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

                                    FORM 10-K
                                  _____________

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934
For the fiscal year ended December 31, 2004

                                       OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934
For the transition period from ____________ to ____________

                         Commission file number: 0-28602

                          PRO TECH COMMUNICATIONS, INC.
             (Exact name of registrant as specified in its charter)

          Florida                                             59-3281593
-------------------------------                      ---------------------------
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                            Identification No.)

                4492 Okeechobee Road, Fort Pierce, Florida 34947
          (Address of principal executive offices, including Zip Code)

       Registrant's telephone number, including area code: (772) 464-5100

        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:
                         Common Stock, $0.001 par value
                                (Title of class)

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

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

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

The aggregate  market value of the  outstanding  common stock of the  registrant
held by  non-affiliates  of the registrant as of June 30, 2004 was approximately
$0.4 million.

Number of shares of common stock outstanding as of March 24, 2005: 73,390,133

<PAGE>

                                Table of Contents

                                                                            Page
                                                                            ----
PART I

Item 1.    Business                                                            3
Item 2.    Properties                                                          7
Item 3.    Legal Proceedings                                                   7
Item 4.    Submission of Matters to a Vote of Security Holders                 7

PART II

Item 5.    Market for the Registrant's Common Equity, Related Stockholder
           Matters and Issuer Purchases of Equity Securities                   7
Item 6.    Selected Financial Data                                             8
Item 7.    Management's Discussion and Analysis of Financial Condition
           and Results of Operations                                           9
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk         18
Item 8.    Financial Statements and Supplementary Data                        18
Item 9.    Changes in and Disagreements with Accountants on Accounting and
           Financial Disclosure                                               18
Item 9A.   Controls and Procedures                                            18
Item 9B.   Other Information                                                  18

PART III

Item 10.   Directors and Executive Officers of the Registrant                 19
Item 11.   Executive Compensation                                             20
Item 12.   Security Ownership of Certain Beneficial Owners and Management     22
Item 13.   Certain Relationships and Related Transactions                     23
Item 14.   Principal Accounting Fees and Services                             24

PART IV

Item 15.   Exhibits, Financial Statement Schedules                            25

Signatures                                                                   S-1


                                       2
<PAGE>



                                     PART I

     This Annual Report on Form 10-K contains  forward-looking  statements  that
reflect our current  estimates,  expectations  and projections  about our future
results,  performance,  prospects and opportunities.  Forward-looking statements
include all statements that are not historical facts. These statements are often
identified  by  words  such as  "anticipate,"  "believe,"  "could,"  "estimate,"
"expect,"  "intend,"  "plan,"  "may,"  "should,"  "will,"  "would"  and  similar
expressions. These forward-looking statements are based on information currently
available to us and are subject to numerous risks and  uncertainties  that could
cause our actual  results,  performance,  prospects or  opportunities  to differ
materially  from  those  expressed  in,  or  implied  by,  the   forward-looking
statements we make in this Annual Report. We have included  important factors in
the cautionary  statements  included in this Annual Report,  particularly in the
section entitled  "Management's  Discussion and Analysis of Financial  Condition
and Results of  Operations - Factors That May Affect Our Future  Results,"  that
could cause our actual results to differ materially from the results referred to
in the forward-looking  statements we make in this Annual Report. You should not
place undue  reliance on any  forward-looking  statements.  Except as  otherwise
required by federal  securities  laws,  we undertake no  obligation  to publicly
update or revise  any  forward-looking  statements,  whether  as a result of new
information,  future events, changed circumstances or any other reason after the
date of this Annual Report.

     "Pro Tech"  (which may be referred  to as "we,"  "us," or "our")  means Pro
Tech Communications, Inc.

     All  trademarks,  service  marks or trade names  referred to in this Annual
Report are the property of their respective owners.

ITEM 1.   BUSINESS

General

     Pro  Tech  Communications,  Inc.  develops,  manufactures  and  distributes
headphone  and  communications  headset  products  and systems  into the contact
center, quick service restaurant,  cellular/mobile  telephone and consumer audio
markets. Our products include:

     o    Apollo headsets and amplifiers for use in contact centers;

     o    ProCom headsets for use in quick-service restaurants; and

     o    NoiseBuster active noise reduction consumer audio headphones.

     We were  incorporated in Florida in 1994. Our principal  executive  offices
are located at 4492 Okeechobee  Road, Fort Pierce,  Florida 34947, our telephone
number    is    (772)     464-5100     and    our     Internet     address    is
www.protechcommunications.com.  The  information on our Internet  website is not
incorporated  into  this  Annual  Report.  We  are  a  majority-owned,  indirect
subsidiary of NCT Group,  Inc., a publicly traded company that designs  products
and develops and licenses  technologies  based upon its portfolio of patents and
related rights and extensive know-how and non-patented technologies.

Operations

     Currently,  we operate our  business  through two  divisions:  products and
telecommunications systems integration. Formerly, we also operated a call center
business  division.  Please  see Note 15 to the  Notes to  Financial  Statements
contained elsewhere in this Annual Report for additional  information  regarding
our business  divisions.  All of our operations are  predominantly  within North
America.

Products

     Our products division develops,  manufactures and distributes headphone and
communications  headset  products  and systems  into the contact  center,  quick
service  restaurant,  cellular/mobile  telephone and consumer audio markets.  In
September  2004,  we introduced  the next  generation  NoiseBuster  active noise
reduction headphone into the consumer audio market.


                                       3
<PAGE>

     We intend to continue to pursue new  product  development.  Under a license
agreement with our parent company, NCT Hearing Products, Inc., we have access to
over 50 patents,  patents  pending  and  innovations  relating  to active  noise
reduction  and noise and echo  cancellation.  Though a recent  expansion of this
license,  we now have the ability to address  additional markets of opportunity,
including  personal  hearing   protection,   spectator  racing,   two-way  radio
communications,  aviation and military. We intend to enter many of these markets
through the  introduction  of an extensive  new  ProActive  line of active noise
reduction  products  as well as  passive  products  designed  for  higher  noise
settings.  The  first of these  products  is  expected  to be  ProActive  safety
earmuff.  This earmuff will provide  industrial  hearing  protection  for use in
high-noise  environments by combining  passive hearing  protection with advanced
active noise  reduction  technology.  We expect to  commercially  introduce this
product during the first half of 2005.

Headsets

     Our headsets include the following products:

     o    Apollo:  Advanced,  lightweight headsets designed for use by telephone
          users in contact centers and other dynamic business environments;

     o    Apollo  Freedom:  Headsets  designed to plug directly into phones with
          built-in amplifiers;

     o    Trinity:  Closed back headsets designed for use in loud  environments,
          such as very noisy contact centers; and

     o    ProCom:  Highly  durable,  lightweight  headsets  designed  for use in
          drive-through quick service restaurants.

Amplifiers

     Our amplifiers include the following products:

     o    Apollo:  Multimedia  amplifier  engineered for simultaneous use of the
          telephone and multimedia  applications,  including  computer training,
          Voice over Internet Protocol and voice recognition programs;

     o    A-10:  Multi-line  amplifier designed for small office and home office
          use that has been  engineered  to work with  over 90% of all  existing
          phone systems in the world; and

     o    A-27:  Amplifier designed for automatic control  distributors or phone
          systems that use the standard PJ-237 2-prong plug as their interface.

Headphones

     Our headphone  product is the  NoiseBuster  personal active noise reduction
headphones  that reduces low frequency  background  noise  electronically  using
active  noise  reduction  technology,  while  leaving  speech and music  clearly
audible.

Hearing Protection

     Our  hearing  protection  products  currently  under  development  are  the
ProActive  active noise reduction  industrial  hearing  protection  earmuffs and
closed back  communications  headsets that are designed for use in  higher-noise
environments  consisting  largely of  low-frequency  noise that cannot easily be
reduced   with   passive   methods.   Low   frequency   noise  often  masks  the
intelligibility of speech and warning signals, which can be hazardous.

Telecommunications Systems Integration

     Our  telecommunications  systems  integration  division  sells and installs
simple to sophisticated analog, digital and Internet Protocol phone systems that
provide telecommunications systems integration support to small office and large
corporate call center clients.


                                       4
<PAGE>

Technology and Proprietary Information

     Under a license  agreement with our parent  company,  NCT Hearing,  we have
access to over 50 patents,  patents pending and  innovations  relating to active
noise  reduction  and  noise  and  echo  cancellation.  These  technologies  are
instrumental in improving the clarity of communications delivered by many of our
products.

     Active Noise  Reduction.  Active noise reduction  technology  minimizes low
frequency   acoustical  noise,  or  rumbling  sounds.   Active  noise  reduction
electronically  couples a sound wave with its exact  mirror  image wave,  called
anti-noise,  resulting in a significant  reduction of the offensive noise before
it reaches the user's ears. This technology is  particularly  effective  against
low frequency noise,  such as noise generated by computer fans, HVAC systems and
motor or engine-driven equipment.  Reduction of this type of noise is especially
important for intelligible communications.

     Noise  and Echo  Cancellation.  Our  technology  license  from NCT  Hearing
includes the ClearSpeech suite of algorithms designed to remove background noise
and echo from a speech signal. This technology improves  communications  clarity
and  intelligibility.  The ClearSpeech Adaptive Speech Filter noise cancellation
algorithm  removes up to 95% of  stationary,  or  constant,  noise from a signal
containing noise and speech.  The ClearSpeech  Acoustic Echo  Cancellation is an
algorithm  designed to  continuously  and adaptively  remove  acoustic echo from
speech.  Acoustic echoes are produced by the open-air  acoustic path between the
loudspeaker and the microphone in hands-free full-duplex  communication systems.
By  continuously  tracking  changes in this  acoustic  path,  the acoustic  echo
cancellation  effectively  eliminates  the echo,  improving  the  clarity of the
communication system.

     We rely on a combination of patent,  trademark,  copyright and trade secret
laws  in the  U.S.  and  elsewhere  as well as  confidentiality  procedures  and
contractual  provisions  to  protect  our  proprietary  information,   including
information  licensed to us by NCT Hearing.  We also enter into  confidentiality
and invention  assignment  agreements  with our  employees  and  confidentiality
agreements with our consultants and other third parties.

Marketing and Sales

     We market and sell our products  primarily  through  direct sales.  We also
supplement  the sales  efforts of our  employees  through the use of  electronic
commerce,  independent sales representatives and strategic marketing agreements.
Our marketing and sales efforts are currently focused on the sale of our headset
products to the commercial  headset market,  including quick service  restaurant
companies and  franchisees,  contact  centers and other large  quantity users of
commercial  headset  systems.  For  example,  we  have  an  agreement  with  the
McDonald's  Corporation  that allows us to sell our products on a  non-exclusive
basis to McDonald's  franchisees and company-owned  restaurants.  As of December
31, 2004, we had an internal  sales and marketing  force of four  employees,  in
addition to some of our executive officers and directors who also participate in
our direct sales efforts.

Competition

     The  lightweight  telephone and  commercial  audio headset  industries  are
highly competitive and dominated by a few manufacturers. The primary competitors
for our  lightweight  telephone  headsets  are  Plantronics  and GN  Netcom.  In
addition,  in the lightweight  telephone  headset  market,  we may face indirect
competition  from companies  offering  interactive  voice response  systems that
eliminate or reduce the need for human operators for certain applications,  such
as account  balance  inquiries  and  airline  flight  information.  The  primary
competitors  for our  NoiseBuster  headphones  are Bose and  Sony.  The  primary
competitors  for our  pending  ProActive  earmuff  are  expected to be Aearo and
Bacou.

     Our  current  competitors  and  many  of  our  potential   competitors  are
well-established companies that have substantially greater financial, technical,
production,  sales and marketing,  and product development resources than we do.
We believe that the competitive advantages for our products and services include
high performance resulting from our proprietary technology,  superior design and
construction,  and low  cost,  but that our  competitive  disadvantages  include
limited name recognition,  limited marketing and distribution resources and long
production lead times.


                                       5
<PAGE>

Manufacturing

     Our manufacturing operations currently consist of assembly and testing, all
of which occurs at our Fort Pierce, Florida facilities. We purchase the majority
of our  components  for our products from several  suppliers in Asia,  who build
each component based on our  specifications.  The majority of our components and
subassemblies  used  in  our  manufacturing  operations  are  obtained,  or  are
reasonably  available  from multiple  suppliers  currently  under  contract.  We
procure materials to meet forecasted customer requirements.  We maintain minimum
levels of finished  goods based on market demand in addition to  inventories  of
work in progress, subassemblies and components. However, our management believes
that the assembly of our products by third parties will be cost effective to our
future  operations.  Therefore,  we intend to  discontinue  the  majority of our
assembly and testing  operations at our Fort Pierce,  Florida  facilities during
2005.

Environmental Matters

     We are subject to various federal,  state and local  environmental laws and
regulations,  including  those  governing  the use,  discharge  and  disposal of
hazardous  substances in the ordinary course of our  manufacturing  process.  We
believe  that  our  current  manufacturing  operations  comply  in all  material
respects  with  applicable  environmental  laws  and  regulations  and  that our
compliance  with these laws and  regulations  does not have a material effect on
our capital expenditures, earnings or competitive position.

Backlog

     Our  backlog  of  unfilled  orders  was  approximately  $44,000  on each of
December 31, 2004 and  December 31, 2003.  We do not believe that our backlog as
of any particular date is indicative of actual sales for any future period,  and
therefore should not be used as an indication of future revenue.

Employees

     As of  December  31,  2004,  we  had  eight  full-time  and  six  part-time
employees,  including five  employees in  administration  and shipping,  four in
sales and marketing and five in assembly and  production.  None of our employees
is  covered by a  collective  bargaining  agreement.  We  believe  our  employee
relationships are good.

Available Information

     We file reports,  proxy  statements and other documents with the Securities
and Exchange Commission  ("SEC").  You may read and copy any document we file at
the SEC's public  reference room at Judiciary Plaza Building,  450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549. You should call 1-800-SEC-0330 for more
information on the public  reference room. Our SEC filings are also available to
you on the SEC's Internet site at http://www.sec.gov.

     We  maintain  an  Internet  website at  www.protechcommunications.com.  Our
periodic  reports  filed with the SEC  (including  annual  reports on Form 10-K,
quarterly  reports on Form  10-Q,  current  reports  on Form 8-K and  Section 16
reports) are  available  free of charge on our Investor  Information  website at
www.protechcommunications.com/ptcinvest  as soon as reasonably practicable after
these reports are  electronically  filed with the SEC. The information posted on
our website is not incorporated into this Annual Report.


                                       6
<PAGE>

ITEM 2.   PROPERTIES

     Our principal executive,  sales and manufacturing facilities are located in
Fort Pierce, Florida where we lease approximately 13,000 square feet pursuant to
a lease that expires in February  2006. We believe these  facilities  provide us
with  adequate  space for the near term  consistent  with our  current  business
plans.

ITEM 3.   LEGAL PROCEEDINGS

     We are not a party to any legal proceeding.

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

     No  matter  was  submitted  to a vote  of  our  stockholders,  through  the
solicitation of proxies or otherwise, during the fourth quarter of 2004.

                                     PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
          ISSUER PURCHASES OF EQUITY SECURITIES

     Our common stock currently  trades on the NASD OTC Bulletin Board under the
symbol  "PCTU." The following  table sets forth the high and low sales prices of
our common stock,  as reported on the NASD OTC Bulletin  Board,  for each of the
periods listed.

                                  2003                      2004
                          ----------------------    ----------------------
                           High          Low          High         Low
                          --------     ---------    ---------    ---------
     1st Quarter          $0.015        $0.005       $0.050       $0.013
     2nd Quarter          $0.018        $0.007       $0.150       $0.022
     3rd Quarter          $0.015        $0.008       $0.055       $0.013
     4th Quarter          $0.018        $0.009       $0.090       $0.025

     As of February  28,  2005,  we had 61 holders of record of our common stock
representing approximately 500 beneficial owners.

Dividends

     We have never declared or paid any cash  dividends on our common stock.  We
currently   anticipate   that  we  will  retain  any  future  earnings  for  the
development,  operation and expansion of our  business.  Accordingly,  we do not
anticipate  declaring  or paying any cash  dividends  on our common stock in the
foreseeable  future.  Our board of directors will have discretion in determining
whether to declare  or pay  dividends,  which  will  depend  upon our  financial
condition, operating results, capital requirements and such other factors as the
board of directors deems relevant. In addition, provisions of our series A and B
convertible  preferred  stock  restrict our ability to pay cash dividends on our
common stock.


                                       7
<PAGE>
ITEM 6.  SELECTED FINANCIAL DATA

     The  following  selected  financial  data is  derived  from our  historical
financial  statements  and  should  be read in  conjunction  with our  financial
statements  and "Item 7.  Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations" that are included  elsewhere in this Annual
Report.
<TABLE>
<CAPTION>
                                                   For the Year  For the Two                        For the Year
                                                      Ended     Months Ended                           Ended
                                                   October 31,   December 31,                       December 31,
                                                   ------------ ------------  -----------------------------------------------------
                                                       2000         2000          2001          2002         2003          2004
                                                   ------------ ------------  ------------ ------------- ------------  -------------
<S>                                                <C>          <C>           <C>          <C>           <C>           <C>
STATEMENTS OF OPERATIONS DATA:

Net sales                                          $ 1,562,484  $   307,902   $ 2,175,306  $  1,648,949  $ 1,178,535   $  1,194,756

Cost of goods sold                                     623,555      129,378       920,127       774,316      364,413        518,340
                                                   ------------ ------------  ------------ ------------- ------------  -------------

      Gross profit                                     938,929      178,524     1,255,179       874,633      814,122        676,416

Selling, general and administrative                  1,275,290      545,586     3,655,711     2,703,425    1,694,363      1,946,990
Impairment charge on intangible assets                     -            -             -      11,500,000          -              -
Provision for doubtful accounts                          7,990        1,574         9,958        29,800        6,591         14,621
                                                   ------------ ------------  ------------ ------------- ------------  -------------

      Loss from operations                            (344,351)    (368,636)   (2,410,490)  (13,358,592)    (886,832)    (1,285,195)
Other income (expense):
  Interest income (expense), net                       (31,715)      (8,713)      (20,262)      (51,290)     (90,966)      (115,356)
  Miscellaneous income                                   1,726        1,029         4,305         5,004        3,352         10,396
  Loss on disposal of fixed assets                         -            -          (2,945)          -            -              -
                                                   ------------ ------------  ------------ ------------- ------------  -------------

      Net loss                                        (374,340)    (376,320)   (2,429,392)  (13,404,878)    (974,446)    (1,390,155)
Less:
Preferred stock beneficial conversion                3,569,000          -          79,190        45,810            -            -
Preferred stock embedded dividend                      375,000          -          62,661           -              -            -
Dividend accretion on preferred stock                    5,425       10,027        24,085        22,000        10,911           -
                                                   ------------ ------------  ------------ ------------- ------------  -------------

      Net loss attributable to common
           stockholders - as previously reported    (4,323,765)    (386,347)   (2,595,328)  (13,472,688)     (985,357)   (1,390,155)

Adjustment of beneficial conversion (1)              2,444,000          -             -             -             -             -
                                                   ------------ ------------  ------------ ------------- ------------  -------------

      Net loss attributable to common
           stockholders - as adjusted              $(1,879,765) $  (386,347)  $(2,595,328) $(13,472,688)  $  (985,357) $ (1,390,155)
                                                   ============ ============  ============ ============= ============  =============

Basic and diluted net loss per share attributable
  to common stockholders - as previously reported        (0.57)       (0.01)        (0.08)        (0.41)        (0.03)        (0.02)

Adjustment of beneficial conversion (1)                   0.32          -             -             -             -             -
                                                   ------------ ------------  ------------ ------------- ------------  -------------

Basic and diluted net loss per share attributable
  to common stockholders - as adjusted             $     (0.25) $     (0.01)  $     (0.08) $      (0.41)  $     (0.03) $      (0.02)
                                                   ============ ============  ============ ============= ============  =============

 Weighted average number
       of common shares outstanding (2)              7,537,855   28,248,438    32,281,034    33,200,311    33,200,311    62,377,398
                                                   ============ ============  ============ ============= ============  =============


                                                   October 31,                               December 31,
                                                   ------------ --------------------------------------------------------------------
                                                       2000         2000          2001          2002         2003          2004
                                                   ------------ ------------  ------------ ------------- ------------  -------------
BALANCE SHEET DATA:
 Total assets                                      $18,652,665  $18,264,130   $17,184,920  $  4,163,492  $  3,673,036  $  3,499,047
 Total current liabilities                             662,956      651,313     1,541,386       866,537     1,334,879     1,212,614
 Long-term debt                                          3,687        3,115        44,632     1,102,931     1,849,949     2,218,526
 Accumulated deficit                                  (787,624)  (1,163,944)   (3,593,336)  (16,998,214)  (17,972,660)  (19,362,815)
 Stockholders' equity (3)                           17,986,022   17,609,702    14,965,464     1,540,586       488,208        67,907
 Working capital/(deficit)                           1,419,819    1,205,686      (320,525)      (19,543)     (647,747)     (630,388)
</TABLE>

(1)  Adjustment  to reflect  the  allocation  of  proceeds  to  multiple  equity
     instruments  (series A  preferred  stock and  warrants)  and to adjust  the
     beneficial conversion feature.
(2)  Excludes  shares  issuable upon the exercise or  conversion of  outstanding
     stock options, warrants and convertible preferred stock, since their effect
     would be antidilutive.
(3)  We have never declared nor paid cash dividends on our common stock.

                                       8
<PAGE>

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

Overview

     We develop, manufacture and distribute headphone and communications headset
products  and  systems  into  the  contact  center,  quick  service  restaurant,
cellular/mobile telephone and consumer audio markets. Our products include:

     o    Apollo headsets and amplifiers for use in contact centers;

     o    ProCom headsets for use in quick-service restaurants; and

     o    NoiseBuster active noise reduction consumer audio headphones.

     We intend to continue to pursue new  product  development.  Under a license
agreement  with our  parent  company,  NCT  Hearing,  we have  access to over 50
patents,  patents pending and innovations relating to active noise reduction and
noise and echo cancellation.  Though a recent expansion of this license,  we now
have the ability to address additional markets of opportunity including personal
hearing protection, spectator racing, two-way radio communications, aviation and
military.  We intend to enter many of these markets through the  introduction of
an extensive new ProActive  line of active noise  reduction  products as well as
passive products designed for higher noise settings.

Critical Accounting Policies and Estimates

     The preparation of our financial statements requires our management to make
estimates  and  assumptions   that  affect  the  reported   amounts  of  assets,
liabilities,  revenue and expenses,  and related disclosure of contingent assets
and liabilities.  Management bases its estimates on historical experience and on
various  other  assumptions  that  are  believed  to  be  reasonable  under  the
circumstances, the results of which form the basis of making judgments about the
carrying  values of assets and  liabilities  that are not readily  apparent from
other sources.  Actual results may differ from these  estimates  under different
assumptions or conditions.

     An accounting  policy is deemed to be critical if it requires an accounting
estimate  to be made  based  upon  assumptions  about  matters  that are  highly
uncertain at the time the  estimate is made,  and if  different  estimates  that
reasonably could have been used, or changes in the accounting estimates that are
reasonably likely to occur  periodically,  could materially impact the financial
statements.  Management  believes the  following  critical  accounting  policies
reflect its more  significant  estimates and assumptions used in the preparation
of the financial statements.

Revenue Recognition

     We recognize net sales from product sales upon shipment  provided title and
risk of loss have been  transferred to the customer,  persuasive  evidence of an
arrangement  exists, fees are fixed or determinable and collection is reasonably
assured.  We generally  have no  obligations  to  customers  after the date that
product is shipped  other than for  warranty  obligations.  Returns and customer
credits are infrequent and recorded as a reduction to sales. Discounts from list
prices  are  recorded  as a  reduction  to sales  at the  time of sale.  We also
maintain  allowances for doubtful  accounts for estimated  losses resulting from
the  inability of our  customers to make  required  payments.  If the  financial
condition of our  customers  were to  deteriorate  resulting in an impairment of
their ability to make payments, additional allowances might be required.

Impairment of Long-Lived Assets and Identifiable Intangible Assets

     We  record   impairment   losses  on  long-lived  assets  and  identifiable
intangible assets used in operations when events and circumstances  indicate the
assets  might be  impaired  or the  remaining  useful  life has  changed and the
undiscounted  cash flows estimated to be generated by those assets are less than
their  carrying  amounts.  The amount of the impairment  loss  recognized is the
amount by which the carrying  amounts of the assets  exceed the  estimated  fair
values.  In order to evaluate  potential  impairment as required by Statement of
Financial  Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment
or Disposal  of  Long-Lived  Assets,"  we estimate  future cash


                                       9
<PAGE>

flows based upon assumptions for projected future operating  results,  projected
future  capital  expenditures  and other  material  factors  that may affect the
continuity  or the  usefulness of the asset.  The carrying  amount of intangible
assets  at  December  31,  2004  and  2003  was  approximately   $2,610,000  and
$2,530,000, respectively.

Inventory and Reserves for Excess and Obsolescence

     We value  inventory at the lower of cost  (first-in,  first-out  method) or
market. We regularly review inventory  quantities on hand and record a provision
to write down  inventory to its estimated  net  realizable  value,  if less than
cost.  This estimate is based upon  management's  assumptions of future material
usage  and  obsolescence,  which  are a  result  of  future  demand  and  market
conditions.  If actual  market  conditions  become  less  favorable  than  those
projected by management,  additional  inventory  provisions may be required.  If
inventory is written down to its net realizable value and subsequently  there is
an increased  demand for the inventory at a higher value, the increased value of
the inventory is not realized until the inventory is sold,  which will result in
improved  margins in the  period in which the  product  is sold.  The  inventory
reserve at December  31, 2004 and 2003 was  approximately  $119,000  and $5,000,
respectively.

Product Warranties

     Accruals for estimated  expenses related to warranties are made at the time
products are sold or services are rendered. These accruals are established using
historical  information  on the nature,  frequency  and average cost of warranty
claims and estimates of future costs.  Management believes the warranty accruals
are adequate;  however,  actual  warranty  expenses  could differ from estimated
amounts for any significant  increase in material and workmanship defects rates,
which in turn could have a material adverse impact on our operating results. The
accrual for  product  warranties  at December  31, 2004 and 2003 was $28,000 and
$42,000, respectively.

     A summary of our significant  accounting  policies can be found in Notes to
Financial  Statements:   Note  1  -  Organization  and  Summary  of  Significant
Accounting Policies.

Recently Issued Accounting Pronouncements

     In November 2004, the Financial  Accounting Standards Board ("FASB") issued
SFAS No. 151, "Inventory Costs--an amendment of ARB No. 43," which is the result
of its  efforts to converge  U.S.  accounting  standards  for  inventories  with
International  Accounting  Standards.   SFAS  No.  151  requires  idle  facility
expenses,  freight,  handling cost and wasted  material  (spoilage)  costs to be
recognized as current-period  charges. It also requires that allocation of fixed
production  overhead to the costs of conversion be based on the normal  capacity
of the production facilities. SFAS No. 151 will be effective for inventory costs
incurred for us beginning  January 1, 2006. We are evaluating the impact of this
standard on our financial statements.

     In December 2004, the FASB issued SFAS No. 123 (Revised 2004)  "Share-Based
Payment."  This standard  replaces  SFAS No. 123,  "Accounting  for  Stock-Based
Compensation" and supercedes Accounting Principals Board Opinion 25, "Accounting
for Stock  Issued to  Employees."  It  requires  that the  compensation  cost of
share-based  payment  transactions be recognized in financial  statements  based
upon  the  fair  value of the  equity  or  liability  instruments  issued.  This
statement is effective for us beginning July 1, 2005. We have not yet determined
the impact of applying the various provisions of SFAS No. 123R.

     In December 2004,  the FASB issued SFAS No. 153,  "Exchanges of Nonmonetary
Assets--an  amendment  of APB  Opinion  No. 29" that  amends  Opinion  No. 29 to
eliminate the exception for nonmonetary  exchanges of similar  productive assets
and replaces it with a general  exception  for exchanges of  nonmonetary  assets
that do not have  commercial  substance.  A nonmonetary  exchange has commercial
substance  if the  future  cash  flows of the  entity  are  expected  to  change
significantly as a result of the exchange.  The provisions of this statement are
effective for  non-monetary  asset  exchanges for us beginning  July 1, 2005. We
believe  the  adoption  of SFAS 153 will not have an  impact on our  results  of
operations or financial position.


                                       10
<PAGE>

Results of Operations

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

     Net  loss.  Net  loss  for the  year  ended  December  31,  2004  increased
approximately  $416,000,  or 43%,  compared to the year ended December 31, 2003.
This increase was due to an increase of approximately  $154,000 in cost of goods
sold and an increase  of  approximately  $245,000 in NCT Hearing and  affiliates
charges.

     Net  sales.  Net sales  for the year  ended  December  31,  2004  increased
approximately $16,000, or 1%, compared to the year ended December 31, 2003. This
increase  was  primarily  due to an increase  related to our  entrance  into the
consumer audio market,  partially offset by reductions in sales to our fast-food
and telephone markets.

     Sales from our fast-food  market  decreased  approximately  $57,000 for the
year ended December 31, 2004 compared to 2003 due mainly to reduced purchases by
one of our major  distributors of fast-food  parts.  The number of units sold in
the  fast-food  market,   including  both  headsets  and  parts,   decreased  to
approximately   29,000  units  for  the  year  ended   December  31,  2004  from
approximately  36,000 units during 2003.  This decrease was primarily the result
of  continued  market  competition  from  Far-East  headset   manufacturers  and
increased industry use of equipment  maintenance support contractors who provide
a wide range of restaurant  equipment,  thereby  eliminating the need for owners
and franchisees to purchase headset products from individual  manufacturers.  We
expect that sales from our fast-food  markets will continue to decline in future
periods as a result of these factors.

     Sales from our telephone  market  decreased  approximately  $21,000 for the
year ended December 31, 2004 compared to 2003 due mainly to reduced purchases by
one of our major  distributors.  Telephone headset purchases by this distributor
decreased approximately $27,000 for the year ended December 31, 2004 compared to
2003.

     For the year ended December 31, 2004, we generated  sales of  approximately
$87,000 from our entrance into the consumer audio market. We entered this market
in  September  2004  with  the  introduction  of our  NoiseBuster  Active  Noise
Reduction headphones.

     Cost of goods sold.  For the year ended  December 31,  2004,  cost of goods
sold increased  approximately  $154,000, or 42%, compared to 2003. This increase
was due mainly to an increase of $114,000 in the inventory  reserve for the year
ended December 31, 2004 as compared to 2003. We increased our inventory  reserve
in December 2004 as part of the  implementation of our strategy to reduce future
costs by using third parties to assemble our high volume products.

     Gross  profit.  Gross profit  margin  decreased to 56.6% for the year ended
December 31, 2004 from 69.1% for the year ended  December 31, 2003.  In December
2004, we increased our inventory reserve by approximately  $114,000 as discussed
above.  Without  this  increase,  the gross  profit  margin  for the year  ended
December  31, 2004 would have been  66.1%.  During the year ended  December  31,
2003, we received a $15,000 credit from a vendor. Without this credit, the gross
profit margin for the year ended December 31, 2003 would have been 67.8%.

     Selling,  general and administrative  expenses. For the year ended December
31, 2004, selling,  general and administrative  expenses increased approximately
$4,000,  or 1%,  compared to 2003.  This increase was due to: (1) an increase of
approximately $52,000 in consulting expenses related to investor  communications
and public relations;  (2) an increase of approximately  $47,000 in professional
services  and (3) an increase of  approximately  $60,000 in  marketing  expenses
related  to  the  introduction  of  our  NoiseBuster  headphones.  Substantially
offsetting  these  increases  were: (1) a decrease of  approximately  $88,000 in
payroll  and  related  expenses,  (2) a  decrease  of  approximately  $37,000 in
insurance  expenses and  miscellaneous  fees and (3) a decrease of approximately
$32,000 in health insurance and claims expenses.  These decreases  resulted from
our continued costs savings through work force  reductions and tighter  controls
over expenditures.

     NCT Hearing and affiliates  charges.  For the year ended December 31, 2004,
NCT Hearing and affiliates  charges increased  approximately  $245,000,  or 78%,
compared to 2003.  This increase was due mainly to the additional work performed
by their  engineering  staff in connection with our next generation  NoiseBuster
headphones  released  in  September  2004  and the  anticipated  release  of our
ProActive safety earmuff in the second quarter of 2005.


                                       11
<PAGE>

     Interest  expense.  Interest  expense for the year ended  December 31, 2004
increased approximately $22,000 compared to 2003. Interest expense - NCT Hearing
comprised  $20,000  of  the  increase.   These  charges  were  incurred  on  the
outstanding  notes payable to NCT Hearing,  which represent  amounts owed to NCT
Hearing for services provided to us by NCT Hearing and its affiliated companies,
as well as cash  advances.  As of  December  31,  2004,  the  balance  of  these
outstanding  noncurrent  notes  payable,   including  interest,  was  $2,207,255
compared to $1,824,520 as of December 31, 2003.

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

     Net  loss.  Net  loss  for the  year  ended  December  31,  2003  decreased
approximately $12,430,000, or 93%, compared to the year ended December 31, 2002.
This decrease was due mainly to the  recognition  of an  $11,500,000  intangible
assets  impairment  charge  in  2002 as well  as a  reduction  of  approximately
$254,000 in selling,  general and  administrative  expenses  and a reduction  of
approximately $756,000 in depreciation and amortization expense during 2003.

     Net  sales.  Net sales  for the year  ended  December  31,  2003  decreased
approximately  $470,000,  or 29%,  compared to the year ended December 31, 2002.
Pro Tech continued the sale of products through  distributors,  augmenting these
sales with direct sales from our own outbound  telemarketing  operation.  During
the year ended  December 31, 2003,  we sold  approximately  35,800  headsets and
headset related  products,  as compared to approximately  60,500 during the same
period 2002, a 41% decrease.

     Sales from our fast-food market decreased  approximately  $313,000, or 28%,
in 2003 as compared to 2002. Net unit sales of fast-food  headsets decreased 51%
due  mainly  to  reduced  purchases  by three of our  major  distributors.  This
decrease was primarily the result of slowed demand from their customer base.

     Sales from our radio market decreased  approximately  $100,000,  or 97%, in
2003 compared to 2002. After evaluating the revenue and costs of this market, we
determined  that it was not  profitable  for us and  decided to exit this market
during 2002.

     Sales from our telephone  market  remained  approximately  the same in 2003
compared to 2002.  We faced  delays in  introduction  of new  products  for this
market due to a lack of working capital.

     Cost of goods sold. Cost of goods sold for the year ended December 31, 2003
decreased  approximately  $410,000,  or 53%, compared to 2002. This decrease was
due mainly to the decrease in sales volume for 2003. In addition, replacement of
headsets in connection with a component  failure that we experienced  during the
second  quarter of 2001 was  completed as of September  30, 2002.  The number of
units  replaced  through  warranty  during  the year  ended  December  31,  2003
decreased by approximately  7,300 compared to 2002,  representing  approximately
$54,000 in costs.  Although  these  component  failures had been  corrected,  we
continued to honor the warranty  associated  with these headsets and repaired or
replaced the headsets for customers as needed. Also contributing to the decrease
in cost of goods  sold was a  $15,000  credit  from a vendor  in  settlement  of
disputed charges from prior years.

     Gross profit.  Gross profit margin percent  increased to 69.1% for the year
ended  December 31, 2003 from 53.0% for the year ended  December 31, 2002.  This
increase was a result of: (1) a favorable change in the mix of customers;  (2) a
decrease in the  expenses  incurred to honor  warranty  replacements;  and (3) a
$15,000  credit  from a  vendor,  mentioned  above.  The  change  in the  mix of
customers  resulted from the decrease in sales to our three major  distributors.
These  distributors  purchased in large  quantities and,  therefore,  were given
discounted  prices  resulting in lower profit margins.  The decrease in expenses
related to warranty is a result of fewer  headsets  being replaced in connection
with the component failure mentioned above.

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative   expenses  for  the  year  ended  December  31,  2003  decreased
approximately  $254,000,  or 20%,  compared to the year ended December 31, 2002.
Starting in 2002 and continuing  throughout 2003, we implemented cost savings to
reduce selling, general and administrative expenses. These cost savings included
a reduction  of work force in all areas of the products  operations  and tighter
controls  over  expenditures.  The  decrease  in  expenses  was due  mainly to a
decrease of  approximately  $292,000 in payroll and related  expenses  comprised
mainly of a $133,000 decrease in health benefit expenses and a $121,000 decrease
in payroll and payroll taxes reflecting workforce reductions.


                                       12
<PAGE>

     We did not have an  impairment  charge on  intangible  assets  for the year
ended  December  31, 2003 as compared  to a charge of  $11,500,000  for the year
ended  December 31,  2002.  We are  required to test the  recoverability  of our
long-lived  assets (which  include our  intangible  assets)  whenever  events or
changes  in  circumstances  indicate  that  their  carrying  amount  may  not be
recoverable.  We  tested  the  recoverability  of the  intangible  assets  as of
December 31, 2003 and  determined  that the carrying  amount of such assets were
less than their fair value.  No  impairment  charge was  necessary  for the year
ended December 31, 2003.

     Interest  expense.  Interest  expense  - NCT  Hearing  for the  year  ended
December 31, 2003 increased  approximately  $35,000,  or 168%, compared to 2002.
These  charges were  incurred on the  outstanding  notes payable to NCT Hearing,
which represent  amounts owed to NCT Hearing for services  provided to us by NCT
Hearing and its affiliated  companies,  as well as cash advances. As of December
31, 2003, the balance of the outstanding notes payable,  including interest, was
$1,824,540, as compared to $1,064,703 as of December 31, 2002.

Liquidity and Capital Resources

     We have experienced net losses since our inception.  These losses have been
funded primarily from product sales, the sale of convertible preferred stock and
advances from NCT Hearing and its affiliates. During the year ended December 31,
2004,  we  funded  working  capital  requirements  with  continued  use  of  our
short-term  factoring   arrangement  and  advances  from  NCT  Hearing  and  its
affiliates.  In addition,  NCT Hearing and its  affiliates  paid expenses on our
behalf,  which were  allocated  to us. We  continue  to closely  monitor all our
expenditures.  We received  approximately  $115,000 in advances during the first
quarter 2005 from NCT Hearing to assist us in funding our working  capital needs
during  2005.  Management  believes  we will have  sufficient  funds to meet our
estimated  anticipated working capital  requirements  through December 31, 2005.
However, our liquidity is affected by many factors, including, among others, the
level  of  product  sales,  capital  expenditures,  the  level  of  new  product
development  efforts  and other  factors  related  to the  uncertainties  of our
industry  and the  economy in general.  Accordingly,  we may be required to seek
additional financing during the next 12 months. Management can give no assurance
that any additional financing,  including from NCT Hearing, will be available to
us on commercially reasonable terms, or at all. The failure to obtain any needed
financing could have a material adverse effect on us.

     On April 5, 2004,  NCT Hearing  converted  an  aggregate of $640,466 of our
outstanding  noncurrent  secured promissory notes payable into 27,846,351 shares
of our common stock.

     On June 27, 2004,  we  negotiated  the rollover of our $62,009  outstanding
note payable to Westek Electronics,  a stockholder,  into a note payable bearing
interest  at 8.5%  and  payable  in  monthly  installments  of  $3,500  with the
remaining balance maturing on June 27, 2005.

     At December 31, 2004, cash and cash equivalents were $59,097.

     The current ratio (current assets to current  liabilities) was 0.48 to 1.00
at December 31, 2004, as compared to 0.51 to 1.00 at December 31, 2003. We had a
working  capital  deficit of $636,388 at December 31, 2004 compared to a deficit
of $647,747 at December  31,  2003.  This  $11,000  decrease in working  capital
deficit  was due mainly to a decrease  in our notes  payable to  stockholder  of
approximately  $102,000  and a decrease  in  accounts  payable of  approximately
$73,000. Offsetting these decreases in current liabilities was a decrease in net
inventories of approximately $150,000.

     Cash flows used in operating activities were approximately  $177,000 during
the year ended December 31, 2004. This use of funds was driven  primarily by the
2004  generated  net  loss  of  approximately  $1,390,000  and the  decrease  of
approximately  $73,000 in accounts  payable.  These uses of funds were offset by
depreciation  and  amortization   expense  of  approximately   $342,000  and  an
approximate  $814,000  increase in notes  payable for  services  received and an
increase in provision for obsolete inventories of approximately $114,000.

     The net cash provided by financing  activities was  approximately  $219,000
during the year ended December 31, 2004, due mainly to approximately $267,000 in
net cash received from NCT Hearing and its  affiliates,  offset by payments made
on notes payable and capital lease obligations.

     We have no lines of credit with banks or other lending institutions.


                                       13
<PAGE>

Capital Expenditures

     There were no material  commitments for capital expenditures as of December
31, 2004, and no material  commitments  are  anticipated in the near future.  In
connection  with the proposed  release of a new product,  the  ProActive  safety
earmuff,  we  have  been in  detailed  discussions  with  the  manufacturer  and
anticipate  incurring  approximately  $110,000  in  tooling  costs (for the mold
needed for the product) payable as follows:  25% at the beginning of production,
25% with the  first  shipment  of  product  and the  remainder  based  upon unit
production,  not to exceed 12  months.  We expect to  finance  these  costs from
working  capital.  In the event that our working capital is not  sufficient,  we
will seek additional funding from NCT Hearing.

Contractual Obligations

     The impact that our  contractual  obligations  as of December  31, 2004 are
expected to have on our liquidity and cash flow in future periods is as follows:

<TABLE>
<CAPTION>
                                                  Payments due by period
                                -----------------------------------------------------------------
<S>                              <C>           <C>           <C>           <C>          <C>
                                                                                         More
                                               Less than                                than 5
Contractual Obligations             Total        1 year      1-3 years     3-5 years     years
                                ------------  ------------  ------------  -----------  ----------
Long-Term Debt                   $    4,076    $    2,646    $    1,430    $      -     $     -
Related Party Long-Term Debt      2,207,255           -       2,207,255           -           -
Capital Leases                       23,474        13,109        10,365           -           -
Operating Leases                    112,747        96,563        16,184           -           -
Purchase Obligations                110,000       110,000           -             -           -
                                ------------  ------------  ------------  -----------  ----------
     Total                       $2,457,552    $  222,318    $2,235,234    $      -     $     -
                                ============  ============  ============  ===========  ==========
</TABLE>

Off-Balance Sheet Arrangements

     As  of  December  31,  2004,  we  did  not  have  any   off-balance   sheet
arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Factors Affecting Our Business and Prospects

     There are many factors that affect our business and our operating  results,
some of which are beyond our control. The following discussion describes some of
the  important  factors that may cause our actual  results in future  periods to
differ materially from those currently expected or desired.

     We have  incurred  substantial  losses since our inception and we expect to
have a continuing need for additional financing.

     We have incurred  substantial  losses from operations  since our inception,
including operating losses of $13,404,878, $974,446 and $1,390,155 for the years
ended December 31, 2002, 2003 and 2004, respectively,  and we had an accumulated
deficit of  $19,362,815 at December 31, 2004. We expect that we will continue at
a loss until, at the earliest, we generate sufficient revenue to offset the cost
of our operations.  Our future revenue levels and potential profitability depend
on many factors,  including  the demand for our existing  products and services,
our ability to develop and sell new  products  and  services  and our ability to
control costs.  We can give no assurance that we will experience any significant
revenue growth or that we will ever achieve profitability. Even if we do achieve
profitability for a fiscal year, we may be unable to sustain  profitability on a
quarterly or annual basis in the future.  It is possible  that our revenues will
grow more slowly than we anticipate or that  operating  expenses will exceed our
expectations.

     We believe that we will have sufficient funds to meet  anticipated  working
capital  requirements  for the next twelve  months.  However,  our  liquidity is
affected by many factors,  including,  among others, the level of product sales,
capital  expenditures,  the level of new product  development  efforts and other
factors related to the uncertainties of our industry and the economy in general.
In the event that our  operations do not generate  sufficient  cash, we could be
required to reduce our level of operations  while attempting to raise additional
working capital. We can give no assurance that additional  financing,  including
funding from NCT Hearing, will be available to us on


                                       14
<PAGE>

acceptable  terms or at all.  The  failure  to obtain any  necessary  additional
financing would have a material  adverse effect on us. If adequate funds are not
available or are not  available  on  acceptable  terms,  our ability to fund our
expansion, take advantage of business opportunities, develop or enhance products
or services or otherwise respond to competitive pressures would be significantly
limited, and we might need to significantly restrict our operations.

     We depend on the  development  of our  businesses in the consumer audio and
industrial safety markets and we could be materially adversely affected if these
businesses do not develop as we expect.

     While the contact center and quick service  restaurant  markets are still a
substantial  portion of our business,  we believe that our future prospects will
depend in large part on the growth in demand for our NoiseBuster  consumer audio
headphones and our pending ProActive industrial hearing protection products.  We
do not have  extensive  experience  in  selling  products  to  customers  in the
consumer audio and industrial  safety  markets.  If we are unable to effectively
market our  products to  customers  in these  markets,  it would have a material
adverse  effect on the potential  demand for these products and on our business,
financial condition, operating results and cash flows.

     If we are  unable  to match  production  to  demand,  we will be at risk of
losing business or our gross margins could be materially adversely affected.

     The demand for our products is dependent on many factors and this demand is
inherently  difficult to forecast.  We have  experienced  sharp  fluctuations in
demand  for many of our  products.  Significant  unanticipated  fluctuations  in
demand could cause the following operating problems, among others:

     o    If forecasted demand does not develop,  we could have excess inventory
          and excess  capacity.  Over  forecast of demand could result in higher
          inventories of finished products, components and subassemblies.  If we
          were unable to sell these inventories, we would have to write off some
          or all of our inventories of excess  products and unusable  components
          and subassemblies.  Excess manufacturing capacity could lead to higher
          production costs and lower margins.
     o    If demand increases  beyond that forecasted,  we would have to rapidly
          increase  production.  We depend on  suppliers  to provide  additional
          volumes of components and subassemblies,  and are experiencing greater
          dependencies on single source  suppliers.  Therefore,  we might not be
          able to increase  production rapidly enough to meet unexpected demand.
          This could cause us to fail to meet customer expectations. There could
          be  short-term  losses  of  sales  while  we are  trying  to  increase
          production. If customers turn to competitive sources of supply to meet
          their needs, there could be a long-term impact on our revenues.
     o    Rapid  increases in  production  levels to meet  unanticipated  demand
          could  result  in  higher  costs  for  components  and  subassemblies,
          increased  expenditures  for freight to expedite  delivery of required
          materials and higher overtime costs and other  expenses.  These higher
          expenditures could lower our profit margins. Further, if production is
          increased rapidly, there may be decreased  manufacturing yields, which
          may also lower our margins.

     Any of  the  foregoing  problems  could  materially  adversely  affect  our
business, financial condition and operating results.

     The failure of our suppliers to provide quality components or products in a
timely manner could adversely affect our results.

     Our  growth  and  ability to meet  customer  demands  depend in part on our
capability to obtain timely deliveries of components, subassemblies and products
from our  suppliers.  We buy  components  and  subassemblies  from a variety  of
suppliers and assemble them into finished products.  We also have certain of our
products  manufactured  for us by third party suppliers.  The cost,  quality and
availability of these goods are essential to the successful  production and sale
of our  products.  Obtaining  components,  subassemblies  and finished  products
entails various risks, including the following:

     o    We obtain certain  subassemblies,  components and products from single
          suppliers  and  alternate  sources  for these  items  are not  readily
          available.  An  interruption  in supply from any of our single  source
          suppliers  in  the  future  would  materially   adversely  affect  our
          business, financial condition and operating results.


                                       15
<PAGE>

     o    Prices of components, subassemblies and finished products may rise. If
          this  occurs  and we are not able to pass  these  increases  on to our
          customers or to achieve  operating  efficiencies that would offset the
          increases,  it would have a material  adverse  effect on our business,
          financial condition and operating results.
     o    Due to the  lead  times  required  to  obtain  certain  subassemblies,
          components and products from certain foreign suppliers,  we may not be
          able to react quickly to changes in demand,  potentially  resulting in
          either  excess   inventories   of  such  goods  or  shortages  of  the
          subassemblies, components and products. Failure in the future to match
          the timing of purchases of  subassemblies,  components and products to
          demand could increase our  inventories  and/or  decrease our revenues,
          consequently  materially  adversely affecting our business,  financial
          condition and operating results.
     o    Most of our suppliers are not obligated to continue to provide us with
          components  and  subassemblies.  Rather,  we buy most  components  and
          subassemblies  on a purchase order basis. If our suppliers  experience
          increased  demand or shortages,  it could affect  deliveries to us. In
          turn,  this would affect our ability to manufacture  and sell products
          that are dependent on those components and  subassemblies.  This would
          materially  adversely  affect our  business,  financial  condition and
          operating results.

     We face significant competition from well-established companies.

     We face formidable  competition in each of the markets in which we operate.
Many of  these  companies  have  substantially  greater  management,  technical,
financial,  marketing and product development resources than we do. In addition,
many of our competitors have substantially  greater name recognition and shorter
production and distribution lead times than we do. For example,  our lightweight
telephone headsets face substantial  competition from Plantronics and GN Netcom,
our NoiseBuster  headphones  compete with products  offered by Bose and Sony and
our pending ProActive  earmuffs are expected to compete with earmuffs offered by
Aearo and Bacou.  While we believe that the quality of our products and services
equals or exceeds  those of our  competitors,  we can give no assurance  that we
will be able to compete effectively against these companies.

     Our success depends upon our ability to develop new products and to enhance
our existing products.

     The  markets  in  which  we   participate   are   characterized   by  rapid
technological advances, evolving standards, changing customer needs and frequent
new product  introductions  and  enhancements.  To keep pace with  technological
developments,  satisfy  increasingly  sophisticated  customer  requirements  and
achieve market  acceptance,  we must enhance and improve our existing  products,
and we must also  continue to introduce  new products  and  services.  If we are
unable to develop new products or adapt our current  products to meet changes in
the  marketplace,  if  we  are  unable  to  enhance  and  improve  our  products
successfully  in a timely  manner,  or if we fail to position  and/or  price our
products to meet  market  demand,  customers  may not buy our  products  and our
business and operating results will be adversely  affected.  If our enhancements
to existing products do not deliver the functionality that our customers demand,
our business and  operating  results  will be  adversely  affected.  Accelerated
product  introductions  and short  product  life cycles  require  high levels of
expenditures  for  research  and  development  that could  adversely  affect our
operating results. Further, any new products we develop may not be introduced in
a timely  manner and may not achieve the broad  market  acceptance  necessary to
generate significant revenues.

     We may not be able to protect our intellectual property.

     We  rely  on  a   combination   of  patent,   trademark,   trade   secrets,
confidentiality   procedures   and   contractual   commitments  to  protect  our
proprietary  information.  Despite our efforts,  these measures can only provide
limited  protection.  Unauthorized  third  parties  may try to  copy or  reverse
engineer  portions of our products or otherwise  obtain and use our intellectual
property.   Any  patents  owned  by  or  licensed  to  us  may  be  invalidated,
circumvented  or challenged.  Any of our pending or future patent  applications,
whether or not being currently  challenged,  may not be issued with the scope of
the claims we seek, if at all. If we cannot protect our  proprietary  technology
against unauthorized copying or use, we may not remain competitive.

     Our business may be harmed if we are found to have  infringed  intellectual
property rights of third parties.

     Third parties may assert claims  against us alleging that we have infringed
their intellectual property rights. If we do not succeed in any such litigation,
we could be required to expend  significant  resources to pay  damages,


                                       16
<PAGE>

develop  non-infringing  intellectual  property  or to  obtain  licenses  to the
intellectual property that is the subject of the litigation.  However, we cannot
be certain that any such licenses,  if available at all, will be available to us
on commercially  reasonable terms. Also, defending these claims may be expensive
and divert the time and efforts of our management.

     Changes in  regulatory  requirements  may  adversely  impact our  operating
results or reduce our ability to generate revenues if we are unable to comply.

     Many  of  our  products  must  meet  the  requirements  set  by  regulatory
authorities in the numerous  jurisdictions in which we sell them. As regulations
and local laws  change,  we must modify our products to address  those  changes.
Regulatory  restrictions  may increase the costs to design and  manufacture  our
products, resulting in a decrease in our margins or a decrease in demand for our
products if the costs are passed along.  Compliance with regulatory restrictions
may impact the technical  quality and  capabilities  of our  products,  reducing
their marketability.

     While we believe that we currently  have  adequate  control  structures  in
place, we are still exposed to potential risks from recent legislation requiring
companies to evaluate  controls under Section 404 of the  Sarbanes-Oxley  Act of
2002.

     We are working toward  evaluating our internal  control systems in order to
allow management to report on, and our independent registered public accountants
to attest to, our internal controls,  as required by the Sarbanes-Oxley  Act. We
are performing the system and process  evaluation and testing (and any necessary
remediation)  required in an effort to comply with the management  certification
and  public   accountant   attestation   requirements  of  Section  404  of  the
Sarbanes-Oxley  Act. As a result,  we expect to incur  additional  expenses  and
diversion  of  management's  time.  While  we  anticipate  being  able to  fully
implement the requirements  relating to internal  controls and all other aspects
of  Section  404 in a timely  fashion,  we cannot be certain as to the timing of
completion of our evaluation,  testing and remediation  actions or the impact of
the same on our  operations  since there is no  precedent  available by which to
measure compliance adequacy. If we are not able to implement the requirements of
Section 404 in a timely manner or with adequate compliance,  we might be subject
to sanctions or investigation by the SEC. Any such action could adversely affect
our financial results.

     Our stock price may be volatile and your investment could lose value.

     Historically,  the market price of our common stock has been volatile.  The
trading  price of our common  stock  could be subject  to wide  fluctuations  in
response to various factors, some of which are beyond our control. These factors
include:

     o    quarterly variations in our operating results;
     o    announcements  by us or our  competitors of new products,  significant
          contracts, commercial relationships or capital commitments;
     o    our  ability to develop  and market  new and  enhanced  products  on a
          timely basis;
     o    concerns about our liquidity; and
     o    general  trends  involving  the economy or OTC  Bulletin  Board traded
          companies.

     In  addition,  the stock market in general,  and the market for  technology
companies in particular,  have experienced  price and volume  fluctuations  that
have often been unrelated or  disproportionate  to the operating  performance of
those  companies.  These market and industry  factors may  seriously  affect the
market price of our common stock regardless of our actual operating performance.

     Trading in our common stock is subject to the SEC's penny stock rules.

     Trading in our common stock is currently subject to the requirements of the
"penny  stock" rules of the SEC. The penny stock rules impose  additional  sales
practice  requirements  on  broker-dealers  who sell penny stock  securities  to
persons other than established customers or accredited  investors.  For example,
the broker must make a special  suitability  determination for the purchaser and
must have received the purchaser's  written consent to the transaction  prior to
the sale. The rules also require that the broker:


                                       17
<PAGE>

     o    deliver  to  purchasers,  prior  to any  penny  stock  transaction,  a
          disclosure  schedule  explaining  the penny stock market and the risks
          involved in investing in penny stocks;
     o    disclose the broker's commissions and current quotations for the penny
          stock;
     o    disclose  whether  the broker is the sole  market  maker for the penny
          stock and, if so, the broker's presumed control over the market; and
     o    send monthly  statements  disclosing  recent price information for the
          penny stocks held in the  customer's  account and  information  on the
          limited market in penny stocks.

     These additional burdens may discourage brokers from effecting transactions
in our common  stock,  which could  severely  limit the market  liquidity of our
common  stock and the ability of  stockholders  to sell our common  stock in the
market.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The response to this item is submitted as a separate section of this Annual
Report on Form 10-K. See Item 15.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

     Not applicable.

ITEM 9A.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

     Our management, with the participation of our President and Chief Financial
Officer,  evaluated the effectiveness of our disclosure  controls and procedures
(as defined in Rule  13a-15(e)  under the  Securities  Exchange Act of 1934,  as
amended) as of December 31, 2004.  Based on that  evaluation,  our President and
Chief Financial Officer concluded that our disclosure controls and procedures as
of December 31, 2004 were effective in ensuring that information  required to be
disclosed by us in reports that we file or submit under the Securities  Exchange
Act of 1934, as amended, is recorded, processed,  summarized and reported within
the time  periods  specified  in the SEC's  rules and forms.  We believe  that a
control  system,  no matter  how well  designed  and  operated,  cannot  provide
absolute  assurance  that the  objectives of the control  system are met, and no
evaluation of controls can provide  absolute  assurance  that all control issues
and instances of fraud, if any, could be detected within a company.

Changes in Internal Controls

     There were no changes in our internal control over financial reporting that
occurred  during  the  quarter  ended  December  31,  2004 that have  materially
affected,  or are reasonably likely to materially  affect,  our internal control
over financial reporting.

ITEM 9B. OTHER INFORMATION

     Not applicable.


                                       18
<PAGE>

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The  following  table sets forth  certain  information  about our executive
officers and directors as of February 28, 2005.

  Name                           Age    Position
  ----                           ---    --------

  Richard Hennessey               45    President, Chief Operating Officer and
                                        Director
  Mary Christian-Hein             43    Senior Vice President, Chief Financial
                                        Officer and Treasurer
  Irene Lebovics                  52    Chairman of the Board
  Keith Larkin                    81    Director
  Michael J. Parrella             57    Director
  Cy E. Hammond                   50    Director
  Mark Melnick                    46    Secretary

     No family  relationships  exist  among  any of our  executive  officers  or
directors.

     Richard  Hennessey has served as our President and Chief Operating  Officer
since  February 1999 and as a director  since August 1998. He also served as our
Secretary from August 1998 to January 2002. Mr. Hennessey  previously  served as
our Vice  President  of  Marketing  from June 1996 to  February  1999 and as our
Director of Marketing from August 1995 to June 1996.

     Mary  Christian-Hein  has  served  as  our  Senior  Vice  President,  Chief
Financial  Officer and Treasurer since September 2004. She previously  served as
Assistant Controller of NCT Group, our ultimate parent company, from May 2001 to
September 2004. From 1991 to 2001, Ms.  Christian-Hein  held various  accounting
and finance positions with Warrantech  Corporation,  an independent  provider of
service contracts and after-market  warranties,  including Director of Reporting
and Compliance, from 1996 to 2001.

     Irene  Lebovics has served as our Chairman of the Board since November 2003
and as a director  since  September  2000.  She has also  served as NCT  Group's
President since April 2000 and as a member of its board of directors since April
2001. Ms.  Lebovics  previously  served as NCT Group's  Executive Vice President
from  February  1999 to April  2000,  its  Secretary  from  February  1999 until
September  2001, a Senior Vice  President from January 1993 to February 1999 and
as a Vice President from July 1989 to January 1993.

     Keith  Larkin  is our  founder  and has  served  as a  director  since  our
incorporation  in 1994. He  previously  served as our Chairman of the Board from
1994 to November  2003, our Chief  Executive  Officer and Treasurer from 1994 to
February 2002 and as our  President  from 1994 to February  1999.  Mr. Larkin is
also the founder of Plantronics, the current industry leader in lightweight
telephone headsets.

     Michael J. Parrella has served as a director since  September  2000. He has
also served as NCT Group's  Chief  Executive  Officer  since August 1995, as its
Chairman of the Board since April 2000 and as a member of its board of directors
since 1986. Mr. Parrella  previously served as NCT Group's President from August
1995 to April 2000, its Executive Vice President from November 1994 to July 1995
and as its President and Chief Operating  Officer from February 1988 to November
1994.

     Cy E. Hammond has served as a director  since  September  2000. He has also
served as NCT  Group's  Senior  Vice  President,  Chief  Financial  Officer  and
Treasurer  since  January 1996 and as a member of its board of  directors  since
March 2004. Mr. Hammond  previously served as a Vice President of NCT Group from
February 1994 to January 1996 and as Controller from January 1990 to January
1994.

     Mark Melnick has served as our  Secretary  since  January 2002. He has also
served as a Senior Vice  President  of NCT Group since  October  2004 and as its
General  Counsel and Secretary  since  September  2001. He also served as a Vice
President of NCT Group from September 2001 to September  2004.  Prior to joining
NCT Group,  Mr.  Melnick  served as Counsel,  Senior  Counsel and then Assistant
General Counsel of CBS Cable and its predecessor-in-interest,  Group W Satellite
Communications  (a  division of  Westinghouse  Broadcasting  Co.),  in the cable
television field, from 1989 to 2000.


                                       19
<PAGE>

Audit Committee Functions

     Our board of directors  does not have a standing  audit  committee  and our
board as a whole performs all audit committee functions,  including oversight of
our independent registered public accountants and oversight of our management on
matters  relating to accounting,  financial  reporting and disclosure,  internal
controls and compliance with laws,  regulations and corporate policies.  None of
the members of the board of  directors  is  "independent"  as defined  under the
rules of the Nasdaq Stock Market. The board of directors has determined that Mr.
Hammond  qualifies as an "audit  committee  financial  expert" as defined by the
SEC.

Code of Ethics

     We have  adopted  a Code of Ethics  that  applies  to our  Chief  Executive
Officer (or persons  performing  similar functions) and all senior financial and
accounting   officers,   including  our  Chief  Financial  Officer  (or  persons
performing similar functions). The Code of Ethics is filed as Exhibit 14 to this
Annual Report.

Section 16(a) Beneficial Ownership Reporting Compliance

     Section 16(a) of the Securities Exchange Act of 1934, as amended,  requires
our  directors  and  executive  officers  and persons who own more than 10% of a
registered class of our equity  securities to file reports of initial  ownership
of, and transactions in, our securities with the SEC. These directors, executive
officers  and  stockholders  are also  required to furnish us with copies of all
Section  16(a) forms they file.  Based solely on a review of the copies of forms
furnished to us, and written  representations from certain reporting persons, we
believe that our  directors,  executive  officers and 10%  stockholders  met all
applicable filing  requirements  during the year ended December 31, 2004, except
that Mr.  Hennessey and Ms. Debra Kirven,  our former Chief  Financial  Officer,
each filed one late Form 4 covering one transaction;  Ms. Christian-Hein filed a
late Form 3; and NCT Hearing,  a beneficial  owner of  approximately  86% of our
common stock, filed three late Form 4's covering a total of three transactions.

ITEM 11.  EXECUTIVE COMPENSATION

Summary Compensation Table

     Set forth below is information for the three years ended December 31, 2004,
2003 and 2002 relating to  compensation  received by our President.  None of our
other  executive  officers'  total  annual  salary and bonus for the fiscal year
ended December 31, 2004 exceeded $100,000.

<TABLE>
<CAPTION>
                                                                                          Long-Term Compensation
                                                                                     ----------------------------------
                                                  Annual Compensation                             Awards
                                      ---------------------------------------------  ----------------------------------

                                                                                        Restricted       Securities
    Name and Principal                                               Other Annual          Stock         Underlying
         Position             Year     Salary ($)      Bonus ($)    Compensation ($)     Awards (#)    Options/SARs (#)
---------------------------- ------   -------------  -------------  ----------------  --------------   ----------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>
Richard Hennessey            2004     $  127,083(a)          -               -                -              200,000

       President and Chief   2003        149,000(b)          -               -                -                  -

       Operating Officer     2002        151,667             -               -                -                  -

</TABLE>

__________
(a)  Mr. Hennessey  voluntarily  accepted a reduction in salary of approximately
     $23,000 to lessen our cash flow requirements during the first half of 2004.
(b)  Includes $87,500 accrued but not yet paid to Mr. Hennessey.


                                       20
<PAGE>

Option Grants in 2004

     The following  table  summarizes  options  granted to our President  during
2004.

<TABLE>
<CAPTION>

                                          Individual Grants
                      ----------------------------------------------------------
                                                                                     Potential Realized Value
                                                                                        at Assumed Annual
                      Number of         Percent of                                     Rates of Stock Price
                      Securities       Total Options                                  Appreciation for Option
                      Underlying        Granted to      Exercise                        and Warrant Term (a)
                       Options          Employees        Price      Expiration    --------------------------------
       Name            Granted           in 2004        Per Share      Date              5%               10%
-------------------   -----------     ---------------  -----------  ------------  ----------------- --------------
<S>                    <C>                <C>           <C>          <C>   <C>       <C>              <C>
Richard Hennessey      200,000            31.5%         $  0.03      03/09/2011      $  2,443         $  5,692

</TABLE>

__________
(a)  The dollar amounts in these columns are the result of  calculations  of the
     respective  exercise prices at the assumed 5% and 10% rates of appreciation
     compounded  annually through the applicable  expiration dates. Actual gains
     realized,  if any, on stock option  exercises and common stock holdings are
     dependent on the future  performance of our common stock and overall market
     conditions.

2004 Option Exercises and Year-End Option Values

     The following table sets forth  information with respect to the exercise of
options  during 2004 and the  unexercised  options  held by our  President as of
December 31, 2004.

<TABLE>
<CAPTION>

                                                                Number of Shares
                            Number of                              Underlying                    Value of Unexercised
                             Shares                          Unexercised Options at             In-the-Money Options at
                            Acquired                             December 31, 2004                December 31, 2004
                               On           Value     ------------------------------------   ----------------------------
       Name               Exercise (#)     Realized    Exercisable(#)     Unexercisable(#)    Exercisable   Unexercisable
--------------------     -------------   -----------  ---------------     ----------------   -------------  -------------
<S>                              <C>            <C>        <C>                     <C>         <C>                  <C>
Richard Hennessey                -              -          450,000                 -           $ 12,000             -

</TABLE>

Compensation of Directors

     Pursuant  to the  terms of a  written  agreement  entered  into in 2002 and
amended in 2003, we pay Mr. Larkin an annual  retainer of $4,200 and provide him
with  coverage  under our health  benefit plans then in effect for our employees
for his  service  on our  board of  directors.  No other  member of our board of
directors receives additional compensation for serving as a director.

Compensation Committee Interlocks and Insider Participation

     Our board of directors does not have a standing compensation  committee and
our board as a whole performs all compensation committee functions. During 2004,
no  executive  officer  served  on the  compensation  committee  or the board of
directors  of another  entity  whose  executive  officer  served on our board of
directors.


                                       21
<PAGE>

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth information  regarding  beneficial ownership
of our common stock as of February 28, 2005 by:

     o    each  person  known  by us to  beneficially  own  more  than 5% of our
          outstanding common stock;

     o    each of our directors, including our President; and

     o    all of our executive officers and directors as a group.

     Beneficial ownership is determined in accordance with the rules of the SEC.
These rules generally  attribute  beneficial  ownership of securities to persons
who possess  sole or shared  voting  power or  investment  power with respect to
those  securities  and include shares of common stock issuable upon the exercise
or conversion of options, warrants,  convertible preferred stock and convertible
notes that are  immediately  exercisable or  convertible  or are  exercisable or
convertible  within 60 days.  Except as otherwise  indicated,  all of the shares
reflected in the table are shares of common  stock and all persons  listed below
have sole voting and  investment  power with respect to the shares  beneficially
owned by them, subject to applicable community property laws. The information is
not necessarily indicative of beneficial ownership for any other purpose.

<TABLE>
<CAPTION>

                                                Shares of Common
                                                      Stock
                                                  Beneficially               Percent of
              Beneficial Owner                        Owned                    Class
  ------------------------------------------    ------------------          ------------
<S>                                                 <C>                         <C>
  Executive Officers and Directors:
  Keith Larkin                                      1,550,000      (a)          2.1%
  Richard Hennessey                                   450,000      (b)            *
  Irene Lebovics                                          -        (c)            -
  Michael J. Parrella                                     -        (c)            -
  Cy E. Hammond                                           -        (c)            -
  All Current Executive Officers and
  Directors as a Group (Seven persons)              2,000,000      (d)          2.7%

  5% or Greater Stockholders:
  NCT Hearing Products, Inc.                       62,769,954      (e)         85.5%
  Alpha Capital Aktiengesellschaft                 16,437,156      (f)         18.3%

*  Less than one percent.
</TABLE>

__________

(a)  Includes 790,000 shares issuable  pursuant to options that may be exercised
     within 60 days of February 28, 2005. Also includes 240,000 shares of common
     stock owned by The Seek Foundation,  a corporation  organized under Section
     501(c)(3) of the Internal  Revenue Code, whose directors are Mr. Larkin and
     his spouse.  Excludes 40,000 shares held by Westek  Electronics,  a company
     controlled  by Mr.  Larkin's  son  and  400  shares  held  by Mr.  Larkin's
     grandchildren,   shares  as  to  which  Mr.  Larkin  disclaims   beneficial
     ownership.

(b)  Consists  of  450,000  shares  issuable  pursuant  to  options  that may be
     exercised within 60 days of February 28, 2005.

(c)  Ms.  Lebovics and Messrs.  Parrella and Hammond are executive  officers and
     directors  of NCT Group.  NCT Hearing is a wholly owned  subsidiary  of NCT
     Group. Ms. Lebovics and Mr. Parrella are also directors of NCT Hearing. Ms.
     Lebovics and Messrs.  Parrella and Hammond disclaim beneficial ownership of
     the shares of our common stock held by NCT Hearing.

(d)  Includes  1,240,000  shares  issuable  pursuant  to  options  that  may  be
     exercised  within 60 days of February  28, 2005 and 240,000  shares held by
     The Seek Foundation, as described in footnote (a).

(e)  The address of NCT Hearing Products,  Inc. is 20 Ketchum Street,  Westport,
     Connecticut 06880.

(f)  Alpha Capital  Aktiengesellschaft's  business  address is Pradafant 7, 9490
     Furstentums,  Vaduz, Lichtenstein.  Konrad Ackermann,  Director, has voting
     and  dispositive  control  of these  shares  on  behalf  of Alpha  Capital.
     Consists of shares  issuable upon  conversion of 460 shares of our series B
     convertible   preferred  stock,   along


                                       22
<PAGE>

     with accretion. Pursuant to a contractual restriction between Alpha Capital
     and us, Alpha  Capital is  prohibited  from  beneficially  owning more than
     4.99% of our common stock at any given time, subject to certain exceptions.

Equity Compensation Plan Information

     The following  table  summarizes  certain  information  with respect to our
equity compensation plans as of December 31, 2004.

<TABLE>
<CAPTION>

                                Number of securities
                                  to be issued upon           Weighted-average
                                    exercise of               exercise price of         Number of securities
              Plan              outstanding options         outstanding options        remaining available for
            Category                 and rights                  and rights                 future issuance
      ---------------------    ------------------------     -----------------------    --------------------------
<S>                                   <C>                           <C>                       <C>
      Equity compensation
      plans approved by
      stockholders                    1,495,000                     $0.158                    28,493,000

      Equity compensation
      plans not approved
      by stockholders                      -                           -                            -
                               ------------------------     -----------------------    --------------------------
          Total                       1,495,000                     $0.158                    28,493,000
                               ========================     =======================    ==========================

</TABLE>

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

NCT Hearing and Affiliates

     On March 29,  2004,  we issued a $200,000  secured  promissory  note to NCT
Hearing,  bearing  interest  at the  prime  rate and due on April  1,  2005,  in
exchange for cash advanced to us by NCT Hearing. This note was consolidated into
a new note dated June 30, 2004 (see below).

     On March 31,  2004,  we issued a $121,387  secured  promissory  note to NCT
Hearing,  bearing  interest  at the  prime  rate and due on April  1,  2005,  in
exchange for  services  provided to us by NCT Hearing and its  affiliates.  This
note was discharged on April 5, 2004 (see below).

     On April 5, 2004,  NCT Hearing  converted  an  aggregate of $640,466 of our
secured promissory notes into 27,846,351 shares of our common stock. NCT Hearing
converted the full amount  outstanding  (including accrued interest) of $284,069
under a December 31, 2003 note and of $121,387  under a March 31, 2004 note.  In
addition,  NCT Hearing  converted a partial  amount of $234,943 under a June 30,
2003 note.

     On April 21,  2004,  we obtained an expansion  of our  existing,  exclusive
worldwide  technology  license from NCT Hearing in exchange for 9,821,429 shares
of our common  stock.  The  expanded  license  covers over 50  patents,  patents
pending and  innovations  relating to active noise  reduction and noise and echo
cancellation,  and  encompasses  all styles of headsets,  including  headphones,
earmuffs,  earbuds and  earplugs,  as well as all  markets,  including  consumer
audio,  industrial safety,  spectator racing,  two-way radio  communications and
aviation.  In addition,  the expanded  license  permits us to use NCT  Hearing's
existing brand names,  including  NoiseBuster active noise reduction lightweight
consumer audio and  communications  headsets,  ProActive  active noise reduction
industrial  safety earmuffs and two-way radio headsets and ClearSpeech noise and
echo cancellation algorithm-based products.

     On June 30, 2004,  we issued a $1,672,666  secured  promissory  note to NCT
Hearing,  bearing  interest  at the  prime  rate and due on April  1,  2006,  in
exchange  for  services  of  $183,423  provided  to us by NCT  Hearing  and  its
affiliates and the consolidation of $1,489,243  outstanding  (including  accrued
interest) on our notes dated June 30, 2003 and March 29, 2004.

     On September 17, 2004, we issued a $35,000  secured  promissory note to NCT
Hearing,  bearing  interest  at the  prime  rate and due on April  1,  2006,  in
exchange for cash advanced to us by NCT Hearing.

     On September 30, 2004, we issued a $218,617 secured  promissory note to NCT
Hearing,  bearing  interest  at the prime rate and due on  October  1, 2006,  in
exchange for services  provided to us by NCT Hearing and its  affiliates  during
the three months ended September 30, 2004.


                                       23
<PAGE>

     On December 31, 2004, we issued a $238,758  secured  promissory note to NCT
Hearing,  bearing  interest  at the prime rate and due on  October  1, 2006,  in
exchange for services  provided to us by NCT Hearing and its  affiliates  during
the three months ended December 31, 2004.

     During the year ended December 31, 2004, NCT Hearing advanced cash to us in
anticipation of the receipt of funds from outstanding accounts receivable. These
advances are non-interest bearing and are payable within 35 days. As of December
31,  2004,  outstanding  cash  advances  to  us  from  NCT  Hearing  under  this
arrangement were $57,847. NCT Hearing is not obligated to provide any additional
cash advances to us.

     As of December 31, 2004, we owed an aggregate of $2,265,102, to NCT Hearing
for cash advances, research,  administrative and accounting services provided to
us. As of December 31, 2004,  $2,207,255 is included in noncurrent notes payable
bearing  interest  at the  prime  rate  (5.25%  at  December  31,  2004) and the
remaining  $57,847 is  included  in due to factor and other  liabilities  on our
balance sheet.

Other Related Party Transactions

     On April 1,  2004,  we  assigned  the  rights  to all  outstanding  amounts
receivable,  or $66,775, due under a promissory note from Keith Larkin, a member
of our board of directors,  to Westek  Electronics,  Inc. who holds a promissory
note issued by us. In consideration for this assignment, the stockholder applied
$66,775  against  our  June  27,  2003  note  payable  to  the  stockholder.  We
subsequently  renegotiated  the  terms of this  note,  which was due on June 27,
2004. The new $62,009 note, dated June 27, 2004, represents principal of $61,621
plus accrued interest of $388 from the matured note. The new note bears interest
at 8.5% and is  payable  in  installments  of $3,500 due on the last day of each
month starting on June 30, 2004 through May 31, 2005, with the remaining balance
due on June 27, 2005.

ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES

Audit and Non-Audit Fees

     The following  table sets forth the aggregate  fees billed or accrued by us
for the audit and other  services  provided  by Eisner  LLP for the years  ended
December 31, 2003 and 2004.

                                      Year Ended December 31,
                                   ------------------------------
                                       2003             2004
                                   --------------   -------------
    Audit Fees (a)                   $  52,500        $  65,000
    Audit-Related Fees                     -                -
    Tax Fees (b)                         3,250            3,250
    All Other Fees                         -                -
                                   --------------   -------------
         Total                       $  55,750        $  68,250
                                   ==============   =============
__________
(a)  Represents fees billed and accrued for  professional  services  rendered in
     connection  with the annual  audit and  quarterly  review of our  financial
     statements  included  in our  annual  reports  on Form  10-K and  quarterly
     reports on Form 10-Q.
(b)  Represents fees billed for  professional  services  rendered in conjunction
     with federal and state tax return preparation and other tax matters.


                                       24
<PAGE>

Board Policy on Pre-Approval of Audit and Permissible Non-Audit Services of
Independent Registered Public Accountants

     Our board of directors has  pre-approved  all audit  services and permitted
non-audit services provided by the independent registered public accountants and
the  compensation,  fees and  terms  for  these  services.  The  board  has also
determined not to adopt any blanket  pre-approval  policy but instead to require
that the board  pre-approve  the  compensation  and terms of  service  for audit
services  provided by the  independent  registered  public  accountants  and any
changes in terms and compensation resulting from changes in audit scope, company
structure  or  other  matters.   The  board  has  also   determined  to  require
pre-approval  by the  board of the  compensation  and terms of  service  for any
permitted  non-audit  services  provided by the  independent  registered  public
accountants.  Any proposed non-audit  services in excess of pre-approved  levels
require further  pre-approval by the board. Our Chief Financial  Officer reports
regularly  to the  board on the  services  performed  and fees  incurred  by the
independent  registered  public  accountants  for audit and permitted  non-audit
services during the prior quarter.

                                     PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)(1)    Financial Statements

The following financial statements are filed as part of this Annual Report:

<TABLE>
<CAPTION>
                                                                                                  Page
                                                                                                  -----
<S>                                                                                                  <C>
     Report of Independent Registered Public Accounting Firm                                       F-1
     Balance Sheets as of December 31, 2003 and December 31, 2004                                  F-2
     Statements of Operations for the years ended December 31, 2002, 2003 and 2004                 F-3
     Statements of Stockholders' Equity for the years ended December 31, 2002, 2003 and 2004       F-4
     Statements of Cash Flows for the years ended December 31, 2002, 2003 and 2004                 F-5
     Notes to the Financial Statements                                                             F-6
</TABLE>

(a)(2)    Financial Statement Schedules

The following financial statement schedule is filed as part of this Annual
Report:

<TABLE>
<CAPTION>
                                                                                                  Page
                                                                                                  -----
<S>                                                                                                  <C>
     Report of Independent Registered Public Accounting Firm on Schedule II                        F-22
     Schedule II.  Valuation and Qualifying Accounts                                               F-23
</TABLE>

All  other  financial  statement  schedules  are  omitted  because  they are not
required or the required  information  is shown in the  financial  statements or
notes thereto.

(a)(3)    Exhibits

The following  exhibits are filed herewith or are  incorporated  by reference to
exhibits previously filed with the SEC.

Exhibit
Number        Description of Exhibit

3.1(a)        Amended  and  Restated  Articles  of  Incorporation  of  Pro Tech
              Communications, Inc., dated as of August 14, 2000 (incorporated
              by reference to Exhibit 3(a) of the registrant's Quarterly Report
              on Form 10-QSB for the quarter ended July 31, 2000 (File No.
              0-28602)).

3.1(b)        Articles  of  Amendment  to  Articles of Incorporation of Pro Tech
              Communications,  Inc.,  dated  as  of  September  29,  2000
              (incorporated by reference to Exhibit 3(b) of the registrant's
              Registration Statement on Form S-1 (Registration No. 333-49318)
              filed on November 3, 2000).


                                       25
<PAGE>

3.1(c)        Articles  of  Amendment  to Articles of Incorporation  of Pro Tech
              Communications, Inc., dated as of July 30, 2001 (incorporated by
              reference to Exhibit 3(a) of the registrant's Quarterly Report on
              Form 10-Q for the quarter ended June 30, 2001 (File No. 0-28602)).

3.1(d)        Articles  of  Amendment  to  Articles of Incorporation of Pro Tech
              Communications, Inc., dated as of August 2, 2002 (incorporated by
              reference to Exhibit 3(a) of the registrant's  Annual  Report on
              Form 10-K for the year ended December 31,2003 (File No. 0-28602)).

3.2           Bylaws of Pro Tech Communications, Inc. (incorporated by reference
              to Exhibit 3(c) of the registrant's Registration Statement on Form
              S-1 (Registration No. 333-49318) filed on November 3, 2000).

*10.1         Pro Tech Communications, Inc. Amended  and  Restated  Stock Option
              Plan  (incorporated  by  reference  to  Exhibit  4(c)  of  the
              registrant's Registration Statement on Form S-8 (Registration No.
              333-49488) filed on November 7, 2000).

10.2(a)       License Agreement, dated as of September 12, 2000, by and between
              Pro Tech Communications, Inc. and NCT Hearing Products, Inc.

10.2(b)       Amendment to License Agreement, dated as of April 21, 2004, by and
              between Pro Tech Communications, Inc. and NCT Hearing Products,
              Inc.

14            Pro Tech  Communications,  Inc.  Code of Ethics  for  the  CEO and
              Senior  Financial  Officers  (incorporated  herein by reference to
              Exhibit 14 to the  registrant's  Annual  Report on Form 10-K for
              the year ended  December 31, 2003 (File No. 0-28602)).

23.1          Consent of Eisner LLP.

31.1          Certification of President pursuant to  Rule 13a-14(a)  under the
              Securities Act of 1934.

31.2          Certification of Chief Financial Officer pursuant  Rule 13a-14(a)
              under the Securities Act of 1934.

32.1          Certification of President and Chief Financial Officer pursuant to
              Rule 13a-14(b)  under  the  Securities  Act of 1934 and 18 U.S.C.
              Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
              Oxley Act of 2002.
_______________________
*    Pertains to a management contract or compensation plan or arrangement.


                                       26
<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors and Stockholders
Pro Tech Communications, Inc.

We have audited the accompanying balance sheets of Pro Tech Communications, Inc.
as of  December  31,  2003 and 2004 and the related  statements  of  operations,
stockholders'  equity and cash flows for each of the years  ended  December  31,
2002, 2003 and 2004. 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  standards  of the Public  Company
Accounting Oversight Board (United States). 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 enumerated above present fairly, in all
material respects, the financial position of Pro Tech Communications, Inc. as of
December 31, 2003 and 2004 and the results of its  operations and its cash flows
for each of the years ended December 31, 2002,  2003 and 2004 in conformity with
accounting principles generally accepted in the United States of America.




/s/  Eisner LLP
---------------
Eisner LLP

New York, New York
January 28, 2005

With respect to Note 1(a)
March 22, 2005


                                       F-1
<PAGE>

PRO TECH COMMUNICATIONS, INC.
BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                             December 31,
                                                                                 ----------------------------------
                                                                                       2003              2004
                                                                                 ----------------    --------------
<S>                                                                               <C>                <C>
ASSETS
Current assets:
     Cash and cash equivalents                                                    $      21,193      $     59,097
     Accounts receivable, less allowance for doubtful accounts
       of $31,437 and $28,277, respectively                                              88,769           137,396
     Inventories, net of reserves (Note 2)                                              493,555           343,847
     Due from officer/stockholder (Note 16)                                              66,044               -
     Other current assets (Note 3)                                                       17,571            35,886
                                                                                 ----------------    --------------
                     Total current assets                                               687,132           576,226

Property and equipment, net (Note 4)                                                    449,672           306,398

Intangible assets, net of accumulated amortization of $180,721
     and $375,331, respectively (Note 5)                                              2,530,094         2,610,484

Other assets                                                                              6,138             5,939
                                                                                 ----------------    --------------
                                                                                  $   3,673,036      $  3,499,047
                                                                                 ================    ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable                                                             $     231,282      $    158,698
     Accrued expenses (Note 6)                                                          195,201           229,145
     Current portion of capital lease obligations (Note 13)                              10,434            11,492
     Due to factor and other liabilities (Notes 7 and 16)                                11,117            61,864
     Note payable (Note 8)                                                                2,385             2,646
     Note payable to stockholder (Notes 8 and 16)                                       142,001            39,728
     Preferred stock, series A and B, subject to mandatory conversion into
       a variable number of shares of common stock (Note 9)                             742,459           709,041
                                                                                 ----------------    --------------
                     Total current liabilities                                        1,334,879         1,212,614



Noncurrent note payable (Note 8)                                                          4,076             1,430
Noncurrent notes payable due to affiliates (Notes 10 and 16)                          1,824,540         2,207,255
Capital lease obligations (Note 13)                                                      21,333             9,841
                                                                                 ----------------    --------------

                     Total liabilities                                                3,184,828         3,431,140
                                                                                 ----------------    --------------

Commitments (Note 13)

Stockholders' equity (Notes 11 and 12):
     Preferred stock, $.01 par value, 1,000,000 shares authorized
       Series A convertible preferred, 4% cumulative dividend,
        stated value $1,000 per share, issued and outstanding, 50 shares (Note 9)
       Series B convertible preferred, 4% cumulative dividend,
        stated value $1,000 per share, issued and outstanding,
        500 and 460 shares, respectively (Note 9)                                           -                 -
     Common stock, $.001 par value, authorized 300,000,000 shares,
       issued and outstanding 33,200,311  and 73,390,133 shares, respectively            33,200            73,390
     Additional paid-in capital                                                      18,427,668        19,357,332
     Accumulated deficit                                                            (17,972,660)      (19,362,815)
                                                                                 ----------------    --------------
                     Total stockholders' equity                                         488,208            67,907
                                                                                 ----------------    --------------
                                                                                  $   3,673,036      $  3,499,047
                                                                                 ================    ==============

The accompanying notes are an integral part of the financial statements.
</TABLE>


                                       F-2
<PAGE>

PRO TECH COMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                                      For the Year Ended December 31,
                                                                                ----------------------------------------------
                                                                                    2002            2003             2004
                                                                                --------------   -------------   -------------
<S>                                                                             <C>              <C>             <C>
Net sales                                                                       $  1,648,949     $  1,178,535    $  1,194,756

Cost of goods sold                                                                   774,316          364,413         518,340
                                                                                --------------   -------------   -------------

     Gross profit                                                                    874,633          814,122         676,416

Selling, general and administrative expenses                                       1,296,088        1,042,085       1,045,870
Depreciation and amortization                                                      1,093,778          338,071         341,650
NCT Hearing and affiliates charges (Note 16)                                         313,559          314,207         559,470
Impairment charge on intangible assets                                            11,500,000              -               -
Provision for doubtful accounts                                                       29,800            6,591          14,621
                                                                                --------------   -------------   -------------

     Loss before other income (expense)                                          (13,358,592)        (886,832)     (1,285,195)

Other income (expense):
     Interest income                                                                   3,109            2,931             734
     Interest expense                                                                (33,297)         (26,353)        (18,586)
     Interest expense - NCT Hearing (Note 14)                                        (21,102)         (56,455)        (76,535)
     Interest expense - convertible preferred stock (Note 9)                             -            (11,089)        (20,969)
     Miscellaneous income, net                                                         5,004            3,352          10,396
                                                                                --------------   -------------   -------------

Net loss                                                                         (13,404,878)        (974,446)     (1,390,155)

Adjustments attributable to preferred stock (Note 9):
   Preferred stock beneficial conversion feature                                      45,810              -               -
   Preferred stock dividend                                                           22,000           10,911             -
                                                                                --------------   -------------   -------------

Net loss attributable to common stockholders                                    $(13,472,688)    $   (985,357)   $ (1,390,155)
                                                                                ==============   =============   =============

Basic and diluted loss per share                                                $      (0.41)    $      (0.03)   $      (0.02)
                                                                                ==============   =============   =============

Weighted average common shares outstanding - basic and diluted                    33,200,311       33,200,311      62,377,398
                                                                                ==============   =============   =============

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

</TABLE>


                                       F-3
<PAGE>

PRO TECH COMMUNICATIONS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (Note 11)

<TABLE>
<CAPTION>
                                             Series A
                                          Preferred Stock           Common Stock        Additional
                                       ----------------------  -----------------------    Paid-in     Accumulated
                                         Shares      Amount      Shares       Amount      Capital       Deficit         Total
                                       ----------   ---------  -----------  ----------  ------------  -------------  --------------
<S>                 <C> <C>                   <C>   <C>         <C>         <C>         <C>           <C>            <C>
Balance at December 31, 2001                  50    $  52,521   33,200,311  $   33,200  $18,473,079   $ (3,593,336)  $  14,965,464

Dividend on preferred stock                  -          2,000          -           -        (22,000)           -           (20,000)

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

                                       ----------   ---------  -----------  ----------  ------------    -----------  --------------
Balance at December 31, 2002                  50    $  54,521   33,200,311  $   33,200  $18,451,079   $(16,998,214)  $   1,540,586

Dividend on preferred stock                  -            991          -           -        (10,911)           -            (9,920)

Waiver of registration rights on
   series B preferred stock                  -            -            -           -        125,000            -           125,000

Accounting change for adoption of
     SFAS No. 150:          series A         (50)     (55,512)         -           -        (12,500)           -           (68,012)
                            series B         -            -            -           -       (125,000)           -          (125,000)

Net loss                                     -            -            -           -            -         (974,446)       (974,446)

                                       ----------   ---------  -----------  ----------  ------------  -------------  --------------
Balance at December 31, 2003                 -      $     -     33,200,311  $   33,200  $18,427,668   $(17,972,660)  $     488,208

Issuance of common stock:
   Conversion of notes payable               -            -     27,846,351      27,846      612,620            -           640,466
   License agreement amendment               -            -      9,821,429       9,822      265,178            -           275,000
   Conversion of preferred stock             -            -      2,522,042       2,522       41,866            -            44,388

Adjustment of monetary value on
   series B preferred stock converted        -            -            -           -         10,000            -            10,000

Net loss                                     -            -            -           -            -       (1,390,155)     (1,390,155)

                                       ----------   ---------  -----------  ----------  ------------  -------------  --------------
Balance at December 31, 2004                 -      $     -     73,390,133  $   73,390  $19,357,332   $(19,362,815)  $      67,907
                                       ==========   =========  ===========  ==========  ============  =============  ==============

The accompanying notes are an integral part of the financial statements.
</TABLE>


                                       F-4
<PAGE>

PRO TECH COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                         For the Year Ended December 31,
                                                                                ----------------------------------------------------
                                                                                     2002               2003              2004
                                                                                ----------------   ---------------   ---------------
<S>                                                                             <C>                <C>               <C>
Cash flows from operating activities:
    Net loss                                                                    $  (13,404,878)    $  (974,446)      $  (1,390,155)
    Adjustments to reconcile net loss to net
         cash used in operating activities:
       Notes payable issued for services received                                      508,561         454,104             813,678
       Depreciation and amortization                                                 1,093,778         338,071             341,650
       Impairment charge on intangible assets                                       11,500,000             -                   -
       Provision for doubtful accounts                                                   2,524           4,128              (3,160)
       Provision for obsolete inventory                                                 10,000          (5,000)            113,531
       Preferred stock dividend as interest                                                -            11,089              20,969
       Changes in operating assets and liabilities:
         Increase (decrease) in accounts receivable                                     55,949          68,064             (45,467)
         Decrease in inventories                                                       343,208         103,981              36,177
         Increase in other assets                                                      (11,250)         (6,845)            (18,847)
         Decrease in accounts payable                                                 (119,941)       (195,694)            (72,584)
         Increase (decrease) in accrued expenses                                        41,071         (26,779)             34,332
         Decrease in other liabilities                                                 (29,865)        (23,048)             (7,100)
                                                                                ----------------   ---------------   ---------------
           Net cash used in operating activities                                $      (10,843)    $  (252,375)      $    (176,976)
                                                                                ----------------   ---------------   ---------------
Cash flows from investing activities:
    Capital expenditures                                                                   -            (4,375)             (3,766)
                                                                                ----------------   ---------------   ---------------
           Net cash used in investing activities                                $          -    $       (4,375)      $      (3,766)
                                                                                ----------------   ---------------   ---------------
Cash flows from financing activities:
    Proceeds from:
       Notes payable - NCT Hearing (Note 16)                                               -           341,114             766,013
    Payment made on:
       Notes payable                                                                   (11,701)        (31,752)            (38,270)
       Notes payable -NCT Hearing (Note 16)                                                -           (35,381)           (498,663)
       Capital lease obligations                                                       (10,713)         (9,662)            (10,434)
                                                                                ----------------   ---------------   ---------------
           Net cash (used in) provided by financing activities                  $      (22,414)    $   264,319       $     218,646
                                                                                ----------------   ---------------   ---------------
Net (decrease) increase in cash and cash equivalents                            $      (33,257)    $     7,569       $      37,904
Cash and cash equivalents - beginning of period                                         46,881          13,624              21,193
                                                                                ----------------   ---------------   ---------------
Cash and cash equivalents - end of period                                       $       13,624     $    21,193       $      59,097
                                                                                ================   ===============   ===============




Supplemental disclosures of cash flow information:
    Cash paid during the period for interest                                    $       26,293     $    25,353       $      18,198
                                                                                ================   ===============   ===============

Supplemental disclosures of non-cash investing and financing activities:
    Dividends accrued on series A and series B preferred stock                  $       22,000     $    10,911       $         -
                                                                                ================   ===============   ===============
    Assets acquired under capital leases                                        $        6,038     $       -         $         -
                                                                                ================   ===============   ===============
    Reversal of redemption penalty on series B preferred stock                  $          -       $   125,000       $         -
                                                                                ================   ===============   ===============
    Adjustment of monetary value on series A and series B preferred stock
     upon adoption of SFAS No. 150 effective July 1, 2003                       $          -       $   137,500       $         -
                                                                                ================   ===============   ===============
    Note receivable from director offset with note payable from stockholder     $          -       $       -         $      66,775
                                                                                ================   ===============   ===============
    Issuance of common stock for payment of notes payable                       $          -       $       -         $     640,466
                                                                                ================   ===============   ===============
    Issuance of common stock for intangible assets                              $          -       $       -         $     275,000
                                                                                ================   ===============   ===============
    Issuance of common stock upon conversion of series B
     preferred stock and dividends                                              $          -       $       -         $      44,388
                                                                                ================   ===============   ===============

The accompanying notes are an integral part of the financial statements.
</TABLE>


                                       F-5
<PAGE>


                          PRO TECH COMMUNICATIONS, INC.
                        NOTES TO THE FINANCIAL STATEMENTS

1.   Organization and Summary of Significant Accounting Policies

     (a)  Organization

          Pro Tech  Communications,  Inc.,  herein  referred  to as "we,"  "us,"
          "our," or "Pro Tech," is  incorporated  under the laws of the State of
          Florida.  We  develop,   manufacture  and  distribute   headphone  and
          communications  headset  products and systems into the contact center,
          quick service restaurant, cellular/mobile telephone and consumer audio
          markets.  Our current  products include Apollo headsets and amplifiers
          for use in contact  centers,  ProCom headsets for use in quick-service
          restaurants  and  NoiseBuster  active noise  reduction  consumer audio
          headphones.

          In September  2000,  we became a subsidiary  of NCT Hearing  Products,
          Inc.,  herein referred to as "NCT Hearing," a wholly-owned  subsidiary
          of NCT Group,  Inc.,  herein  referred to as "NCT." As of December 31,
          2004, NCT Hearing owned  approximately 85.5% of our outstanding common
          stock.

          We have experienced recurring net losses ($19,362,815 through December
          31, 2004) since our  inception.  These losses,  which include the cost
          for  development  of products and an impairment  charge of $11,500,000
          (see Note 5), have been funded  primarily from product sales, the sale
          of common stock and convertible preferred stock, and advances directly
          and  indirectly  from  NCT  (our  ultimate  parent  company)  and  its
          affiliates.

          In addition,  we had a working capital deficit of $636,388 at December
          31,  2004.  We continue to closely  monitor all our  expenditures.  We
          received  approximately  $115,000  in  advances  from  January 1, 2005
          through  March 22,  2005 from NCT  Hearing to assist us in funding our
          working  capital needs during 2005.  Management  believes we will have
          sufficient  funds to meet our estimated  anticipated  working  capital
          requirements  through  December  31,  2005.  In  the  event  that  our
          operations do not generate sufficient cash, we would attempt to reduce
          our level of  discretionary  spending,  if any,  and  attempt to raise
          additional funds.

     (b)  Cash and Cash Equivalents

          Cash and cash equivalents  include all highly liquid  investments with
          original maturities at acquisition of three months or less.

     (c)  Inventory

          We value inventory at the lower of cost (first-in,  first-out  method)
          or market. We regularly review inventory quantities on hand and record
          a provision to write down  inventory to its estimated  net  realizable
          value,  if less than cost.  This  estimate is based upon  management's
          assumptions  of future  material usage and  obsolescence,  which are a
          result of future demand and market conditions.

     (d)  Revenue and Cost Recognition

          We recognize net sales from product sales upon shipment provided title
          and risk of loss have been  transferred  to the  customer,  persuasive
          evidence of an arrangement  exists, fees are fixed or determinable and
          collection is reasonably  assured. We generally have no obligations to
          customers  after the date  that  product  is  shipped  other  than for
          warranty obligations.  Returns and customer credits are infrequent and
          recorded  as a  reduction  to sales.  Discounts  from list  prices are
          recorded as a reduction to sales at the time of sale. Generally,  each
          headset,  depending on the model, is sold with a warranty ranging from
          90 days to two  years.  Accruals  for  estimated  expenses  related to
          warranties  are made at the time  products  are sold or  services  are
          rendered.  These accruals are established using historical information
          on the  nature,  frequency  and average  cost of  warranty  claims and
          estimates of future costs. The accrued liability for warranty costs is
          included  in  accrued  expenses  in the  balance  sheet  (see Note 6).
          Freight  charges  are  charged  to  expense


                                       F-6
<PAGE>


          when  incurred.  Not all  customers  are  billed for  shipping  costs;
          however,  the amount of shipping  costs  collected  from  customers is
          netted against our incurred  freight  charges.  The amount of shipping
          costs netted against our incurred  freight charges for the years ended
          December  31, 2002,  2003 and 2004 was  $29,743,  $25,560 and $31,857,
          respectively.  The net  amount  of  freight  charges  is  included  in
          selling,  general and  administrative  expenses on our  statements  of
          operations.

     (e)  Property and Equipment

          Property and  equipment is carried at cost.  Depreciation  is computed
          using the straight-line  method over the estimated useful lives of the
          assets  (including  assets  held  under  capital  leases).   Leasehold
          improvements are amortized over the shorter of the useful life or term
          of the lease.  Asset lives are 3-10 years for  machinery and equipment
          and 5 years for leasehold  improvements.  Repair and maintenance costs
          are charged to expense when incurred.

     (f)  Long-Lived Assets and Certain Identifiable Intangibles

          Long-lived  assets and certain  identifiable  intangibles are reviewed
          for impairment  whenever events or changes in  circumstances  indicate
          that  the  carrying  amount  of  an  asset  may  not  be  recoverable.
          Recoverability  of  assets  to be  held  and  used  is  measured  by a
          comparison of the carrying amount of an asset to  undiscounted  future
          net cash flows expected to be generated by the asset.  If these assets
          are  considered  to be impaired,  the  impairment  to be recognized is
          measured  by the  amount by which the  carrying  amount of the  assets
          exceeds  the fair value of the  assets.  Assets to be  disposed of are
          reported at the lower of the carrying  amount or fair value less costs
          to sell. Our identifiable intangible assets consist of licensed rights
          to certain technologies acquired from NCT Hearing through the issuance
          of common  stock  (see Note 5).  Amortization  is  computed  using the
          straight-line method over the estimated useful lives of the assets.

     (g)  Income Taxes

          Income taxes are accounted  for under the asset and liability  method.
          Deferred tax assets and  liabilities are recognized for the future tax
          consequences   attributable  to  differences   between  the  financial
          statement  carrying  amounts of existing  assets and  liabilities  and
          their  respective tax bases.  Deferred tax assets and  liabilities are
          measured  using enacted tax rates  expected to apply to taxable income
          in the years in which those  temporary  differences are expected to be
          recovered or settled. The effect on deferred tax assets or liabilities
          of a change in tax rates is  recognized  in income in the period  that
          includes the enactment date (see Note 14).

     (h)  Advertising

          The costs of advertising, promotion and marketing programs are charged
          to  operations  in the year  incurred  and are  included  in  selling,
          general and administrative  expenses in the accompanying statements of
          operations.  Advertising  costs were $17,638,  $13,453 and $42,898 for
          the years ended December 31, 2002, 2003 and 2004, respectively.

     (i)  Research and Development

          Research  and  development  costs are expensed  when  incurred and are
          included in selling,  general and administrative expenses. The amounts
          charged to expense  were  $10,377,  $28,334 and $275,949 for the years
          ended December 31, 2002, 2003 and 2004, respectively.

     (j)  Fair Value of Financial Instruments

          The  estimated  fair  value  of our  notes  payable  approximates  the
          carrying amount.  The fair values of loans to or from stockholders and
          affiliates  ultimate  parent are not readily  determinable  due to the
          related party nature of those instruments.


                                       F-7
<PAGE>


     (k)  Use of Estimates

          The  preparation  of  our  financial  statements  in  conformity  with
          accounting  principles  generally  accepted  in the  United  States of
          America  requires  management to make estimates and  assumptions  that
          affect the reported and/or disclosed  amounts of assets,  liabilities,
          revenues  and  expenses  and  contingent  assets and  liabilities.  In
          particular,  judgment  is  used  in  areas  such  as  determining  the
          allowance for doubtful accounts,  adjustments to inventory valuations,
          asset  impairments  and the accrual for warranty  expense.  Management
          periodically  assesses and evaluates those estimates and  assumptions.
          Actual results could differ from those estimates.

     (l)  Reclassifications

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

     (m)  Loss Per Common Share

          We report  loss per  common  share in  accordance  with  Statement  of
          Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share."
          The effect of potential common shares such as warrants,  options, debt
          and  convertible  instruments  have not been  included,  as the effect
          would be antidilutive. The potential common shares are as follows:

<TABLE>
<CAPTION>
                                                 December 31,
                                       -----------------------------------------------
                                            2002             2003             2004
                                       --------------   -------------   --------------
<S>                                       <C>             <C>                    <C>
          Warrants                        5,500,000       1,000,000              -
          Options                         1,235,000       1,285,000        1,495,000
          Convertible preferred stock    72,869,875      58,169,135       10,384,654
                                       --------------   -------------   --------------
                                         79,604,875      60,454,135       11,879,654
                                       ==============   =============   ==============
</TABLE>

          However, when preferred stock will be convertible to common stock at a
          conversion  rate that is at a discount  from the common  stock  market
          price at the time of  issuance,  the  discounted  amount is an assured
          incremental  yield,  the  "beneficial   conversion  feature,"  to  the
          preferred stockholders and is accounted for as an embedded dividend to
          preferred   stockholders.   In  2002,  we  reflected  such  beneficial
          conversion  feature as an adjustment to the net loss  attributable  to
          common stockholders.

     (n)  Stock Based Compensation

          We have elected to apply the  disclosure-only  provisions  of SFAS No.
          123, "Accounting for Stock-Based Compensation," as amended by SFAS No.
          148,  "Accounting  for  Stock-Based   Compensation  -  Transition  and
          Disclosure  an amendment to FASB  Statement  No. 123," and continue to
          apply  Accounting  Principles Board ("APB") Opinion No. 25 and related
          interpretations in accounting for our stock-based  compensation plans.
          Under APB No. 25, no  compensation  costs are recognized if the option
          exercise  price is equal to or greater  than the fair market  price of
          the common stock on the date of the grant.  Under SFAS No. 123,  stock
          options  are  valued  at grant  date  using the  Black-Scholes  option
          pricing model and compensation  costs are recognized  ratably over the
          vesting period. No stock-based employee compensation cost is reflected
          in our net  loss  attributable  to  common  stockholders,  as  options
          granted  under our plans have an  exercise  price  equal to or greater
          than the market  value of the  underlying  common stock on the date of
          grant.  Had


                                       F-8
<PAGE>


          compensation  costs been determined as prescribed by SFAS No. 123, our
          net loss  attributable to common  stockholders  and net loss per share
          would have been the pro forma amounts indicated below:

<TABLE>
<CAPTION>

                                                For the year ended December 31,
                                        --------------   -------------   ---------------
                                              2002            2003             2004
                                        --------------   -------------   ---------------
<S>                                     <C>              <C>             <C>
          Net loss attributable to
            common stockholders,
            as reported                 $ (13,472,688)   $   (985,357)   $   (1,390,155)
          Stock-based employee costs
            based on fair value method,
            net of related taxes              (14,596)         (5,022)          (11,334)
                                        --------------   -------------   ---------------
          Net loss attributable to
            common stockholders,
            pro forma                   $ (13,487,284)   $   (990,379)   $   (1,401,489)
                                        ==============   =============   ===============
          Loss per common share:
            As reported                 $       (0.41)   $      (0.03)   $        (0.02)
                                        ==============   =============   ===============
          Pro forma                     $       (0.41)   $      (0.03)   $        (0.02)
                                        ==============   =============   ===============
</TABLE>

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

                                         For the year ended December 31,
                                        ---------------------------------
                                              2002              2004
                                        ----------------   --------------
          Volatility                              100%             100%
          Expected life of options             7 years     4 to 7 years
          Risk free interest rate                3.65%            2.16%
          Dividend yield                            0%               0%

          There were no options  granted  during the fiscal year ended  December
          31, 2003.  The weighted  average fair value of options  granted during
          the years  ended  December  31,  2002 and 2004 was  $0.05  and  $0.02,
          respectively.

     (o)  Concentrations of Credit Risk

          Cash and cash equivalents and trade receivables potentially subject us
          to concentration of credit risk. We maintain cash and cash equivalents
          in accounts with one financial institution in amounts which, at times,
          may be in excess of the FDIC insurance limit. We do not believe we are
          exposed  to any  significant  risk  with  respect  to  cash  and  cash
          equivalents.

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

          We are  currently  outsourcing  the  majority of our  components  from
          several  Far  East   suppliers   who  build  each   component  to  our
          specifications. An interruption in the supply of a component for which
          we are unable to readily  procure a substitute  source of supply could
          temporarily  result in our  inability to deliver  products on a timely
          basis,  which in turn could adversely  affect our operations.  We have
          not experienced any shortages of supplies.


                                       F-9
<PAGE>


     (p)  Significant Customers

          In each of the years  ending  December  31,  2002 and 2003,  net sales
          derived  from  certain  customers  comprised  more than 10% of our net
          sales.  Two  customers  accounted for  approximately  38% of net sales
          generated  during the year ended  December 31, 2002.  Three  customers
          accounted for approximately 35% of net sales generated during the year
          ended   December  31,   2003.   These  three   customers   represented
          approximately  9% of the gross  accounts  receivable  at December  31,
          2003.  There were no customers  that  accounted for 10% or more of net
          sales generated during the year ended December 31, 2004.

     (q)  Recent Accounting Pronouncements

          In November 2004, the Financial  Accounting  Standards  Board ("FASB")
          issued SFAS No. 151,  "Inventory  Costs--an  amendment of ARB No. 43,"
          which  is the  result  of its  efforts  to  converge  U.S.  accounting
          standards for inventories  with  International  Accounting  Standards.
          SFAS No. 151 requires idle facility expenses,  freight,  handling cost
          and   wasted   material   (spoilage)   costs  to  be   recognized   as
          current-period  charges.  It also  requires  that  allocation of fixed
          production  overhead to the costs of conversion be based on the normal
          capacity of the production facilities.  SFAS No. 151 will be effective
          for us beginning January 1, 2006. We are evaluating the impact of this
          standard on our financial statements.

          In  December  2004,  the FASB  issued  SFAS  No.  123  (Revised  2004)
          "Share-Based  Payment" that  prescribes the accounting for share-based
          payment  transactions in which a company receives employee services in
          exchange for (a) equity  instruments of the company or (b) liabilities
          that are based on the fair value of the company's  equity  instruments
          or that may be settled by the  issuance  of such  equity  instruments.
          SFAS No.  123R  addresses  all forms of  share-based  payment  awards,
          including  shares issued under employee stock  purchase  plans,  stock
          options, restricted stock and stock appreciation rights. SFAS No. 123R
          eliminates  the  ability  to  account  for  share-based   compensation
          transactions using APB Opinion No. 25, "Accounting for Stock Issued to
          Employees,"  that  was  previously  allowed  under  SFAS  No.  123  as
          originally  issued.  Under SFAS No.  123R,  companies  are required to
          record  compensation   expense  for  all  share  based  payment  award
          transactions  measured at fair value.  This statement is effective for
          us beginning  July 1, 2005. We have not yet  determined  the impact of
          applying the various provisions of SFAS No. 123R.

          In  December  2004,  the FASB  issued  SFAS  No.  153,  "Exchanges  of
          Nonmonetary  Assets--an  amendment  of APB Opinion No. 29" that amends
          Opinion No. 29 to eliminate the exception for nonmonetary exchanges of
          similar productive assets and replaces it with a general exception for
          exchanges of nonmonetary assets that do not have commercial substance.
          A  nonmonetary  exchange has  commercial  substance if the future cash
          flows of the entity are expected to change  significantly  as a result
          of the exchange.  The  provisions of this  statement are effective for
          non-monetary asset exchanges for us beginning July 1, 2005. We believe
          the  adoption  of SFAS 153 will not have an impact on our  results  of
          operations or financial position.


                                       F-10
<PAGE>


2.  Inventory

Inventory consisted of the following:

                                                         December 31,
                                              ----------------------------------
                                                     2003               2004
                                              ----------------   ---------------
Finished goods                                $       295,346    $      268,012
Components                                            179,179           174,726
Work in progress                                       24,030            19,640
                                              ----------------   ---------------
    Gross inventory                                   498,555           462,378
Less:  reserve for obsolete inventory                   5,000           118,531
                                              ----------------   ---------------
Total Inventory                               $       493,555    $       343,847
                                              ================   ===============

Management  believes  that the assembly of our products by third parties will be
cost  effective to our future  operations.  Therefore,  we intend to discontinue
manufacturing  of our high volume products at our Fort Pierce,  Florida location
in 2005.  Consequently,  in December 2004, we increased our inventory reserve by
approximately $114,000 primarily to reflect the implementation of this strategy.

3.   Other Current Assets

Other Current Assets consisted of the following:

                                                         December 31,
                                              ----------------------------------
                                                     2003               2004
                                              ----------------   ---------------
Prepaid insurance                             $           -      $       15,922
Prepaid inventory purchases                            11,632             4,843
Other                                                   5,939            15,121
                                              -----------------  ---------------
   Total Other current assets                 $        17,571    $       35,886
                                              =================  ===============

4.   Property and Equipment

The following is a summary of property and equipment:

                                                         December 31,
                                              ----------------------------------
                                                     2003              2004
                                              ----------------   ---------------
Production molds                              $       455,440    $      454,303
Office equipment                                      149,568           171,582
Production equipment                                   39,514            39,140
Leasehold improvements                                315,050           315,050
Vehicles                                               12,414            12,414
Marketing displays                                     16,160            18,116
                                              ----------------   ---------------
                                                      988,146         1,010,605
Less accumulated depreciation
  and amortization                                    560,365           708,946
                                              ----------------   ---------------
                                                      427,781           301,659
                                              ----------------   ---------------
Assets under capital lease:
Cost                                                   83,188            61,893
Less accumulated amortization                          61,297            57,154
                                              ----------------   ---------------
                                                       21,891             4,739
                                              ----------------   ---------------
Total Property and equipment, net             $       449,672    $      306,398
                                              ================   ===============

Total  depreciation  and  amortization  expense,  with  respect to property  and
equipment, was $161,219,  $155,887 and $147,040 for the years ended December 31,
2002,  2003 and 2004,  respectively.  Included in these  totals is


                                       F-11
<PAGE>


amortization expense on assets under capital leases for the years ended December
31, 2002, 2003 and 2004 of $20,401, $18,517 and $17,152, respectively.

5.   Intangible Assets

On September 12, 2000, we obtained a license for rights to certain  technologies
from NCT Hearing in  consideration  of the issuance of 23,982,438  shares of our
common stock,  including  279,688  shares of common stock for costs of issuance.
The intangible  assets received in the exchange were valued at the fair value of
the shares we issued, or $16,307,492.

On April 21, 2004, we obtained an expansion of our existing, exclusive worldwide
technology  license from NCT Hearing,  in exchange for  9,821,429  shares of our
common  stock.  The  license  covers  over  50  patents,   patents  pending  and
innovations  relating  to  active  noise  reduction  ("ANR")  and noise and echo
cancellation,  and with this  expansion,  encompasses all styles of headsets (an
expansion from  lightweight,  portable styles) including  headphones,  earmuffs,
earbuds  and  earplugs,  as well as all  markets (an  expansion  from  cellular,
multimedia and telephony) including consumer audio, industrial safety, spectator
racing,  two-way radio  communications and aviation.  In addition,  the expanded
license  permits  us  to  use  NCT  Hearing's  existing  brand  names  including
NoiseBuster  ANR  lightweight   consumer  audio  and  communications   headsets,
ProActive ANR industrial  safety  earmuffs and two-way radio headsets  including
aviation and ClearSpeech noise and echo cancellation  algorithm-based  products.
The intangible  assets received in the license expansion were valued at the fair
value of the shares we issued,  or  $275,000  and added to the cost basis of the
intangible  assets included in our balance sheet. The license expansion is being
amortized over the remaining life of the original  license (13.75 years at April
2004) on a straight-line basis.

Intangible assets are periodically  reviewed for impairment where the fair value
is less than the carrying value. We did not have an impairment on our intangible
asset  for the years  ended  December  31,  2003 and  2004;  however,  we had an
impairment  charge of  $11,500,000  for the year ended  December 31, 2002. As of
December 31, 2002, due to the lack of available working capital, we reviewed the
impairment testing under the guidelines of SFAS No. 144. We estimated the future
cash flows of those  products  identified  as using the patent  rights  included
under our intangible  assets.  These future cash flows were then compared to the
carrying  value of our  intangible  assets on the books as of December 31, 2002.
Based on this comparison, we determined an impairment was present. We calculated
the impairment loss by comparing the carrying value of the intangible  assets to
the estimated fair value of the intangible  assets.  We determined the estimated
fair  value  of the  intangible  assets  based  on  the  discounted  cash  flows
attributable  to the new products  utilizing the  technology.  The discount rate
used was  based on cost of  capital  associated  with our  series B  convertible
preferred stock. The resulting  impairment  charge of $11,500,000 is included in
the statement of operations for the year ended  December 31, 2002.  Amortization
expense was  $931,857,  $180,721 and  $194,610 for the years ended  December 31,
2002, 2003 and 2004,  respectively.  Estimated  amortization expense for each of
the next five years is $200,721.

6.   Accrued Expenses

Accrued expenses consisted of the following:

                                                         December 31,
                                              ----------------------------------
                                                     2003              2004
                                              ----------------   ---------------
Accrued payroll and vacation                  $       132,182    $      109,607
Accrued professional services                             -              70,434
Accrued warranty                                       41,687            28,044
Other                                                  21,332            21,060
                                              ----------------   ---------------
Total Accrued expenses                        $       195,201    $      229,145
                                              =================  ===============

7.   Due to Factor and Other Liabilities

On March 26, 2001, we entered into a factoring  agreement.  Under this agreement
we are  required  to  factor  substantially  all of our trade  receivables  on a
non-recourse basis in return for immediate cash credit equal to 85% of


                                       F-12
<PAGE>


these factored  receivables,  less a factoring fee. The factoring fee is 1.9% of
the invoice amount and 3.5% over the prime rate on the amount advanced under the
factoring agreement. The prime rate was 5.25% at December 31, 2004. In addition,
at December 31, 2004 we had $6,673 in holdback at the factor representing 15% of
the aggregate  unpaid gross amount of all  outstanding  accounts  factored under
this factoring  agreement plus customer payments made to the factor in error. If
the net amount of accounts submitted for any one month does not exceed $100,000,
the factor may charge an additional  commitment fee. As of December 31, 2004, no
such fees were required.  Such factored receivables are subject to acceptance by
the factor.  The factor also has the option to accept factored  receivables with
recourse.  If such recourse receivables are not paid within 46 days, we must buy
back the total outstanding  receivable.  Obligations due to the factor under the
factoring  agreement are collateralized by a continuing security interest in all
of  our  accounts  receivable,  notes  receivable,   chattel  paper,  documents,
instruments and general  intangibles now existing or hereafter acquired of every
kind wherever located,  together with merchandise  returns and goods represented
thereby, and all proceeds therefrom of every kind and nature.

At December 31, 2004,  accounts  receivable  factored  under this  agreement and
still  outstanding  were $10,690,  of which,  $9,087 had been received under the
factoring  agreement  under the recourse  provisions.  Total fees incurred under
this  arrangement  amounted to $6,346,  $4,433 and $2,106 during the years ended
December 31, 2002, 2003 and 2004, respectively.  Interest expense incurred under
this  arrangement  amounted to $3,393,  $2,285 and $1,301 during the years ended
December 31, 2002, 2003 and 2004, respectively.

During the year ended December 31, 2003 and 2004,  NCT Hearing  advanced cash to
us in anticipation of the receipt of funds from outstanding accounts receivable.
These  advances are  non-interest  bearing and are payable within 35 days. As of
December  31, 2003 and 2004,  outstanding  cash  advances to us from NCT Hearing
under this arrangement were zero and $57,847, respectively (see Note 16). During
2004,  advances  under this  arrangement  totaled  $499,013  and  payments by us
totaled $441,166.

8.   Notes Payable and Note Payable to Stockholder

On May 13, 2001, we received a bank loan of $11,346. The loan provides for equal
monthly  payments  of $245,  including  interest  at prime  plus 2.3%  (7.55% at
December  31,  2004),  maturing on May 13, 2006 and secured by a vehicle.  As of
December 31, 2004, the balance outstanding was $4,076 and future maturities are:
2005, $2,646; and 2006, $1,430.

On various  dates in 2000 through  2002,  we had entered into  promissory  notes
payable to repay borrowed  funds  received in March 2000 from a stockholder.  On
June 27, 2003,  we  renegotiated  the  outstanding  amount into a $159,937  note
bearing  interest  at  8.5%  with  installment  payments  of  $3,500  (including
interest) due on the last day of each month  beginning June 30, 2003 through May
31, 2004,  with the  remaining  balance due on June 27, 2004. As of December 31,
2003,  the balance of this note was $142,001.  On April 1, 2004, we assigned the
rights  to all  outstanding  amounts  receivable  due  under a  promissory  note
receivable  ($66,775)  from  Keith  Larkin,  a  director  of Pro  Tech,  to this
stockholder who holds a promissory note issued by us. In consideration  for this
assignment,  the  stockholder  agreed to apply $66,775 against our June 27, 2003
note  payable  to the  stockholder.  On  June  27,  2004,  we  renegotiated  the
outstanding  amount of our June 27,  2003 note  payable  to  stockholder  into a
$62,009 note dated June 27, 2004 (representing principal of $61,621 plus accrued
interest  of  $388).  The  note  bears  interest  at  8.5%  and  is  payable  in
installments  of $3,500  (including  interest) due on the last day of each month
beginning June 30, 2004 through May 31, 2005, with the remaining  balance due on
June 27, 2005. As of December 31, 2004, the balance of this note was $39,728.

9.   Preferred Stock Subject to Mandatory Conversion into a Variable Number of
     Shares

Series A Convertible Preferred Stock

As of December 31, 2004, we had 1,500 shares designated and 50 shares issued and
outstanding of our series A convertible  preferred  stock.  Each share has a par
value of $0.01, and a stated value of $1,000. Our series A preferred stock has a
cumulative dividend of 4% per annum on the stated value, payable upon conversion
or  exchange in either  cash or common  stock.  The shares of series A preferred
stock may be converted  into shares of our common stock or exchanged  for shares
of NCT common  stock at the  holder's  option.  Each share of series A preferred
stock is convertible  into our common stock based on a conversion  price that is
the lower of: the lowest  average  closing bid price for a five-day  consecutive
period out of fifteen  trading days  preceding  the date of  conversion,  less a
discount of 20%; or a fixed price of $0.50.  The  exchange  rate into NCT common
stock is the


                                       F-13
<PAGE>


lowest average of the average  closing bid price for a share of NCT common stock
for any consecutive  five trading days out of the fifteen trading days preceding
the date of conversion, less a discount of 20%.

We may redeem,  at our option,  up to $50,000 of our series A preferred stock if
the  closing  bid price of our common  stock is less than  $0.50 per share.  The
redemption  price  is  equal  to  125%  of the  stated  value  plus  100% of the
cumulative  4%  dividend.  The stock may be redeemed at the  holders'  option if
two-thirds of all series A preferred  stockholders  require such redemption upon
certain events. Any outstanding shares will be automatically  converted on March
31, 2005.

Our series A  preferred  stock was covered  under the  adoption of SFAS No. 150,
"Accounting  for Certain  Financial  Instruments  with  Characteristics  of both
Liabilities  and Equity"  effective  July 1, 2003.  SFAS No. 150  required us to
reclassify the series A preferred stock from the stockholders' equity section to
the current  liability  section on our balance  sheet.  In connection  with this
reclassification,  we were  required  to  increase  the  value  of the  series A
preferred  stock to reflect  the  monetary  value of the shares  required  to be
issued upon conversion.  The series A preferred stock was increased $12,500 with
a corresponding decrease to additional paid-in capital.

SFAS No. 150 also  required us to record any payments or accruals of payments to
holders of such  instruments  as interest  costs.  Therefore,  effective July 1,
2003,  the  dividends  accrued to holders  of the series A  preferred  stock are
recorded as interest expense in the statement of operations; whereas, previously
they were  recorded as a  reduction  to  additional  paid-in  capital.  Interest
expense  recorded for the series A preferred  stock for the years ended December
31,  2003 and  2004 was  $1,009  and  $2,006,  respectively.  The  reduction  to
additional  paid-in  capital for the series A preferred  stock,  calculated  for
purposes of determining net loss attributable to common stockholders, was $2,000
and $991 for the years ended December 31, 2002 and 2003, respectively.

The series A preferred  stock is carried on our balance sheet as of December 31,
2004 at its monetary  value of $71,026,  which is comprised of the fair value of
the shares of $62,500 plus the cash value of the accrued dividends of $8,526. We
would  have to  issue  approximately  893,000  shares  of our  common  stock  if
settlement  of the stated value of the series A preferred  stock had occurred as
of December 31, 2004. We have the option to settle the accrued dividends in cash
or common  stock.  As of December 31, 2004,  settlement  in common stock for the
accrued  dividends  on the series A preferred  stock would  require  issuance of
approximately  152,000 shares. There is no limit on the number of shares that we
could be required to issue upon  conversion of the series A preferred  stock. No
shares of series A preferred stock were converted or exchanged  during the years
ended December 31, 2002, 2003 and 2004.

Series B Convertible Preferred Stock

As of December 31, 2004, we had 500 shares  designated and 460 shares issued and
outstanding of our series B convertible  preferred  stock.  Each share has a par
value of $0.01 and a stated value of $1,000.  Our series B preferred stock has a
cumulative dividend of 4% per annum on the stated value, payable upon conversion
or  exchange in either  cash or common  stock.  The shares of series B preferred
stock may be converted  into shares of our common stock or exchanged  for shares
of NCT common stock.  Each share of stock is  convertible  into our common stock
based on a conversion price that is the lower of: the lowest average closing bid
price for a five-day  consecutive  period out of fifteen  trading days preceding
the date of conversion,  less a discount of 20%; or a fixed price of $0.25.  The
exchange rate into NCT common stock is the lowest average of the average closing
bid price for a share of NCT common stock for any consecutive  five trading days
out of the fifteen trading days preceding the date of exchange,  less a discount
of 20%.  Any  outstanding  shares will be  automatically  converted on March 31,
2006.

In accordance  with Emerging  Issues Task Force 98-5, as codified in EITF 00-27,
we recorded a beneficial  conversion  feature of $125,000 in connection with the
issuance of our series B preferred stock in July 2001,  comprised of a reduction
to the outstanding  balance of the preferred stock and an increase to additional
paid-in  capital.  The beneficial  conversion  feature was  recognized  over the
period  from the date of issuance  to the date of  earliest  conversion  (50% on
January  30,  2002 and 50% on July 30,  2002) and  $45,810  is  included  in the
calculation of net loss attributable to common  stockholders on our statement of
operations for the year ended December 31, 2002.

Prior to April  10,  2003,  the  series B  preferred  stock  was  classified  as
temporary equity rather than stockholders' equity because under the terms of the
agreements entered into in connection with the issuance of the series B


                                       F-14
<PAGE>


preferred  stock,  the holder of those shares may have had a right to require us
to redeem the shares at 125% of the stated  value,  or an  increase  of $125,000
over the  stated  value.  This type of  redemption  would not be within our sole
control,  and accordingly,  we treated the shares as temporary  equity. On April
10, 2003,  we entered  into an  agreement  with the holder of series B preferred
stock whereby the holder agreed to waive certain registration rights relating to
series B preferred stock.  This cancelled the triggering  event,  which may have
placed the redemption of series B preferred stock at the holder's  option.  With
the signing of this  agreement,  such  redemption was solely within our control.
The  increase  of $125,000  over the stated  value was  reversed  by  increasing
additional  paid-in  capital and decreasing our series B preferred stock and our
series B preferred stock was classified within the stockholders'  equity section
of the balance sheet.

Our series B  preferred  stock was  covered  under the  adoption of SFAS No. 150
effective  July 1, 2003.  SFAS No. 150  required us to  reclassify  our series B
preferred stock from the  stockholders'  equity section to the current liability
section on our balance sheet. In connection with this reclassification,  we were
required  to increase  the value of the series B preferred  stock to reflect the
monetary value of the shares required to be issued upon conversion. The series B
preferred  stock  was  increased  $125,000  with  a  corresponding  decrease  to
additional paid-in capital.

SFAS No. 150 also  required us to record any payments or accruals of payments to
holders of such  instruments  as interest  costs.  Therefore,  effective July 1,
2003,  the dividends  accrued to the holder of the series B preferred  stock are
recorded as interest expense in the statement of operations; whereas, previously
they were  recorded as a  reduction  to  additional  paid-in  capital.  Interest
expense  recorded for the series B preferred  stock for the years ended December
31,  2003 and 2004 was $10,080  and  $18,963,  respectively.  The  reduction  to
additional  paid-in  capital for the series B preferred  stock,  calculated  for
purposes  of  determining  net loss  attributable  to common  stockholders,  was
$20,000 and $9,920 for the years ended December 31, 2002 and 2003, respectively.

The series B preferred  stock is carried on our balance sheet as of December 31,
2004 at its monetary value of $638,015,  which is comprised of the fair value of
the shares of $575,000 plus the cash value of the accrued  dividends of $63,015.
We would have to issue  approximately  8.2 million shares of our common stock if
settlement  of the stated value of the series B preferred  stock had occurred as
of December 31, 2004. We have the option to settle the accrued dividends in cash
or common  stock.  As of December 31, 2004,  settlement  in common stock for the
accrued  dividends  on the series B preferred  stock would  require  issuance of
approximately 1.1 million shares. There is no limit on the number of shares that
we could be required to issue upon  conversion of the series B preferred  stock.
No shares of series B preferred  stock were  converted or  exchanged  during the
years ended December 31, 2002 and 2003. During the year ended December 31, 2004,
40 shares of series B preferred stock and accrued  dividends were converted into
2,522,042 shares of our common stock.

10.  Noncurrent Notes Payable Due to Affiliates

As of December 31, 2003,  we owed  $1,824,540 to NCT Hearing under the following
secured  promissory  notes,  bearing  interest  at the prime  rate  (4.00% as of
December 31, 2003).

<TABLE>
<CAPTION>

Original issue date of note:    Maturing:            Principal             Interest            Total
                                                  ----------------     ----------------   ----------------
<S>    <C> <C>                        <C>          <C>                 <C>                 <C>
  June 30, 2003                 April 1, 2005      $    1,512,679      $        30,760     $    1,543,439
  December 31, 2003             April 1, 2005             281,101                  -              281,101
                                                  ----------------     ----------------   ----------------
                                                   $    1,793,780      $        30,760     $    1,824,540
                                                  ================     ================   ================
</TABLE>

On April 5, 2004, NCT Hearing  converted an aggregate of $640,466 of our secured
promissory  notes and interest into 27,846,351  shares of our common stock.  The
following notes payable were converted on April 5, 2004:

<TABLE>
<CAPTION>

Original issue date of note:                         Principal             Interest            Total
                                                  ----------------     ----------------   ---------------
<S>    <C> <C>                                    <C>                  <C>                 <C>
  June 30, 2003                                   $       234,943      $           -       $      234,943
  December 31, 2003                                       281,101                2,968            284,069
  March 31, 2004                                          121,387                   67            121,454
                                                  ----------------     ----------------   ----------------
Total converted                                   $       637,431      $         3,035     $      640,466
                                                  ================     ================   ================
</TABLE>


                                       F-15
<PAGE>


During 2004, we issued an aggregate of $2,486,428 of secured promissory notes to
NCT Hearing as consideration for $267,000 of cash advanced, $730,185 of services
provided and  rollover of  $1,428,020  of principal  and $61,223 of interest for
notes consolidated in advance of maturity.

As of December 31, 2004,  we owed  $2,207,255 to NCT Hearing under the following
secured promissory notes,  bearing interest at the prime rate (5.25% at December
31, 2004).

<TABLE>
<CAPTION>

Original issue date of note:    Maturing:            Principal             Interest            Total
                                                  ----------------     ---------------    ---------------
<S>    <C> <C>                        <C>         <C>                  <C>                 <C>
  June 30, 2004                 April 1, 2006     $     1,671,843      $        39,808     $    1,711,651
  September 17, 2004            April 1, 2006              35,000                  497             35,497
  September 30, 2004            October 1, 2006           218,617                2,732            221,349
  December 31, 2004             October 1, 2006           238,758                  -              238,758
                                                  ----------------     ---------------    ---------------
                                                  $     2,164,218      $        43,037     $    2,207,255
                                                  ================     ===============    ===============
</TABLE>

11.  Capital Stock

Common Stock

On April 5, 2004, NCT Hearing  converted an aggregate of $640,466 of our secured
promissory  notes and interest into  27,846,351  shares of our common stock (see
Note 10).

On April 21, 2004, we obtained an expansion of our existing  technology  license
from NCT Hearing in exchange for 9,821,429  shares of our common stock (see Note
5).

On April 27,  2004,  40  shares  of our  series B  preferred  stock and  accrued
dividends were converted into 2,522,042 shares of our common stock (see Note 9).

The  number of shares of our  common  stock  required  to be  reserved  was 15.8
million at December 31, 2004. This reserve  includes  amounts for the conversion
of  preferred  stock and for the exercise of options and  warrants.  On July 12,
2002,  we, NCT and the holder of eight  convertible  notes payable issued by NCT
entered  into an  agreement  pursuant  to which the holder of the notes  payable
waived her right to exchange such notes into our common shares. In consideration
of these  waivers,  the holder was given a warrant for 20 million  shares of NCT
common stock.

Warrants

The following table summarizes  warrants to purchase our common stock during the
years ended December 31, 2002, 2003 and 2004:

<TABLE>
<CAPTION>

                                                                    Years Ended December 31,
                                   ------------------------------------------------------------------------------------------
                                             2002                             2003                           2004
                                   ---------------------------  ------------------------------ ------------------------------
                                                   Weighted                        Weighted                       Weighted
                                                    Average                         Average                        Average
                                                   Exercise                        Exercise                       Exercise
                                     Shares         Price           Shares           Price          Shares          Price
                                   -----------  --------------  ---------------  --------------  -------------  -------------
<S>                                 <C>         <C>                  <C>         <C>                <C>         <C>
Outstanding at beginning of year    5,500,000   $       0.433        5,500,000   $       0.433      1,000,000   $      0.130
Warrants granted                          -              -                 -               -              -              -
Warrants canceled or expired              -              -          (4,500,000)         (0.500)    (1,000,000)        (0.130)
                                   -----------                   --------------                  -------------
Outstanding at end of year          5,500,000   $       0.433        1,000,000   $       0.130            -     $        -
                                   ===========                   ==============                  =============

</TABLE>

12.  Stock Option Plans

In 1998,  our Board of  Directors  adopted  the 1998 Stock  Option  Plan for the
benefit of our directors,  officers,  employees and  consultants.  This plan, as
amended, authorizes the issuance of up to 30 million shares of our common stock.


                                       F-16
<PAGE>

On February 1, 2002, we issued options to our Chairman of the Board of Directors
to purchase up to 250,000  shares at an exercise  price of $0.06 per share under
the 1998 Stock Option Plan,  which options vested  immediately upon issuance and
expire on February 1, 2009. The exercise price of these options was equal to the
fair market  value of our common  stock on the grant date.  All 250,000 of these
options remain outstanding and exercisable as of December 31, 2004.

On March 9, 2004, we issued  options to officers and employees to purchase up to
635,000 shares of our common stock at an exercise price of $0.03 per share under
the 1998 Stock Option Plan,  which  options  vested or vest as follows:  158,750
immediately  upon issuance;  158,750 on March 9, 2005;  158,750 on March 9, 2006
and 158,750 on March 9, 2007 and expire on March 9, 2011.  The exercise price of
these  options  was equal to the fair  market  value of our common  stock on the
grant date. On November 23, 2004, the Board of Directors accelerated the vesting
schedules of options granted to directors, officers and employees dated March 9,
2004  to 100%  vested  to  acknowledge  its  continued  gratitude  for  employee
dedication. Although the acceleration of vesting schedules was a modification of
the original  grants,  there was no  accounting  consequence  because the market
price on the date of the modification  was equal to the original  exercise price
of the  grants.  As a result of this  acceleration,  we will not be  required to
recognize an expense for the fair value of the unvested  options after  adoption
of SFAS No. 123R. Of these options,  440,000 remain  outstanding and exercisable
as of December 31, 2004.

The following  summarizes stock option activity for the years ended December 31,
2002, 2003 and 2004:

<TABLE>
<CAPTION>
                                                                     Years Ended December 31,
                                         --------------------------------------------------------------------------------
                                                    2002                       2003                        2004
                                         -------------------------  --------------------------  -------------------------
                                                         Weighted                   Weighted                   Weighted
                                                          Average                    Average                    Average
                                                         Exercise                   Exercise                   Exercise
                                            Shares        Price        Shares        Price         Shares       Price
                                         ------------  -----------  ------------  ------------  ------------  -----------
<S>                                        <C>         <C>            <C>         <C>             <C>         <C>
Outstanding at beginning of the year       1,740,000   $    0.283     1,372,500   $     0.253     1,285,000   $    0.242
Options granted                              250,000        0.060           -             -         635,000        0.030
Options exercised                                -            -             -             -             -            -
Options expired                             (617,500)       0.259       (87,500)        0.402      (425,000)       0.221
                                         ------------               ------------                ------------
Outstanding at end of year                 1,372,500   $    0.253     1,285,000   $     0.242     1,495,000   $    0.158
                                         ============               ============                ============
Options exercisable at end of year         1,235,000   $    0.232     1,285,000   $     0.242     1,495,000   $    0.158
                                         ============               ============                ============
</TABLE>

As of December 31, 2004,  our  outstanding  stock options have  exercise  prices
ranging from $0.03 to $0.4375 and a weighted average remaining  contractual life
of  approximately  4.3 years. As of December 31, 2004,  28,493,000  options were
available for future grants under the 1998 Stock Option Plan.

13.  Commitments

Future minimum lease payments under noncancelable operating leases for buildings
and equipment and the present value of future minimum  capital lease payments as
of December 31, 2004 are as follows:

<TABLE>
<CAPTION>
         Year ending December 31                                                 Capital Leases      Operating Leases
         -----------------------                                                ----------------    ------------------
                                                                                <C>                 <C>
              2005                                                              $        13,109     $          96,563
              2006                                                                        9,992                16,184
              2007                                                                          373                   -
              2008                                                                          -                     -
              2009 and thereafter                                                           -                     -
                                                                                ----------------    ------------------
         Total minimum lease payments                                                    23,474     $         112,747
                                                                                                    ==================
         Less amount representing interest                                                2,141
                                                                                ----------------
         Present value of net minimum capital lease payments                             21,333
         Less current installments                                                       11,492
                                                                                ----------------
         Obligations under capital leases, excluding current installments       $         9,841
                                                                                ================
</TABLE>

Rent expense under real property lease agreements totaled $119,690, $119,238 and
$121,936 for the years ended December 31, 2002, 2003 and 2004, respectively.

                                       F-17
<PAGE>


14.  Income Taxes

There was no provision  for income taxes for the years ended  December 31, 2002,
2003 and 2004 due to operating losses incurred.

We had net  deferred  tax  assets of  approximately  $6,887,000  and  $7,341,400
attributable to net operating  losses  available to offset future federal income
tax at December  31, 2003 and 2004,  respectively.  Our net  deferred tax assets
have been fully reserved by a valuation  allowance  since the realization of its
benefit is uncertain.  The difference  between the statutory  federal income tax
rate of 34% and our  effective  tax rate is due to  increases  in the  valuation
allowance  of $680,000 for the year ended  December  31, 2002,  $364,000 for the
year ended December 31, 2003 and $454,400 for the year ended December 31, 2004.

At December 31, 2004, we had net operating  loss  carryforwards  for federal and
state  income  tax   purposes   amounting  to   $10,190,000   and   $10,266,000,
respectively,  which expire  through the year 2024. In accordance  with Internal
Revenue Code Section 382, our net operating  loss  carryforwards  are subject to
certain  limitations  resulting from the issuance of common stock to NCT Hearing
(see Note 5).

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

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

<TABLE>
<CAPTION>
                                                                 December 31,
                                                       ---------------------------------
                                                            2003             2004
                                                       ---------------  ----------------
<S>                                                     <C>              <C>
Allowance for doubtful accounts                         $     12,000     $      11,000
Inventory reserve                                              1,900            44,800
Accrued warranty expense                                      16,000            10,500
Property and equipment                                           -              18,000
Intangible assets                                          3,795,000         3,422,000
Net operating loss carryforwards                           3,073,000         3,834,000
Other carryforwards                                            1,100             1,100
                                                       ---------------  ----------------
Total deferred tax assets                                  6,899,000         7,341,400

Property and equipment                                        12,000               -
                                                       ---------------  ----------------
Total deferred tax liabilities                                12,000               -

Net deferred tax asset                                     6,887,000         7,341,400
Less valuation allowance                                   6,887,000         7,341,400
                                                       ---------------  ----------------
Net deferred tax asset                                  $        -      $          -
                                                       ===============  ================
</TABLE>

15. Business Division Information

Our  business  divisions  are:  (1) Products  Business,  (2)  Telecommunications
Systems  Integration  and  (3)  Call  Center  Operations.   Our  operations  are
predominately  based  in  the  Products  Business  division.   Our  Call  Center
Operations  division has insignificant  commercial  operations.  At December 31,
2002,  2003 and 2004 these divisions are not separately  reportable  segments in
accordance with SFAS No. 131,  "Disclosures  about Segments of an Enterprise and
Related  Information." We evaluate  division  performance based on net sales and
operating  income.  Management does not track division data or evaluate division
performance  on  additional  financial  information.   As  such,  there  are  no
separately identifiable division assets or separately identifiable statements of
income (below operating income).  We do not track or assign assets to individual
business  divisions.  Likewise,  depreciation  expense and capital additions are
also not tracked by business division.


                                       F-18
<PAGE>

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

Business division data is as follows:

<TABLE>
<CAPTION>

                                                                        Division
                                          -------------------------------------------------------------------
                                             Product       Telecom Systems     Call Center         Total
                                             Business        Integration       Operations        Divisions
                                          --------------  -----------------  ---------------  ---------------
<S>                                       <C>                     <C>               <C>       <C>
For the year ended December 31, 2002:
   Net sales to external  customers       $   1,500,883           131,378           16,688    $    1,648,949
   Loss before other income (expense)     $ (13,321,985)             (657)         (35,950)   $  (13,358,592)

For the year ended December 31, 2003:
   Net sales to external  customers       $   1,067,430           110,133              972    $    1,178,535
   Loss before other income (expense)     $    (856,729)          (17,120)         (12,983)   $     (886,832)

For the year ended December 31, 2004:
   Net sales to external  customers       $   1,075,633           119,123              -      $    1,194,756
   Loss before other income (expense)     $  (1,273,109)           (7,283)          (4,803)   $   (1,285,195)

</TABLE>

Product Business:  Our Products Business develops,  manufactures and distributes
headphone  and  communications  headset  products  and systems  into the contact
center, quick service restaurant,  cellular/mobile  telephone and consumer audio
markets.  Our current products include Apollo headsets and amplifiers for use in
contact  centers,  ProCom  headsets  for use in  quick-service  restaurants  and
NoiseBuster active noise reduction consumer audio headphones.

Telecommunications  Systems Integration Business: Our Telecommunications Systems
Integration Business sells and installs simple to sophisticated analog,  digital
and  Internet  Protocol  phone  systems  providing   telecommunications   system
integration  support to the small  office and the large  corporate  call  center
clients.

Call Center Operations  Business:  Our Call Center Operations Business performed
outbound  telemarketing and information  gathering  services.  The extent of our
commercial  activities  for this  business  during  2004 was  insignificant  and
management has decided to let the operations run down.

16.  Related Party Transactions

In  October  2001,  the  outstanding  balances  from a 1996 and 1998 loan to our
former Chairman of the Board were combined with an additional amount of $10,594,
which bore interest at 5% per annum and matured on October 19, 2003. On April 1,
2004, we assigned the rights to all  outstanding  amounts  receivable  due under
this promissory note ($66,775) from Keith Larkin, a director and former Chairman
of the Board,  to a  stockholder  who holds a  promissory  note issued by us. In
consideration  for this  assignment,  the  stockholder  agreed to apply  $66,775
against  our June  27,  2003  note  payable  to the  stockholder  (see  Note 8).
Outstanding  principal and interest  amounted to $66,044 and zero as of December
31, 2003 and 2004, respectively.

As of  December  31,  2003  and  December  31,  2004,  we owed an  aggregate  of
$1,824,540 and $2,265,102, respectively, to NCT Hearing (see Notes 7 and 10). As
of December 31, 2004, $2,207,255 is included in noncurrent notes payable and the
remaining  $57,847 is  included  in due to factor and other  liabilities  on our
balance sheet. NCT Hearing and its affiliates  provided  approximately  $306,000
and $267,000 in net cash advances to us during the years ended December 31, 2003
and 2004, respectively.


                                       F-19
<PAGE>

NCT  Hearing  and its  affiliates  charge us for labor  and  overhead  which are
included in NCT Hearing and affiliates  charges on our statements of operations.
These charges were allocated to us based on specific  identification and, to the
extent that such identification was not practical,  on the basis of employees or
other methods  which  management  believes to be a reasonable  reflection of the
utilization  of services  provided or the benefit  received by us. The following
table  summarizes  the  approximate  charges by NCT Hearing  and its  affiliates
during the years ended December 31, 2002, 2003 and 2004.

                                          For the Year Ended December 31,
                                --------------   -------------   ---------------
                                     2002            2003             2004
                                --------------   -------------   ---------------

Labor                           $     120,000     $   137,000    $      442,000
Overhead                              194,000         177,000           117,000
                                --------------   -------------   ---------------
                                $     314,000     $   314,000    $      559,000
                                ==============   =============   ===============

We participate in the NCT Group, Inc. Employee Benefits Plan, referred to as the
Benefit Plan. The Benefit Plan provides,  among other  coverage,  certain health
benefits to  employees  and  directors of NCT's United  States  operations.  NCT
administers  this  modified  self-insured  Benefit  Plan  through  a  commercial
third-party administrative health care provider. NCT's maximum aggregate benefit
exposure  in each  Benefit  Plan  fiscal  year is  limited  to  $617,000,  while
individual  benefit  exposure  in each  Benefit  Plan  fiscal year is limited to
$45,000.  Benefit claims in excess of these individual or maximum aggregate stop
loss limits are covered by a commercial  insurance  provider to which NCT pays a
nominal  premium for such stop loss coverage.  NCT records benefit claim expense
in the  period  in which the  benefit  claim is  incurred.  Any  benefit  claims
incurred  by us are  submitted  to NCT for  payments  and such  claims  are then
charged to us. At each of December  31, 2003 and 2004,  the total amount owed to
NCT for benefit claims was approximately  $471,000 and is included in the amount
due to NCT Hearing  discussed above. For the years ended December 31, 2002, 2003
and  2004,  health  benefits  and  claims  included  in  selling,   general  and
administrative  expenses on our  statements  of  operations  were  approximately
$203,000, $69,000 and $32,000, respectively.

We participate in NCT's 401(k) Plan,  referred to as the 401(k) Plan. The 401(k)
Plan is qualified  under  Section  401(k) of the Internal  Revenue Code of 1986.
Each  eligible  employee  may elect to  contribute  up to 15% of the  employee's
annual  compensation  to the 401(k) Plan. NCT, at the discretion of its Board of
Directors,  may match employee  contributions  to the 401(k) Plan. There were no
matching contributions for the years ended December 31, 2002, 2003 and 2004.


                                       F-20
<PAGE>


17.  Selected Quarterly Financial Data (Unaudited)

The following tables contain selected quarterly  financial data for each quarter
of 2003 and 2004.  We believe  the  following  information  reflects  all normal
recurring  adjustments  necessary for a fair presentation of the information for
the periods presented. The operating results for any quarter are not necessarily
indicative of results for any future periods.

(Unaudited)

<TABLE>
<CAPTION>
                                                                Year Ended December 31, 2003
                                        -----------------------------------------------------------------------------
                                         1st Quarter    2nd Quarter     3rd Quarter     4th Quarter       Full Year
                                        -------------   -------------  -------------   -------------   --------------
<S>                                     <C>             <C>            <C>             <C>             <C>
Net sales                               $    353,537    $    258,142   $    324,639    $    242,217    $   1,178,535
Gross profit                                 229,006         192,774        221,656         170,686          814,122
Loss attributable to common stockholders    (257,916)       (239,887)      (188,350)       (299,204)        (985,357)
Loss per share - basic and diluted             (0.01)          (0.01)           -             (0.01)           (0.03)

                                                                Year Ended December 31, 2004
                                        -----------------------------------------------------------------------------
                                         1st Quarter    2nd Quarter     3rd Quarter     4th Quarter       Full Year
                                         -------------   -------------  -------------   -------------   --------------

Net sales                               $    267,017    $    269,797   $    300,307    $    357,635     $  1,194,756
Gross profit                                 184,142         185,658        198,646         107,970 (a)      676,416
Loss attributable to common stockholders    (247,645)       (304,650)      (326,291)       (511,569)(a)   (1,390,155)
Loss per share - basic and diluted             (0.01)            -              -             (0.01)           (0.02)
</TABLE>

(a)  Includes increase in inventory reserve of $114,000.



                                       F-21
<PAGE>


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON SCHEDULE II


Board of Directors and Stockholders
Pro Tech Communications, Inc.

Our audits  were  conducted  for the  purpose of forming an opinion on the basic
financial  statements of Pro Tech  Communications,  Inc. as of December 31, 2003
and 2004 and for each of the years ended December 31, 2002,  2003 and 2004 taken
as a whole.  The 2002,  2003 and 2004  information  included  on  Schedule II is
presented for purposes of additional  analysis and is not a required part of the
basic financial statements.  Such information has been subjected to the auditing
procedures  applied in the audits of the basic financial  statements and, in our
opinion,  is fairly  stated in all  material  respects  in relation to the basic
financial statements taken as a whole.


/s/ Eisner LLP
--------------
    Eisner LLP


New York, New York
January 28, 2005


                                       F-22
<PAGE>


<TABLE>
<CAPTION>
                                                                   SCHEDULE II

PRO TECH COMMUNICATIONS, INC.
VALUATION AND QUALIFYING ACCOUNTS

------------------------------------------------------------------------------------------------------------------------------------
                 Column A                                    Column B              Column C               Column D       Column E
------------------------------------------------------------------------------------------------------------------------------------
                                                                            Charged       Charged to
                                                             Balance at     to costs        other                        Balance at
                                                             beginning        and         accounts -     Deductions -     end of
                Description                                   of period     expenses       Describe        Describe       period
--------------------------------------------------           -----------   -----------   -------------   ------------   ------------
 <S>                       <C> <C>                            <C>           <C>           <C>             <C>            <C>
Allowance for doubtful accounts:
      Year ended December 31, 2002                           $   24,784    $   29,800    $       0       $   27,275 (a) $   27,309
      Year ended December 31, 2003                               27,309         6,591            -            2,463 (a)     31,437
      Year ended December 31, 2004                               31,437        14,621            -           17,781 (a)     28,277

Allowance for inventory obsolescence:
      Year ended December 31, 2002                                  -          10,000            -              -           10,000
      Year ended December 31, 2003                               10,000           -              -            5,000 (b)      5,000
      Year ended December 31, 2004                                5,000       113,531            -              -          118,531

Accumulated depreciation:
      Year ended December 31, 2002                              306,640       161,219            -            2,084 (c)    465,775
      Year ended December 31, 2003                              465,775       155,887            -              -          621,662
      Year ended December 31, 2004                              621,662       147,040            -            2,602 (c)    766,100

Accumulated other intangibles and other assets amortization:
      Year ended December 31, 2002                            1,166,166       932,559     11,500,000 (d) 13,596,677 (e)      2,048
      Year ended December 31, 2003                                2,048       182,184            -            3,511 (e)    180,721
      Year ended December 31, 2004                              180,721       194,610            -              -          375,331


Attention is directed to the foregoing report of independent
registered accounting firm and the notes to our financial statements.
</TABLE>

----------
(a) Accounts written off, net of recoveries.
(b) Accounts previously reserved for, written off in current year.
(c) Write off fixed asset dispositions against reserve.
(d) Write down intangibles to estimated fair value.
(e) Write off fully amortized intangibles and other assets.


                                       F-23
<PAGE>


                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on March 29, 2005.

                                                   PRO TECH COMMUNICATIONS, INC.

                                                   By:  /s/ RICHARD HENNESSEY
                                                        ---------------------
                                                        Richard Hennessey
                                                        President and
                                                        Chief Operating Officer

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

           Name                            Title                      Date
           ----                            -----                      ----

  /s/ RICHARD HENNESSEY          President, Chief Operating       March 29, 2005
  ------------------------          Officer and Director
      Richard Hennessey         (principal executive officer)

  /s/ MARY CHRISTIAN-HEIN       Senior Vice President, Chief      March 29, 2005
  ------------------------     Financial Officer and Treasurer
      Mary Christian-Hein         (principal finance and
                                    accounting officer)

  /s/ IRENE LEBOVICS               Chairman of the Board          March 29, 2005
  ------------------------
      Irene Lebovics


  /s/ KEITH LARKIN                        Director                March 29, 2005
  ------------------------
      Keith Larkin


  /s/ MICHAEL J. PARRELLA                 Director                March 29, 2005
  ------------------------
      Michael J. Parrella


  /s/ CY E. HAMMOND                       Director                March 29, 2005
  ------------------------
      Cy E. Hammond



                                       S-1