997:

                                                  1998           1997
                                                --------      --------
                  Accrued warranty expense      $152,503        55,000
                  Other accrued expenses          20,962         3,935
                                                --------      --------

                                                $173,465        58,935
                                                ========      ========
(5)    CAPITAL STOCK

       At October 31, 1998 and 1997, $4,000 was held in escrow for the benefit
       of the Company pending completion of the subscription agreements by two
       investors for 4,000 shares each. These receivables are netted against
       additional paid-in capital. 

       Prior to November 1997, the Company had issued warrants to purchase
       600,000 shares of common stock at $1.50 per share. In December 1996, the
       Company issued warrants to purchase 400,000 shares of common stock at
       $1.50 per share. 

       During fiscal year 1997, the Company filed Form SB-2 which allowed the
       Company to sell an additional 1,000,000 shares of common stock at $5.25
       per share. The filing also registered the common stock underlying the
       1,000,000 outstanding warrants and 830,000 outstanding stock options
       (note 6). As of October 31, 1998 no additional shares were sold as a
       result of the offering. However, during the year ended 1997, 200,000
       options were exercised at a price of $0.60 per share and 90,000 options
       were exercised at a price of $0.50 per share. Total proceeds generated,
       net of related issue costs of $46,645, were $118,355. During November
       1997, in accordance with the 1997 registration statement, all outstanding
       warrants were terminated. 

       The following table summarizes warrants to purchase common stock:

<TABLE>
<CAPTION>
                                                      1998                      1997
                                             -----------------------   -----------------------
                                                             WEIGHTED                  WEIGHTED
                                                              AVERAGE                   AVERAGE
                                                             EXERCISE                  EXERCISE
                                              SHARES          PRICE      SHARES          PRICE
                                             ---------      --------   ---------      --------
<S>                                          <C>            <C>          <C>          <C>     
Warrants outstanding, beginning of year      1,000,000      $   1.50     600,000      $   1.50

Warrants granted                                    --         --        400,000          1.50

Warrants terminated                          1,000,000          1.50          --            --
                                             ---------      --------   ---------      --------


Warrants outstanding and exercisable,
  end of year                                      --       $    --    1,000,000      $   1.50
                                             =========      =======    =========      ========
</TABLE>
                                      F-8
<PAGE>   24



       During the year ended October 31, 1998, the Company's president was paid
       a salary in cash of $30,000. In addition, the Company recorded
       compensation expense of $15,000, with a corresponding credit to
       additional paid-in capital, to reflect the estimated fair value of the
       unpaid services provided by the president to the Company. 

       During the year ended October 31, 1997, the Company's president was paid
       a salary in cash of $2,500. In addition, the Company recorded
       compensation expense of $40,000, with a corresponding credit to
       additional paid-in capital, to reflect the estimated fair value of the
       unpaid services provided by the president to the Company.

(6)    STOCK OPTION PLAN

       On April 15, 1996, the Board of Directors adopted The 1996 Stock Option
       Plan (the Plan), for the benefit of directors, officers, employees and
       consultants to the Company. The 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 Company's President and officers,
       respectively, at an option price of $.50 per share. The stock option
       exercise price was the fair value at the date of the grant, which was
       determined from the price paid per share during the Company's stock
       offering carried out in 1996. The stock options are exercisable upon the
       grant date, extending over a period of three years. 

       Prior to November 1, 1997, the Company had issued options to purchase
       200,000 shares of common stock at $0.60 per share. 

       During 1997, the Company received $25,000 upon issuance of 50,000 shares
       of common stock upon the exercise of 50,000 options by the Company's
       officers and $140,000 upon the issuance of 240,000 shares of common stock
       to others. 

       On March 5, 1998, the Board of Directors adopted the 1998 Stock Option
       Plan for the benefit of directors, officers, employees and consultants to
       the Company. This plan authorized the issuance of up to 500,000 shares of
       common stock. On August 4, 1998, 200,000 and 100,000 shares were granted
       to the Company's officers and employees, respectively, at an option price
       of $.375 per share. The stock option exercise price was the fair market
       value of a share of common stock at the date of the grant. Options to
       purchase 150,000 shares of common stock vest and are exercisable 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-9
<PAGE>   25


       The following table summarizes stock option activity:

<TABLE>
<CAPTION>
                                                                 1998                     1997
                                                       -----------------------  -----------------------
                                                                      Weighted                 Weighted
                                                                       Average                 Average
                                                                      Exercise                 Exercise
                                                       Shares          Price     Shares         Price
                                                       -------      ----------  --------       --------
               <S>                                     <C>          <C>          <C>           <C>     
               Options outstanding, beginning of
                 year                                  540,000      $    0.500   830,000       $   0.52
               
               Options granted                         300,000           0.375        --             -- 
               Options exercised                            --              --  (290,000)         (0.57)
                                                      --------      ----------  --------       --------               
               Options outstanding, end of year        840,000      $    0.455   540,000       $   0.50
                                                      ========      ==========  ========       ========
               
               Options exercisable, end of year        740,000      $    0.466   540,000       $   0.50
                                                      ========      ==========  ========       ========

</TABLE>


       As of October 31, 1998, the Company's outstanding stock options have
       exercise prices ranging from $0.375 to $0.50 and a weighted average
       remaining contractual life of approximately 1.4 years.

       No compensation expense was recorded during 1998 for the options issued
       to the Company's 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 Statement 123, the Company's
       net loss and loss per share would have been adjusted to the pro forma
       amounts indicated below:

                                         1998                1997
                                    -------------       ------------ 
            Net loss:

               As reported          $    (223,416)           (12,241)
                                    =============       ============
               Pro forma            $    (278,280)           (12,241)
                                    =============       ============
               
            Loss per share:
               
               As reported          $       (0.05)             (0.00)
                                    =============       ============
               Pro forma            $       (0.06)             (0.00)
                                    =============       ============

       The fair value of each option grant is estimated on the date of grant
       using the Black-Scholes option-pricing model with the following
       weighted-average assumptions used for grants in 1998: dividend yield of
       0%; expected volatility of 150%; risk-free interest rate of 5.45%; and,
       expected lives of three years.



                                      F-10
<PAGE>   26



(7)    OPERATING LEASES

       The Company leases office and production facilities under operating
       leases expiring November 30, 1998. On December 1, 1998, the Company
       extended those leases to November 30, 1999. The Company also leases
       office equipment under operating leases expiring through the year 2001.
       Future minimum lease payments for such noncancelable leases, considering
       the subsequent extensions of the lease terms, are as follows:

                      1999                                      $ 24,465
                      2000                                         6,413
                      2001                                         2,656
                                                                --------

                      Total                                     $ 33,534
                                                                ========

       Rent expense under lease agreements totaled $24,637 and $21,979 for
       fiscal year 1998 and 1997, respectively.


(8)    INCOME TAXES

       Income tax expense (benefit) consist of:

                                CURRENT       DEFERRED        TOTAL
                                -------       --------       -------
               1998:

                   Federal      $(6,264)        3,800        (2,464)
                   State             --         1,500         1,500
                                -------       -------       -------

                                $(6,264)        5,300          (964)
                                =======       =======       =======

               1997:

                   Federal      $ 1,500        (1,000)          500
                   State            300          (400)         (100)
                                -------       -------       -------

                                $ 1,800        (1,400)          400
                                =======       =======       =======

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

<TABLE>
<CAPTION>
                                                                           1998            1997
                                                                         --------       --------
<S>                                                                      <C>              <C>    
               Computed "expected" tax benefit                           $(75,961)        (4,030)
               Increase (reduction) in income taxes resulting from:
                     Effect of graduated tax rates                         19,411           (700)
                     Increase in valuation reserve                         35,700             --
                     Net operating loss not currently utilizable           14,890             --
                     Nondeductible expenses                                 4,996
                     Nondeductible costs of potential acquisition              --          4,740
                     Other, net                                                --            390
                                                                         --------       --------

                                                                         $   (964)           400
                                                                         ========       ========

</TABLE>



       The exercise of stock options which have been granted under the Company's
       1996 Stock Option Plan (see note 6) gave rise to compensation totaling
       $225,000 which is includable in the taxable income of the employees and
       deductible by the Company for federal and state income tax purposes. Such
       compensation resulted from increases in the fair market value of the
       Company's common stock subsequent to the date of grant of the applicable
       exercised stock options and, accordingly, in accordance with APB 25, such
       compensation is not recognized as an expense for financial reporting
       purposes. The related tax benefits will be reflected as contributions to
       additional paid-in capital in the periods in which the compensation
       deduction is utilized by the Company and, in accordance with APB 25 and
       Statement 109, such compensation deductions are not considered to be
       temporary differences. Such deductions have not been utilized by the
       Company due to the net operating loss generated in 1998.



                                      F-11
<PAGE>   27



       The Company has a net operating loss carryforward for federal and state
       income tax purposes amounting to $265,000 and $340,000, respectively,
       which expire in the year 2018.

       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 the Company's deferred tax assets and
       liabilities are as follows:

<TABLE>
<CAPTION>
                                                                                             1998         1997
                                                                                           -------      -------
<S>                                                                                         <C>          <C>   
               Accounts receivable principally due to allowance for doubtful accounts      $ 2,900        2,400
               Accrued warranty expense                                                     30,000       10,800
               Net operating loss carryforwards                                             11,800           --
                                                                                           -------      -------
                                                                                            44,700       13,200

               Less valuation allowance                                                     35,700           --
                                                                                           -------      -------

                     Total deferred tax assets                                               9,000       13,200

               Plant and equipment principally due to differences in depreciation            9,000        7,900
                                                                                           -------      -------
 
                     Total deferred tax liabilities                                          9,000        7,900
                                                                                           -------      -------

                     Net deferred taxes                                                    $    --        5,300
                                                                                           =======      =======

</TABLE>


       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.


                                      F-12
<PAGE>   28



(9)    RELATED PARTY TRANSACTIONS

       During fiscal year 1996, the Company loaned $28,882 to its President.
       Outstanding principal and interest, at 15% per annum, were due August 2,
       1998. During fiscal year 1998, the Company loaned an additional $3,650 to
       its President, which is due October 31, 2000, with interest at 5% per
       annum. The Company also modified the first note to bear interest at 5%
       after August 2, 1998 and extended the due date to August 2, 2003.
       Outstanding principal and interest amounted to $42,860 and $34,282 as of
       October 31, 1998 and 1997, respectively. 

       The Company also loaned to its Vice President $3,500 during 1996, with
       interest at 15% per annum. This loan was repaid during 1997. 

       The Company has entered into an employment agreement with its President
       expiring December 9, 1999. The agreement provides for a maximum annual
       salary of $90,000 with additional amounts added using the consumer price
       index as a minimum. The President is eligible for the maximum annual
       salary during a given year only if the Company generates annual sales of
       at least $2,000,000 and pre-tax income equal to at least 20% of the
       Company's annual sales. If at any time during the Company's fiscal year
       the Board of Directors determines the Company will not meet minimum
       requirements noted above, the Board shall determine the President's
       compensation for that year, taking into account the Company's projected
       financial performance and needs for that year. (See note 5.)

(10)   MAJOR CUSTOMERS

       For 1998 and 1997, approximately 17% and 21%, respectively, of all sales
       were to McDonald's Restaurant franchises.




                                      F-13
<PAGE>   29



                                   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 January 29, 1999.



                                                 PRO TECH COMMUNICATIONS, INC.

                                                                    (REGISTRANT)

                                                 By: /s/  Keith Larkin
                                                     -------------------------
                                                     Keith Larkin, President



         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                                 Title                              Date

<S>                                <C>                                 <C>
/s/ Keith Larkin                    President, Treasurer               January 29, 1999
---------------------------         and Chairman of the Board
Keith Larkin                        (Principal Executive, Financial
                                    and Accounting Officer)

/s/ Rich Hennessey                  Director, Secretary                January 29, 1999
---------------------------         and Vice President
Rich Hennessey                      



</TABLE>