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

                                   FORM 10-QSB

                QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                              For the Quarter Ended

                               September 30, 2003

                        Commission File Number : 0-30463

                               R-Tec Holding, Inc.
             (Exact name of registrant as specified in its charter)

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

                   1471 E. Commercial Ave., Meridian, ID 83542
                    (Address of principal executive offices)

                                 (208) 887-0953
                           (Issuer's telephone number)

                    At September 30, 2003, the registrant had
                 22,272,246 shares of common stock outstanding.

<PAGE>

                         PART I - FINANCIAL INFORMATION

Forward Looking Statements and Risk Factors

      This form 10-QSB contains certain forward-looking statements which are
based on management's current expectations. The Company has identified risk
factors which could cause actual results to differ substantially from the
forward looking statements. These risk factors include, but are not limited to:
general economic conditions, current industry specific trends, variability in
time line of new product developments, new product acceptance, economic
viability of our customers and vendors, changes in legislation, the ability to
obtain adequate capital funding for product development and expansion, the
availability of qualified employees, and the volatile nature of the technology
sector in general.

Item 1. Financial Statements:

The following financial statements are filed as part of this report:

      1)    Consolidated Balance Sheet for the periods ending September 30, 2003
            (unaudited) and December 31, 2002

      2)    Consolidated Statement of Operations for the periods ending
            September 30, 2003 and September 30, 2002 (unaudited)

      3)    Consolidated Statement of Cash Flows for the periods ending
            September 30, 2003 and September 30, 2002 (unaudited)

      4)    Notes to Financial Statements

Item 2. Management's Discussion and Analysis or Plan of Operation:

      Revenues for the Company in its two main product groups are listed below
for the quarters ending September 30, 2003 and 2002 respectively. For the 3
months ending September 30, 2003, total revenues decreased by 65%, with
decreases in automation of 79% and 15% in interconnect. For the 9 months ending
September 30, 2003, and September 30, 2002, total sales decreased by 49%, with
decreases in automation of 59% and 15% in interconnect.

3 Months ending September 30, 2003
Segment                     2003                          2002
--------------------------------------------------------------

Automation                  $  122,682         46%        $  585,164         78%
Interconnect                $  143,845         54%        $  169,662         22%
                            ----------        ---         ----------        ---
Total Sales                 $  266,527        100%        $  754,826        100%

9 Months ending September 30, 2003
Segment                     2003                          2002
--------------------------------------------------------------

Automation                  $  643,466         61%        $1,575,901         76%
Interconnect                $  414,989         39%        $  487,847         24%
                            ----------        ---         ----------        ---
Total Sales                 $1,058,455        100%        $2,063,748        100%

<PAGE>

Financial Results of Operations

      Management feels the continued decrease in sales for both product sectors
is primarily attributable to sluggish economic conditions in general, but
particularly in the technology sectors. Key customers for the Company in the
interconnect group have indicated a perceptible upswing in their production
volumes, but these positive movements have not yet translated into sales
increases for the Company. In the automation product group, customers' capital
expenditure budgets, which represent allocated funds for the type of products
produced in the automation group, appear to be on hold until the 2nd and 3rd
quarters of 2004.

      Gross profit for the period ending September 30, 2003 was $28,196 or 11%,
compared to $225,959 or 30%, for the period ending September 30, 2002. The
decrease in gross profit was attributable primarily to decreases in sales and
underutilization of plant capacities which are factored into cost of good sold.

      Selling, General, and Administrative expenses were $147,689 for the period
ending September 30, 2003, compared to $329,097 for the period ending September
30, 2002, a decrease of $181,408 or 55%. The decrease in expenses is
attributable primarily to additional layoffs and continued efforts to reduce
expenses.

      Net loss for the quarter was $208,791, or $.01 per share for the period
ending September 30, 2003, compared to a net loss of $141,817 or $.01 per share
for the period ending September 30, 2002. The increase in net loss resulted
primarily from the decrease in gross profit and an increase in interest expense
of $38,657, from $13,241 for the period ending September 30, 2002, to $51,898,
for the period ending September 30, 2003.

Changes in Financial Condition:

      The following discussion and analysis should be read in conjunction with
the financial statements and notes thereto appearing elsewhere herein for
September 30, 2003 and December 31, 2002.

      Current assets were $312,732 for the period ending September 30, 2003,
compared to $873,517, for the period ending December 31, 2002, a decrease of
$560,785, or 64%, respectively. Current liabilities were $1,393,425 and
$1,178,965, for the same respective periods. The resulting current ratio was .22
at September 30, 2003, compared to .74 at December 31, 2002. The decrease in
current assets from December 31, 2002 to September 30, 2003 was primarily due to
a decrease of $143,336 in cash, a decrease of $299,202 in accounts receivable, a
decrease in costs and estimated earnings in excess of billings on uncompleted
contracts of $58,229, and a decrease in prepaid expenses of $72,798. Significant
changes in current liabilities included an increase in accounts payable of
$181,081 or 168%, from December 31, 2002, to September 30, 2003, and a decrease
in billings in excess of costs and estimated earnings on uncompleted contracts,
from $61,594 to $24,022 for the same respective periods.

<PAGE>

Liquidity:

      Management is aware that the Company's liquidity position has continued to
deteriorate due to successive quarterly losses. Short term areas of concern
include an increase in aging of the accounts payable and additional short term
notes payable that have matured and are now past due. In addition, the Company
has fallen behind on payment of accrued interest on the short term notes
payable. Aging of accounts payable includes $88,251 at 61-90 days late and
$82,098 at greater than 90 days. Notes payable currently past due as of
September 30, 2003 include principal in the amount of $584,422 and approximately
$20,965 in past due interest payable.

Funding and Capital Resources:

      For the period ending September 30, 2003, the Company received no
additional funding from either equity instruments or debt instruments. The
Company has an agreement with 1st SB Partners Ltd., which was entered into in an
attempt to raise additional equity funding, but has been unable to use this
funding source due to predetermined parameters set by 1st SB Partners Ltd. that
are linked to the Company's stock performance. The Company is also continuing to
seek other sources of funding via partnering with key customers, equity funding
opportunities, and debt funding opportunities. Without some additional funding,
it is unlikely that the Company will be able to maintain operations at the
current level through the end of the period ending December 31, 2003. The
Company is attempting to secure additional funding, but cannot guarantee that
the funding will be available.

Plan of Operation:

      Within the recent approximate six weeks, the Company has experienced a
measurable increase in interest from new and existing customers in its
interconnect products. Renewed efforts, as resources allow, are being directed
at responding to these potential sales opportunities as well as prospecting new
opportunities. Management feels that due to physical property changes in the IC
testing industry, including increased testing speeds and tighter testing
tolerances, or finer pitches, the Company's interconnect products are gaining
attention as one of the potentially leading solutions for future testing
applications in several of the testing market segments. To the extent this is
correct, older mechanical solutions will become obsolete and newer, leading edge
solutions will begin to take their places. Management feels that the Company's
interconnect products are in position to be viewed as one of these leading edge
solutions. With the Company's current research and development efforts, several
new leading edge GCI(TM) products are being tested for market introduction,
including a version of its existing standard GCI(TM) with finer pitches than
previously available.

      To support the opportunity to increase market awareness and acceptance,
management is directing limited resources to support marketing and sales
efforts. With its state-of-the-art production facility on-line, the Company will
be able to handle substantial increases in sales and production of its
interconnect products with minimal capital expenditures. Of the capital funding
the Company is attempting to secure, a larger amount than previously budgeted is
targeted to support the increased marketing efforts.

      From a financial performance perspective the Company has moved towards a
profit center approach to better analyze each operating group and to determine
the best operating structure to minimize expenses and maximize operating
margins. It is anticipated that within the

<PAGE>

next quarter, management will make decisions to restructure the Company's
operating groups to focus on areas with the most opportunity for positive margin
contributions.

      Management is aware of the acute cash flow position the Company faces and
has implemented strict cash flow management policies, including reduced budgets,
reductions in personnel, reductions on work hours, and short term work area
closures adjusted to current production scheduling.

      With the tighter financial controls, management is working towards the
short term goals of achieving a positive cash flow position within six to eight
months, and GAAP financial profitability within eight to ten months. With the
increased interest in the Company's interconnect products, management feels that
the interconnect sales will continue to grow and enable the Company to reach its
target financial goals. Due to the cyclical nature of interconnect sales, no
significant sales increases are expected until the first quarter of 2004.
Testing facilities, which represent the Company's interconnect product
customers, normally slow down or shut down the testing and qualifying of new IC
products during the holiday periods from Thanksgiving thru New Years, with
demand picking up within the first few weeks of January. Management is aware
that without additional capital funding, it will become extremely difficult to
achieve its goals previously mentioned, as well as continuing operations at
their current level. To the extent funding is not secured, the Company may need
to seek alternative solutions, including informal or formal restructuring. If
the Company is successful in securing additional funding, it cannot guarantee
that the foregoing goals of positive cash flow and profitability will be
achieved.

Item 3. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Based on their evaluation as of a date within 90 days of the filing date of this
Report on Form 10-Q, the Company's principal executive officer and principal
financial officer have concluded that the Company's disclosure controls and
procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities
Exchange Act of 1934 (the "Exchange Act") are effective to ensure that
information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms.

(b) Changes in Internal Controls

There were no significant changes in the Company's internal controls or in other
factors that could significantly affect the controls subsequent to the date of
their evaluation. There were no significant deficiencies or material weaknesses,
and therefore there were no corrective actions taken.

                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings: Nothing to Report

<PAGE>

Item 2. Changes in Securities: Nothing to Report

During the period ending September 30, 2003, the Company, pursuant to a consent
of directors, issued R-144 common stock to pay for the lease expenses at its
interconnect plant. The monthly lease expense was $1,550 per month. The stock
value was determined by using the closing price of the Company's stock, on the
first trading day of the 3 month rental quarter.

Date            Shares    Consideration                              Shareholder
----            ------    -------------                              -----------

07/01/03        58,125    Lease expense - March, April, May          SWCR, Inc.
07/01/03        77,500    Lease expense - June, July, Aug            SWCR, Inc.
09/30/03        46,500    Lease expense - Sept, Oct, Nov             SWCR, Inc.
--------------------------------------------------------------------------------
Totals         182,125

Other Security Transactions: Nothing to Report

Item 3: Defaults Upon Senior Securities: Nothing to Report

Item 4: Submission of Matters to a Vote of Security Holders: Nothing to Report

Item 5: Other Information.

Changes in Officers and Personnel:

            a)    Effective September 30, 2003, Dave Stewart resigned as a
                  member of the Board of Directors and as Chairman of the Audit
                  Committee. Mr. Stewart cited "personal changes I am making in
                  my own business" as the basis of his decision. Mr. Stewart did
                  offer to continue working with the Company on "some type of
                  advisory basis" if the Company so desires. Mr. Stewart
                  represented the financial export on the Audit Committee. The
                  Company is working diligently to replace Mr. Stewart with a
                  qualified financial expert for the audit committee. As of the
                  date of this filing, this position has not yet been filled.

Item 6: Exhibits and Reports on form 8-K.

      a)    Exhibit 31.1 Certification Pursuant to 18 U.S.C Section 1350, as
            Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

            Exhibit 31.2 Certification Pursuant to 18 U.S.C. Section 1350, as
            Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

      b)    Exhibit 32.1 Certification Pursuant to Sections 13(a) or 15(d) of
            the 1934 Act, and as Adopted Pursuant to Section 906 of the
            Sarbanes-Oxley Act of 2002.

            Exhibit 32.2 Certification Pursuant to Sections 13(a) or 15(d) of
            the 1934 Act, and as Adopted Pursuant to Section 906 of the
            Sarbanes-Oxley Act of 2002.

      c)    No reports on Form 8-K were filed during the quarter ended September
            30, 2003.

<PAGE>

                                   SIGNATURES

      In accordance with requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

      R-Tec Holding, Inc.
      (Registrant)


Date: November 12, 2003                 By / s / Douglas G. Hastings
                                                 -------------------------------
                                                 Douglas G. Hastings, President
                                                 and CEO


                                        By / s / Michael T. Montgomery
                                                 -------------------------------
                                                 Michael T. Montgomery, CFO

<PAGE>

                       R-TEC HOLDING, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEET
           As of September 30, 2003 (Unaudited) and December 31, 2002

<TABLE>
<CAPTION>
                                                                            September 30, 2003   December 31, 2002
                                                                            ------------------   -----------------
<S>                                                                            <C>                  <C>
Current assets
     Cash                                                                      $    29,236          $   172,572
     Accounts receivable (net of $12,952 and $20,177
         allowance for doubtful accounts, respectively)                            179,327              478,529
     Costs and estimated earnings in excess
         of billings on uncompleted contracts                                       14,494               72,723
     Income taxes receivable                                                        15,295               15,295
     Inventory                                                                      48,721               35,941
     Prepaid expenses                                                               25,659               98,457
                                                                               -----------          -----------
                                                  Total current assets             312,732              873,517

Equipment and leasehold improvements, at cost,
     net of accumulated depreciation                                               706,544              888,247
Other assets, at cost, net of accumulated
     amortization                                                                   10,229               24,775
                                                                               -----------          -----------

                                                          Total assets         $ 1,029,505          $ 1,786,539
                                                                               ===========          ===========

Current liabilities
     Accounts payable                                                          $   288,650          $   107,569
     Accrued expenses                                                              102,849               84,797
     Billings in excess of costs and estimated
       earnings on uncompleted contracts                                            24,022               61,594
     Notes payable, current portion related parties                                100,000                   --
     Notes and leases payable, current portion                                     877,904              925,005
                                                                               -----------          -----------
                                             Total current liabilities           1,393,425            1,178,965

Accrued preferred dividends payable                                                196,832              161,780
Notes and leases payable, less current portion                                     197,112              110,013
Notes payable to related parties                                                   100,000              200,000
                                                                               -----------          -----------
                                                     Total liabilities           1,887,369            1,650,758

Shareholders' equity
     Series A cumulative convertible preferred stock, par value
         $0.23437 per share, 5,000,000 authorized, 2,646,094
         and 2,781,564 shares issued and outstanding                               619,350              651,100
     Common stock, no par value per share,
         60,000,000 authorized, 22,272,246 and 21,742,189
         shares issued and outstanding                                           2,888,804            2,834,082
     Additional paid-in capital                                                    538,123              514,123
     Accumulated deficit                                                        (4,904,141)          (3,863,524)
                                                                               -----------          -----------
                                  Total shareholders' equity (deficit)            (857,864)             135,781
                                                                               -----------          -----------

                  Total liabilities and shareholders' equity (deficit)         $ 1,029,505          $ 1,786,539
                                                                               ===========          ===========
</TABLE>

                             See accompanying notes


                                     - 2 -
<PAGE>

                       R-TEC HOLDING, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
   For the Period Ended September 30, 2003 and September 30, 2002 (Unaudited)

<TABLE>
<CAPTION>
                                                   Three Months Ended September 30,         Nine Months Ended September 30,
                                                   --------------------------------         -------------------------------
                                                       2003                2002                2003                2002
                                                   ------------        ------------        ------------        ------------
<S>                                                <C>                 <C>                 <C>                 <C>
Revenues
      Automation revenues                          $    122,682        $    585,164        $    643,466        $  1,575,901
      Interconnect revenues                             143,845             169,662             414,989             487,847
                                                   ------------        ------------        ------------        ------------

                               Total revenue            266,527             754,826           1,058,455           2,063,748

Operating costs
      Automation operating costs                        133,713             413,104             678,658           1,309,619
      Interconnect operating costs                      104,618             115,763             302,154             299,907
                                                   ------------        ------------        ------------        ------------

                       Total operating costs            238,331             528,867             980,812           1,609,526
                                                   ------------        ------------        ------------        ------------

                                Gross profit             28,196             225,959              77,643             454,222

Selling, general and administrative expenses            147,689             329,097             779,521           1,108,018
Research and development                                 22,616              10,668              81,679              44,696
                                                   ------------        ------------        ------------        ------------

                              Operating loss           (142,109)           (113,806)           (783,557)           (698,492)

Interest expense                                        (51,898)            (13,241)           (212,985)            (53,711)
Interest income                                              --                  --                  --               2,341
                                                   ------------        ------------        ------------        ------------
                                                        (51,898)            (13,241)           (212,985)            (51,370)
                                                   ------------        ------------        ------------        ------------

Income (loss) before income taxes                      (194,007)           (127,047)           (996,542)           (749,862)
Income taxes                                                 --                  --                  --                  20
                                                   ------------        ------------        ------------        ------------

                                    Net loss           (194,007)           (127,047)           (996,542)           (749,882)

Preferred stock dividends                                14,784              14,770              44,075              43,829
                                                   ------------        ------------        ------------        ------------

                       Net loss available to
                         common shareholders       $   (208,791)       $   (141,817)       $ (1,040,617)       $   (793,711)
                                                   ============        ============        ============        ============

Net loss per common share                          $      (0.01)       $      (0.01)       $      (0.05)       $      (0.04)
Weighted average shares outstanding                  22,140,169          21,052,005          22,109,681          20,525,895
</TABLE>

                             See accompanying notes


                                     - 3 -
<PAGE>

                       R-TEC HOLDING, INC. AND SUBSIDIARY
                  CONSOLIDATED STATEMENTS OF CASH FLOWS For the
       Periods Ended September 30, 2003 and September 30, 2002 (Unaudited)

<TABLE>
<CAPTION>
                                                                                       Nine Months Ended September,
                                                                                          2003              2002
                                                                                       ---------        -----------
<S>                                                                                    <C>              <C>
Cash flows from operating activities
     Net loss                                                                          $(996,542)       $  (749,882)
     Adjustments to reconcile net loss to net
         cash used by operating activities
         Depreciation and amortization                                                   196,431            194,965
         Options issued for consulting services                                           24,000                 --
         Common stock issued for services                                                 13,950                 --
         Changes in assets and liabilities
             Accounts receivable                                                         299,202           (291,987)
             Costs and estimated earnings in excess
               of billings on uncompleted contracts                                       58,229             20,546
             Prepaid expenses                                                             72,798             (8,671)
             Inventory                                                                   (12,780)           (54,129)
             Accounts payable                                                            181,080             (4,435)
             Accrued expenses                                                             18,052             61,323
             Billings in excess of costs and estimated
               earnings on uncompleted contracts                                         (37,572)               778
                                                                                       ---------        -----------
                                           Net cash used by operating activities        (183,152)          (831,492)

Cash flows from investing activities
     Purchase of equipment and other assets                                                 (182)          (384,089)

Cash flows from financing activities
     Collections on loans                                                                     --             10,666
     Proceeds from common stock and options                                                   --            822,400
     Proceeds from debt                                                                   75,000            658,922
     Payments on debt                                                                    (35,002)          (316,890)
                                                                                       ---------        -----------
                                       Net cash provided by financing activities          39,998          1,175,098
                                                                                       ---------        -----------

                                                            Net decrease in cash        (143,336)           (40,483)
Beginning cash                                                                           172,572            330,044
                                                                                       ---------        -----------

                                                                     Ending cash       $  29,236        $   289,561
                                                                                       =========        ===========

Supplemental disclosures of cash flow information
     Interest paid                                                                     $ 112,403        $    37,118
     Noncash investing and financing activities
         Preferred stock dividends payable                                             $  44,075        $    43,829
         Common stock issued through conversion of preferred
             stock and accrued preferred dividends                                     $  40,772        $        --
         Common stock issued for services                                              $  13,950        $        --
         Accrued preferred stock dividends payable converted to common stock           $   9,022        $        --
</TABLE>

                             See accompanying notes


                                     - 4 -
<PAGE>

                       R-TEC HOLDING, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           September 30, 2003 and 2002

NOTE A - SIGNIFICANT ACCOUNTING POLICIES

Unaudited Interim Financial Statements

In the opinion of management, the accompanying unaudited financial statements
contain all adjustments (consisting solely of normal recurring adjustments)
necessary to present fairly the financial position of R-Tec Holdings, Inc. (the
Company) and the results of operations and cash flows. Certain reclassifications
of prior quarter amounts were made to conform with current quarter presentation,
none of which effects previously recorded net loss.

Revenue

The Company recognizes revenue when it is realized or realizable and earned. The
Company considers revenue realized or realizable and earned when it has
persuasive evidence of an arrangement, the product has been shipped or the
services have been provided to the customer, the sales price is fixed or
determinable and collectibility is reasonably assured. In addition to the
aforementioned general policy, the following are specific revenue recognition
policies for each category of revenue.

Contracts are reported using the percentage-of-completion method of revenue
recognition. Under the percentage-of-completion method, earnings are recognized
based on the ratio of costs incurred to total estimated costs. Costs include
direct materials, direct labor, subcontractors and job related overhead. Assets
and liabilities relating to the "costs and estimated earnings in excess of
billings on uncompleted contracts" and "billings in excess of costs and
estimated earnings on uncompleted contracts" are recorded as current assets and
current liabilities on the balance sheet as they will be liquidated in the
normal course of contract completion. Revisions in cost and profit estimates
during the course of the work are reflected in the accounting period in which
the facts requiring revision become known. The entire amount of an estimated
ultimate loss is accrued at the time such a loss becomes known.

Revenue from Interconnect inventory sales is recognized when the product is
shipped to the customer and when there are no unfulfilled company obligations
that affect the customer's final acceptance of the arrangement. Any cost of
these obligations is accrued when the corresponding revenue is recognized.

Stock Options

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


                                     - 5 -
<PAGE>

                       R-TEC HOLDING, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           September 30, 2003 and 2002

plan further allows for the option period to not exceed five years for the
incentive stock options and not to exceed ten years for the non-qualified stock
options. The Company issued 2,410,000 stock options under the plan during the
nine months ended September 30, 2003. The Company is aware that the total number
of stock options available for allocation needs to be increased.

The Company accounts for its stock options under Accounting Principles Board
(APB) Opinion No. 25 using the intrinsic value method. In accordance with
Financial Accounting Standards (SFAS) No. 148, Accounting for Stock-Based
Compensation - Transition and Disclosure, pro-forma net income, stock-based
compensation expense, and earnings per share using the fair value method are
stated as follows:

                                                         Nine Month Ended
                                                  ------------------------------
                                                  September 30,    September 30,
                                                       2003           2002
                                                  -------------    -------------

  Net loss, as reported                            $(1,040,617)     $(793,711)
  Deduct: stock-based employee compensation
    expense determined under fair value based
    method, net of tax                                 (37,627)       (11,801)
                                                   -----------      ---------
  Pro forma net income                             $(1,078,244)     $(805,512)
                                                   ===========      =========

  Earnings per share
    Basic - as reported                            $      (.05)     $    (.04)
    Basic - pro forma                              $      (.05)     $    (.04)

NOTE B - EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Equipment and leasehold improvements consists of:

  Equipment                                                       $   946,212
  Vehicles                                                              2,633
  Office equipment and furnishings                                     96,082
  Leasehold improvements                                              118,484
                                                                  -----------
                                                                    1,163,411
  Accumulated depreciation and amortization                          (456,867)
                                                                  -----------

                                                                  $   706,544
                                                                  ===========


                                     - 6 -
<PAGE>

                       R-TEC HOLDING, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           September 30, 2003 and 2002

NOTE C - OTHER ASSETS

Intangible assets consist of:

      Software                                                   $ 76,327
      Accumulated amortization                                    (66,098)
                                                                 --------

                                                                 $ 10,229
                                                                 ========

The estimated useful life of software is three years.

NOTE D - INVENTORY

Inventory is stated at the lower of cost (last-in, first-out method) or market.

Inventories consist of:

      Finished goods                                               $ 9,658
      Work in process                                                6,186
      Raw materials                                                 32,877
                                                                   -------

                                                                   $48,721
                                                                   =======

NOTE E - SEGMENT DISCLOSURE

The Company operates in two business segments: Custom Automation and
Interconnect. These segments have been determined by evaluating the company's
internal reporting structure and nature of products offered.

Custom Automation: The Company, under contracts with various customers,
develops, engineers and fabricates High-Tech custom manufacturing equipment and
parts to be incorporated into customer owned and operated manufacturing
equipment and manufactured products.

Interconnect: The Company manufactures a line of high performance sockets and
interconnecting devices used in the testing of IC chips.


                                     - 7 -
<PAGE>

                       R-TEC HOLDING, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           September 30, 2003 and 2002

                                             Custom
                                           Automation   Interconnect     Total
                                          -----------   ------------  ----------
Nine months ended September 30, 2003

Operating revenue                         $   643,466     $414,989    $1,058,455
Operating income (loss)                       (35,192)     112,835        77,643
Depreciation and amortization                  92,530       72,421       164,951

                                             Custom
                                           Automation   Interconnect     Total
Nine months ended September 30, 2002

Operating revenue                         $ 1,575,901     $487,847    $2,063,748
Operating income loss                         266,282      187,940       454,222
Depreciation and amortization                  95,654                     95,654

Three months ended September 30, 2003

Operating revenue                         $   122,682     $143,845    $  266,527
Operating income (loss)                       (11,031)      39,227        28,196
Depreciation and amortization                  31,118       24,132        55,250

Three months ended September 30, 2002

Operating revenue                         $   585,164     $169,662    $  754,826
Operating income loss                         172,060       53,899       225,959
Depreciation and amortization                  27,599                     27,599

The Company does not assign interest income, interest expense, other income or
income taxes to operating segments. Identifiable assets and related capital
expenditures are assigned to operating segments, with depreciation and
amortization allocated to the segments.

NOTE F - COMMITMENTS

On June 16, 2003, the Company entered into a consulting agreement that provides
for the payment of 600,000 shares of common stock. The liability of $36,000 has
been included in accounts payable.

NOTE G - NOTES PAYABLE

Notes payable currently past due as of September 30, 2003, include principal in
the amount of $584,422 and approximately $20,965 in past due interest payable.

UCC filings have been filed on behalf of convertible note holders for a
perfected security position in significantly all assets of the Company excluding
intellectual properties.

The Company has received a letter from one note holder requesting repayment of
the note in the amount of $50,000. The note matured on October 31, 2003.


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<PAGE>

                       R-TEC HOLDING, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           September 30, 2003 and 2002

NOTE H - GOING CONCERN CONSIDERATIONS

The Company's recurring losses from operations in current and prior years raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments to reflect the possible
effects on the recoverability and classification of assets or amounts and
classifications of liabilities that may result from the possible inability of
the Company to continue as a going concern. The Company is attempting to
increase sales and raise additional capital to sustain operations. However,
there can be no assurance that these plans will be successful.


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