|UNITED STATESSECURITIES
AND EXCHANGE COMMISSIONWashington, D.C. 20549


Form 10-QSB
|-----------------------------------------------------------------------------------

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

| | For
the quarterly period ended March 31, 2004
| | ---------------------------------------------

||_| |  | TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- |  | ----------------------------------------------------------------------------------

| | For
the transition period from _____________ to _____________
| | -------------------------------------------------------------

|Commission file number:
0-30463


R-TEC HOLDING,
INC.(Name of small business issuer in its charter)
|---------------------------------------------------------------------------------------------------

|IDAHO 
      (State or other jurisdiction of incorporation or organization)                   | 82-0515707
      
      (I.R.S. Employer Identification No.)
|--------------------------------------------------------------------------------------------- | ------------------------------------------------------------
|                                                                                              |                                                             
|1471 E. Commercial
      Ave., Meridian, Idaho
      (Address of principal executive offices) | 83642 
      (Zip Code)                                     
|                                                                                              |                                                             
|Issuers
      telephone number: (208) 887-0953      FAX:
      (208) 888-1757               

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


State the number of shares
outstanding of each of the issuers classes of common equity, as of the latest practical
date:


Shares outstanding as of
March 31, 2004 of the Companys common stock:  22,878,994


Transitional Small Business
Disclosure Format (Check one):  Yes  |_|     No |X|


Common Stock
no par value(Title of class)


1
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|TABLE OF
CONTENTS
|-----------------

|             |  | PART
      I - FINANCIAL INFORMATION                            |   
|------------ |  | --------------------------------------------------------------- | --
|Item
      1 |  | Financial
      Statements                                      | 3 
|Item
      2 |  | Managements
      Discussion and Analysis or Plan of Operation | 10
|Item
      3 |  | Controls
      and Procedures                                   | 12
|             |  |                                                                 |   
|             |  | PART
      II - OTHER INFORMATION                               |   
|Item
      1 |  | Legal
      Proceedings                                         | 12
|Item
      5 |  | Other
      Information Changes in Officers and Personnel     | 13
|Item
      6 |  | Exhibits
      and Reports on form 8-K                          | 13
|             |  | Exhibit
      31                                                |   
|             |  | Exhibit
      32                                                |   

|DISCLOSURE
REGARDING FORWARD LOOKING STATEMENTS

This
Report, including any documents incorporated by reference into this Report, contains
certain Forward-Looking Statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended, including without limitation, statements regarding our products, our
operating revenues or profits, our dependence on products that are still undergoing
research and development, exposure to general economic fluctuations, government
regulations which may affect our production capabilities or products, competition to our
products in both design and pricing, employment factors including but not limited to
adequate personnel to support the design, manufacturing, and sales of our products,
status of patent protection to our intellectual properties, and our ability to raise
additional funding for continuing operations. Other than statements of historical fact,
all statements made within this Report may be construed to be forward looking and are
identified by terminology such as may, believe, estimates, projects, anticipates, plans, hopes, or
potential, or the negative thereof or similar terminology. Although we
believe that statements made within the context of this Report are reasonable, there can
be no assurance that said expectations or any of the Forward-Looking Statements will
prove to be correct. Actual results may differ substantially from those statements,
projections, tabulations, or estimates, presented or projected. All Forward-Looking
Statements included in the Companys press releases or reports to the Securities and
Exchange Commission (SEC) contain inherent risk and are expressly qualified by these
cautionary statements.


2
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|PART I  FINANCIAL
INFORMATION



Item 1.
Financial Statements:


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

| |  | 1) |  | Consolidated
Balance Sheet for the periods ending March 31, 2004, (unaudited) and December 31, 2003
| |  | -- |  | ---------------------------------------------------------------------------------------------------

| |  | 2) |  | Consolidated
Statement of Operations for the periods ending March 31, 2004, (unaudited) and March 31,
2003 (unaudited)
| |  | -- |  | ----------------------------------------------------------------------------------------------------------------------

| |  | 3) |  | Consolidated
Statement of Cash Flows for the periods ending March 31, 2004, (unaudited) and March 31,
2003 (unaudited)
| |  | -- |  | ----------------------------------------------------------------------------------------------------------------------

| |  | 4) |  | Notes
to Financial Statements
| |  | -- |  | -----------------------------

|3
|-

|R-TEC
HOLDING, INC. AND SUBSIDIARYCONSOLIDATED BALANCE SHEET


March 31, 2004
(unaudited) and December 31, 2003
|---------------------------------------------------------------------------------------------------------------

|                                                                 |  | March
      31, 2004 |            | December
      31, 2003 |  
|---------------------------------------------------------------- |  | -------------------- | ---------- | ----------------------- | -
|                                                                 |  |                      |            |                         |  
|                                                                 |  |                      |            |                         |  
|Current
      assets                                             |  |                      |            |                         |  
|Cash                                                             |  | $                    | 74,569     |                         | $
|Accounts
      receivable (net of $                             |  |                      |            |                         |  
|allowance
      for doubtful accounts)                           |  |                      | 116,291    |                         |  
|Income
      taxes receivable                                    |  |                      |           |                         |  
|Insurance
      claim receivable                                 |  |                      |           |                         |  
|Inventory                                                        |  |                      | 30,649     |                         |  
|Prepaid
      expenses                                           |  |                      | 12,535     |                         |  
|                                                                 |  |                      |            |                         |  
|Total
      current assets                                       |  |                      | 234,044    |                         |  
|                                                                 |  |                      |            |                         |  
|Equipment
      and leasehold improvements, at cost,             |  |                      |            |                         |  
|net
      of accumulated depreciation                            |  |                      | 561,363    |                         |  
|Other assets,
      at cost, net of accumulated                  |  |                      |            |                         |  
|amortization                                                     |  |                      | 2,198      |                         |  
|                                                                 |  |                      |            |                         |  
|                                                                 |  |                      |            |                         |  
|Total
      assets                                               |  | $                    | 797,605    |                         | $
|                                                                 |  |                      |            |                         |  
|                                                                 |  |                      |            |                         |  
|Current liabilities                                              |  |                      |            |                         |  
|Accounts
      payable                                           |  | $                    | 264,673    |                         | $
|Accrued
      expenses                                           |  |                      | 190,734    |                         |  
|Notes
      and leases payable, current portion                  |  |                      | 1,056,700  |                         |  
|Notes
      payable to related parties, current portion          |  |                      | 200,000    |                         |  
|                                                                 |  |                      |            |                         |  
|Total
      current liabilities                                  |  |                      | 1,712,107  |                         |  
|                                                                 |  |                      |            |                         |  
|Accrued preferred
      dividends payable                        |  |                      | 226,196    |                         |  
|Notes payable
      to related parties                           |  |                      |           |                         |  
|                                                                 |  |                      |            |                         |  
|Total
      liabilities                                          |  |                      | 1,938,303  |                         |  
|                                                                 |  |                      |            |                         |  
|Shareholders
      deficit                                      |  |                      |            |                         |  
|Series
      A cumulative convertible preferred stock, par value |  |                      |            |                         |  
|$0.23437
      per share, 5,000,000 authorized, 2,646,094        |  |                      |            |                         |  
|shares
      issued and outstanding                              |  |                      | 619,350    |                         |  
|Common
      stock, no par value per share,                      |  |                      |            |                         |  
|60,000,000
      authorized, 22,878,994 shares                   |  |                      |            |                         |  
|issued
      and outstanding                                     |  |                      | 2,924,804  |                         |  
|Additional
      paid-in capital                                 |  |                      | 538,123    |                         |  
|Accumulated
      deficit                                        |  |                      | (5,222,975 | )                       |  
|                                                                 |  |                      |            |                         |  
|Total
      shareholders deficit                                |  |                      | (1,140,698 | )                       |  
|                                                                 |  |                      |            |                         |  
|                                                                 |  |                      |            |                         |  
|Total
      liabilities and shareholders deficit                |  | $                    | 797,605    |                         | $
|                                                                 |  |                      |            |                         |  

|4
|-

|R-TEC HOLDING, INC.
AND SUBSIDIARYCONSOLIDATED STATEMENT OF OPERATIONS


Three Months Ended
March 31, 2004 and March 31, 2003 (unaudited)
|-----------------------------------------------------------------------------------------------------------------------------------------

|                                                   |  | 2004 |            | 2003 |  
|-------------------------------------------------- |  | ---- | ---------- | ---- | -
|                                                   |  |      |            |      |  
|                                                   |  |      |            |      |  
|Revenues                                           |  | $    | 277,500    |      | $
|                                                   |  |      |            |      |  
|Operating
      costs                              |  |      | 190,875    |      |  
|                                                   |  |      |            |      |  
|                                                   |  |      |            |      |  
|Gross
      profit (loss)                          |  |      | 86,625     |      |  
|                                                   |  |      |            |      |  
|Selling,
      general and administrative expenses |  |      | 147,430    |      |  
|Research
      and development                     |  |      | 4,566      |      |  
|                                                   |  |      |           
|                                                   |  |      |            |      |  
|Operating
      loss                               |  |      | (65,371    | )    |  
|                                                   |  |      |            |      |  
|Interest
      expense                             |  |      | 38,569     |      |  
|                                                   |  |      |            |      |  
|                                                   |  |      |            |      |  
|Loss before
      income taxes                     |  |      | (103,940   | )    |  
|Income
      taxes expense                         |  |      |           |      |  
|                                                   |  |      |            |      |  
|                                                   |  |      |            |      |  
|Net
      loss                                     |  |      | (103,940   | )    |  
|                                                   |  |      |           
|Preferred
      stock dividends                    |  |      | 14,579     |      |  
|                                                   |  |      |            |      |  
|                                                   |  |      |            |      |  
|Net
      loss available to common shareholders    |  | $    | (118,519   | )    | $
|                                                   |  |      |            |      |  
|                                                   |  |      |            |      |  
|Net loss
      per common share                    |  | $    | (0.01      | )    | $
|Weighted
      average shares outstanding          |  |      | 22,878,994 |      |  

|5
|-

|R-TEC HOLDING, INC.
AND SUBSIDIARYCONSOLIDATED STATEMENT OF CASH FLOWS


Three Months Ended
March 31, 2003 and March 31, 2004, (unaudited)
|------------------------------------------------------------------------------------------------------------------------------------------

|                                                          |  | 2004 |          | 2003 |  
|--------------------------------------------------------- |  | ---- | -------- | ---- | -
|                                                          |  |      |          |     
|Cash
      flows from operating activities                |  |      |          |      |  
|Net
      loss                                            |  | $    | (103,940 | )    | $
|Adjustments
      to reconcile net loss to net            |  |      |          |      |  
|cash
      provided (used) by operating activities        |  |      |          |      |  
|Depreciation
      and amortization                       |  |      | 61,205   |      |  
|Changes
      in assets and liabilities                   |  |      |          |      |  
|Accounts
      receivable                                 |  |      | (58,718  | )    |  
|Income
      taxes receivable                             |  |      | 11,625   |      |  
|Insurance
      claim receivable                          |  |      | 68,986   |      |  
|Costs
      and estimated earnings in excess              |  |      |          |      |  
|of
      billings on uncompleted contracts                |  |      |         |      |  
|Prepaid
      expenses                                    |  |      | 4,455    |      |  
|Inventory                                                 |  |      | 5,551    |      |  
|Accounts
      payable                                    |  |      | (27,258  | )    |  
|Accrued
      expenses                                    |  |      | 76,309   |      |  
|Billings
      in excess of costs and estimated           |  |      |          |      |  
|earnings
      on uncompleted contracts                   |  |      |         |      |  
|                                                          |  |      |          |     
|Net
      cash provided (used) by operating activities    |  |      | 38,215   |      |  
|                                                          |  |      |          |      |  
|Cash flows
      from investing activities                |  |      |          |      |  
|Purchase
      of equipment and other assets              |  |      | (212     | )    |  
|                                                          |  |      |          |      |  
|Cash flows
      from financing activities                |  |      |          |      |  
|Payments
      on debt                                    |  |      |         |      |  
|                                                          |  |      |          |     
|                                                          |  |      |          |      |  
|Net
      increase (decrease) in cash                     |  |      | 38,003   |      |  
|Beginning
      cash                                      |  |      | 36,565   |      |  
|                                                          |  |      |          |     
|                                                          |  |      |          |      |  
|Ending
      cash                                         |  | $    | 74,568   |      | $
|                                                          |  |      |          |     
|                                                          |  |      |          |      |  
|Supplemental
      disclosures of cash flow information   |  |      |          |      |  
|Interest
      paid                                       |  | $    | 1,705    |      | $
|Noncash
      investing and financing activities          |  |      |          |      |  
|Preferred
      stock dividends payable                   |  | $    | 14,579   |      | $
|Common
      stock issued through conversion of preferred |  |      |          |      |  
|stock
      and accrued preferred dividends               |  | $    |         |      | $
|Accrued
      preferred stock dividends payable converted |  |      |          |      |  
|to
      common stock                                     |  | $    |         |      | $

|6
|-

|R-TEC
HOLDING, INC. AND SUBSIDIARYNOTES TO
FINANCIAL STATEMENTS


Three Months
Ended March 31, 2004 and 2003 (unaudited)


NOTE A  STATEMENT OF SIGNIFICANT
ACCOUNTING POLICIES


Unaudited Interim
Financial Statements


The accompanying unaudited
financial statements have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. In the opinion of management,
all adjustments and disclosures necessary to a fair presentation of these
financial statements have been included. These financial statements should be
read in conjunction with the financial statements and notes thereto included in
the Companys 2003 Annual Report on Form 10-KSB for the year ended December
31, 2003, as filed with the Securities and Exchange Commission. Certain
reclassifications and other corrections for rounding have been made in prior
period financial statements to conform to the current period presentation. The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiary. All significant inter-company transactions and balances
have been eliminated in consolidation.


Stock Based
Compensation


The Company has an
incentive stock option plan wherein 2,000,000 shares of the Companys
common stock can be issued. The Company granted no options during the three
month period ended March 31, 2004 or 2003.

In October 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 123, which established financial accounting and reporting standards for
stock-based compensation. This standard defines a fair value method of
accounting for an employee stock option or similar equity instrument. In
December 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 148, which revised certain provisions of
adopting a fair value method of accounting for stock options and required
certain additional disclosures regarding stock options. These statements give
entities the choice between adopting the fair value method or continuing to use
the intrinsic value method under Accounting Principles Board (APB) Opinion No.
25 with footnote disclosures of the pro forma effects if the fair value method
had been adopted. The Company has opted for the latter approach.


The Company accounts for
its stock options under Accounting Principles Board (APB) Opinion No. 25 using
the intrinsic value method.  The Company has elected not to adopt the
provisions of Statement of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation(FAS 123). 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:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                               | Three
      Months Ended March 31, |         
|---------------------------------------------- | ---------------------------------- | --------
|                                               |                                    |         
|                                               |                                    |         
|                                               | 2004                               |         
|                                               |                                    |         
|Net
      loss, as reported                    | $                                  | (118,519
|Deduct:
      stock based compensation expense |                                    |         
|determined
      under fair value method,      |                                    |         
|net
      of tax                               |                                    | 20,858  
|                                               |                                    |         
|Pro
      forma net loss                       | $                                  | (139,376
|Loss
      per share:                          |                                    |         
|Basic
      and diluted  as reported          | $                                  | (.01    
|Basic
      and diluted  pro forma            | $                                  | (.01    

|Assumptions used to calculate the
income statement impact of stock options granted as if the Company had adopted FAS 123
were as follows:


7
|---------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                            | Three
      Months Ended March 31, |  
|------------------------------------------------------------------------------------------- | ---------------------------------- | -
|                                                                                            |                                    |  
|                                                                                            |                                    |  
|                                                                                            | 2004                               |  
|                                                                                            |                                    |  
|Weighted
      average:                                                                     |                                    |  
|Risk-free
      interest rate                                                               | 5.00                               | %
|Expected
      life                                                                         | 10
      years                     |  
|Expected
      volatility                                                                   | 293                                | %
|Expected
      dividends                                                                    | none                               |  
|                                                                                            |                                    |  
|NOTE B
       EQUIPMENT AND LEASEHOLD IMPROVEMENTS                                         |                                    |  
|                                                                                            |                                    |  
|Equipment
      and leasehold improvements consists of:                                     |                                    |  
|Equipment                                                                                   |                                    |  
|Vehicles                                                                                    |                                    |  
|Office
      equipment and furnishings                                                      |                                    |  
|Leasehold
      improvements                                                                |                                    |  
|                                                                                            |                                    |  
|                                                                                            |                                    |  
|Accumulated
      depreciation and amortization                                             |                                    |  
|                                                                                            |                                    |  
|                                                                                            |                                    |  
|                                                                                            |                                    |  
|                                                                                            |                                    |  
|                                                                                            |                                    |  
|NOTE C
       OTHER ASSETS                                                                 |                                    |  
|                                                                                            |                                    |  
|Intangible
      assets consist of:                                                         |                                    |  
|                                                                                            |                                    |  
|Software                                                                                    |                                    |  
|Accumulated
      amortization                                                              |                                    |  
|                                                                                            |                                    |  
|                                                                                            |                                    |  
|                                                                                            |                                    |  
|                                                                                            |                                    |  
|                                                                                            |                                    |  
|The estimated
      useful life of software is three years.                                 |                                    |  
|                                                                                            |                                    |  
|NOTE D
       INVENTORY                                                                    |                                    |  
|                                                                                            |                                    |  
|Parts inventory
      is stated at the lower of cost (last-in, first-out method) or market. |                                    |  
|                                                                                            |                                    |  
|Inventories
      consist of:                                                               |                                    |  
|                                                                                            |                                    |  
|Finished
      Goods                                                                        |                                    |  
|                                                                                            |                                    |  
|                                                                                            |                                    |  
|                                                                                            |                                    |  
|                                                                                            |                                    |  

|NOTE E  GOING CONCERN
CONSIDERATIONS


The Companys recurring losses
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 raise additional
capital to sustain operations. However, there can be no assurance that these plans will
be successful.


NOTE F  COMMITMENTS


NOTE G  CONTINGENT LIABILITIES


8
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Plocher
Group Contingent Liability:In the Companys efforts to
obtain funding, we entered into funding agreements with a group of shareholders
called the Plocher Group. The name Plocher Group is used only for
identification of the collective group of individuals and does not connote any
liability or commitment of any one individual. The transactions and agreements
although entered into have not yet been completed nor have we received any
funding from these efforts. Managements position on this contingent
liability is represented by the disclosure following:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Due
to continued  operating losses and the need for additional  capital in the 4th quarter of
2003, the Company entered into discussions with the Olympus Group as  representatives of
a             group of shareholders  previously identified above as the Plocher Group.
The discussions focused on accomplishing the following goals: 1) providing a financing
vehicle whereby existing members             of the Plocher Group and/or new investors
could provide funding for R-Tec for continued  operational needs, 2) an  indemnification
 agreement or Covenant Not To Sue, based on asserted claims             of securities
violations from the Plocher Group, and 3) the creation of a secured position for the
investments made by the Plocher Group or others associated with them.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Olympus Group advised  management  that the Plocher Group wanted some form of security
 agreement in place as part of their  agreement not to sue.  After input from legal
 counsel,             management  determined  that it could not grant a secured  position
for the Plocher  Groups  original equity  investment,  solely for the purpose of
resolving a threatened  legal action which             management  believed was not well
 founded.  However,  if the Plocher  Group  and/or new  investors  would  provide
 additional  consideration  in the form of new funding to the Company,  then
            Management  determined  it was in the best interest of the Company to include
a covenant not to sue as part of any agreement  with the Plocher  Group.  This would
avoid the cost and expense of             threatened litigation.  After numerous
discussions between R-Tec management,  the Olympus Group and legal counsel, it became
clear to management that all three goals cited above, would have to             be part
of an agreement  between the parties.  Management  clearly advised the Olympus Group,
 that the Company could not provide a secured position in its IP (intellectual
 properties) to the             Plocher Group, without additional consideration or
funding, and that it would not do so solely to satisfy the asserted threat of a
shareholder lawsuit.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | With
no other  reasonable  funding  opportunities  available to management and the belief that
the Companys  survivability in the short term was at stake without  additional  funding,
            management made the decision to enter into  agreements on or about March 1,
2003 (on or about is used here due to the fact that different  documents were signed on
different dates due to the             number of people and locations involved).
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
final  agreements  provided that a new limited  liability  company would be formed by the
Plocher Group and other  potential  investors.  The express  purpose of the new LLC was
to             provide funding to R-Tec by way of establishing a line of credit up to
$1.2 million dollars,  at 10% interest,  for a period of 36 months. The Plocher Group
also signed a Covenant Not To Sue             R-Tec as part of the agreement.  R-Tec
executed a security  agreement,  the intent of which was to secure the Plocher Group for
the original amount of funds invested,  $740,000 and funds to be             loaned to
R-Tec through the soon to be established line of credit.  Additionally,  R-Tec was to
make a UCC filing when the new funding came in. Management  clearly advised the Olympus
Group on             several occasions that the agreements would only be viable if new
funding was provided to the Company.  For additional  specific  details,  please see
documents  incorporated by reference;  1)             R-Tec Holding, Inc. Line of Credit
Agreement, 2) Security Agreement, and 3) Covenant Not To Sue.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Management
now believes there are serious issues relating to the validity and  enforceability of the
agreements due to lack of or failure of consideration.  It does not appear that the
            Plocher Group itself or together with other  investors has formed an LLC to
provide funding to the Company.  It further does not appear that a line of credit has
been  established and in fact,             no funding has been provided to the Company
which has now found it necessary to explore other funding options.  Therefore,  it is
managements  position that the agreements may either be void,             voidable or
not enforceable.  However, Management understands that the validity and enforceability of
the agreements is a legal issue that may require judicial determination.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|9
|-

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


RESULTS OF OPERATIONS


Revenues
for the period ending March 31, 2004 were $277,500, compared to $300,631 for the
same period in 2003. The decrease of $23,131, or 8% is attributable primarily to
discontinued sales of custom automation projects and our reliance upon our two
remaining product groups, i.e., interconnect sales and machine shop sales. We
have anticipated that our sales will be lower for some time until we can grow
our sales in the two remaining product groups.


Operating
expenses dropped from $379,041 in 2003, or 126% of sales, to $190,875, or 69% of
sales in 2004, both periods ending March 31. The decrease is primarily due to
our continued efforts to reduce our expenses and the elimination of
non-profitable operations that constituted high operating costs as a percent of
sales. Custom automation projects were part of these operations that resulted in
high direct costs and low operating margins. We have suspended sales of custom
automation projects as part of our strategic plan to focus on higher margin
operations.


Gross
profit increased from ($78,410), or (26%) of sales, for the period ending March
31, 2003, to $86,625, or 31% of sales, for the same period ending 2004. The
increase of $165,035, or 210%, again reflects our lower operating costs.


Selling,
General and Administrative Expenses decreased from $310,309 to $147,430, for the
periods ending March 31, 2003 and 2004 respectively. We have made concerted
efforts to control our costs in these areas as well as cost of goods sold.


Net
loss decreased from ($491,640) for the period ending March 31, 2003, to
($103,940) for the same period ending 2004. This decrease in net loss of
$387,700 or 79%, reflects our continued efforts to better manage our expenses as
they relate to revenues. We will continue to focus on minimizing our expenses in
both cost of goods sold and overhead. Some of our expenses in production are
fixed and we anticipate that as revenues increase and we achieve higher plant
utilizations, especially with our Interconnect Products plant, that our margins
will increase at a faster rate than revenues, at least until we reach full
capacity.


LIQUIDITY AND CAPITAL
RESOURCES


We
do not anticipate any commitments for capital expenditures in the next quarter.
Our liquidity remains a concern for us and we anticipate that we will need to
continue to seek funding to augment our cash position. For the period ending
March 31, 2004, our current assets were $234,044 and our current liabilities
were $1,712,107, resulting in a current ratio of .14. Of current liabilities,
$1,256,700 represents notes payable that are either currently due or will be due
within the next 12 months.


We
believe we will face liquidity challenges from several sources. First, we are
not yet generating enough cash flow from revenues to fund current operations.
Second, due to accounts payable that are aged in excess of 90 days, and which
represent approximately $203,032 of a total accounts payable of $264,673, we
will face challenges in paying past due balances. Some of our vendors with whom
we have overdue balances, have been working with us by allowing us to purchase
on a C.O.D. basis. We have been able to reach settlement agreements with a few
of our vendors who have agreed to accept payments for less than the full balance
owed. Due to our severe liquidity position we will continue to seek settlements
with our vendors as much as possible on invoices that are significantly past
due. Third, we have notes payable that are now due. We have not been able to pay
interest on most of the notes since July 2003, and have not been able to pay off
the principal balances as they have come due. It is likely, that we will be
forced to come up with a plan to deal with the notes that are overdue within the
short term. While we will make efforts to work with our note holders and to come
up with a plan to resolve the overdue note situations that we have, we cannot
guarantee that we will be successful in doing so.


MANAGEMENTS PLAN OF
OPERATION


We
believe that our decision to discontinue sales of custom automation projects and
to focus on our interconnect and machine shop sales was the correct decision for
the current period. An analysis of our financial statements indicates that our
EBITDA (earnings or (loss) before interest, taxes, depreciation, and
amortization)) was ($4,169), for the period ending March 31, 2004. For the same
period ending 2003, our EBITDA was ($348,281). The reduction in loss represents
a 99% decrease in loss, comparatively year to year. If we are able to achieve
additional growth in our remaining product group revenues, we believe we may be
able to achieve a positive EBITDA by year end 2004.


10
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|In
order to achieve a significant growth in our sales and reach a positive EBITDA
and eventually a positive net income per share, we feel we will need to obtain
additional funding to augment our marketing and sales budgets. Our target
markets are represented by numerous customers, that require technical selling
and support. In order to achieve broader market penetration and product
acceptance, we will need to visit numerous customer sites and present our
products competitive advantages. While other broader based marketing tools
may be available, such as advertising in industry specific magazines, we feel
the best return on our marketing investment is achieved through direct
presentation and support. In addition to the direct selling and support, we feel
we also need to increase the effectiveness of our web site. Many of our
customers, after initial contact, request our web site address so they can
validate our viability as a company and obtain additional technical
specifications. To increase our web site effectiveness, we feel we need to
increase the availability of product data, particularly product performance and
parameters, on our web site.


In
the next few quarters, we will attempt to focus on getting our sales people in
front of selling opportunities and creating strong, technical customer support
for those sales. Additionally, we will attempt to update our web site. We feel
that we have reduced our expenses as low as is practical while maintaining
adequate support staff and functions for production to support sales. We
recognize our critical position regarding our cash position and we will continue
to attempt to obtain funding to meet our needs as discussed previously in
Liquidity and Capital Resources.


Our
current efforts to obtain funding include an attempt to reach a funding
agreement and receipt of funds through an opportunity working with a group named
the Plocher Group. To-date, these efforts have not resulted in our
receiving any funding. We do not anticipate that funding will be forthcoming
from this source at this time. See note G in notes to financials for a complete
discussion of our situation regarding attempts to obtain funding with the
Plocher Group. (The name Plocher Group is only used to designate a
group of individuals we have worked with and does not represent any intentions
or commitments by any one individual within the group)


We
are currently in discussions with another funding group in our local area,
Boise, Idaho. If an agreement is consummated with this Boise, Idaho investment
group, it would provide some funding to us for ongoing operations and would
provide some hands-on management guidance to help us return to profitability. If
an agreement is consummated with this investment group, they would obtain a
majority ownership of the Company. To-date, this investment group has loaned to
us, funds to help pay off invoices from our auditors from year 2003, and to
extend a retainer to our auditors, to allow us to complete our year end 2003
audit and our first quarter 2004 review, and has loaned funds to us to pay off
some invoices to vendors that were significantly past due. These amounts paid to
vendors were part of an effort on our part to reach settlements with the
respective vendors. The funds advanced to us by the Boise, Idaho investment
group are secured by a short-term note payable. As security for the short-term
note payable, we have granted this investment group a security position in one
of our patents, namely the GCI patent.


We
are attempting to continue in our efforts to obtain additional funding with the
Boise, Idaho investment group, but we cannot guarantee that we will be
successful. In the event we are not successful, we cannot guarantee that we will
be able to continue operations.


CONTINGENT LIABILTIES


We
feel that our agreement with the Plocher Group represents a potential,
contingent liability. Our position as detailed in note G to the financial
statements is that the agreement for funding has not been consummated. We have
not received any funding from these attempts. We are seeking legal guidance
pertaining to our position with these agreements and our potential contingent
liability. We cannot guarantee that we will not be liable for the amounts
specified in the details of note G, in the notes to financial statements.


11
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Item 3.  Controls and
Procedures


(a) Evaluation of
Disclosure Controls and Procedures


Evaluation
of Disclosure Controls and Procedures:Under the supervision and
with the participation of our executive officers, we conducted an evaluation of
our disclosure controls and procedures, as such term is defined under Rule
13a-14(c) promulgated under the Securities Exchange Act of 1934, as amended (the
Exchange Act), within 90 days of the filing date of this report.
Based on this evaluation, our officer, who serves as chief financial officer and
interim chief executive officer, concluded that our disclosure controls and
procedures are effective in alerting him on a timely basis to material
information relating to the Company required to be included in our reports filed
or submitted under the Exchange Act.


Changes
in Internal Controls:There have been no material changes,
including corrective actions with regard to significant deficiencies or
weaknesses, in our internal controls or in other factors that could
significantly affect these controls subsequent to the date of the evaluation
referenced in the preceding paragraphs.


PART II
 OTHER INFORMATION



Item 1. Legal
Proceedings


We
acknowledge that due or our current financial condition, we have received
complaints from parties pertaining to resolution of overdue invoices and notes
payable. Contained herein is a list of legal proceedings pending or known to be
contemplated in excess of 10% of the value of our current assets, or in excess
of $23,404. We also received a complaint regarding unfair trade practices as
described in item #1 below.


1. We received a letter
dated December 8, 2000, from a law firm in North Carolina alleging the Company
was guilty of unfair trade practices involving suppliers and customers of
Connect2it, a North Carolina LLC. Management responded with a letter denying the
allegations. It is our understanding that there has been no further response,
contact or action by either side and that Management believes the allegations
are baseless.


2. ProPeople Staffing
Services, Inc., an Idaho corporation, filed a legal action against the Company
for payment of $22,342.78 plus interest and attorneys fees for services involved
in providing temporary employees to the Company. Management agreed we owed the
money and has entered into a stipulated judgment with a covenant not to execute
which provides for the Company to pay $2,000 per month for April, May and June
of 2004; $3,000 per month for July, August, September, October and November of
2004; and $2,320.09 for December of 2004. The first two payments have been made.


3. Attorneys for Douglas
Hardin, a noteholder of the Company, threatened legal action for failure of the
Company to make payments on the note owing to said individual. Mr. Hardins
counsel also claimed violations of the securities laws. Management disagrees
that there have been violations of securities laws but acknowledge that payments
are due on the note. Management has agreed with the Hardin attorneys to make
payments of $2,270.83 per month until the total balance of $27,250 has been paid
in full.


6. Attorneys for Emory
Christensen, a note holder of the Company, have made written demand upon the
Company for the payment of $83,500 plus interest. Some discussions and
correspondence ensued. We are not aware of any agreements or further action
being taken by counsel for Mr. Christensen at this time.


7. Attorneys for a group of
shareholders, referred to as the Plocher Group, contacted the Company
threatening legal action claiming violation of securities laws and inappropriate
use of investment proceeds. Management believes there is no legitimate basis for
a legal action. The Plocher Group, together with other investors, then agreed to
create a line of credit up to $1,000,000 to provide additional funding for the
Company in exchange for a security interest in the Companys IP
(intellectual property) and options to purchase the Companys stock. A
written agreement was entered into memorializing the agreement. At this point in
time, we do not know whether the contractual agreement is valid and we have not
received any funding pursuant to the agreement. Our position regarding this
pending or contemplated legal proceeding is presented in detail in Note G, notes
to financial statements, contained herein.


12
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|In addition to the pending
and contemplated legal proceedings disclosed above, the Company was contacted by
the State of Idaho Department of Finance, Securities Division, on February 27,
2004, which requested information from the Company including the following
items: 1) Names and addresses of individuals that have offered or sold debt
instruments on behalf of R-Tec, 2) Copies of all finders fee agreements,
3) Payments made to individuals who located investors and related information,
4) Names and addresses of investors and related information, 5) Exemptions from
registration requirements of the Idaho Securities Act, and 6) Copies of
contracts, agreements and other legal documents, including marketing materials
and other related documents. We have furnished the requested information and
have met with the individual representing the Securities Division, State of
Idaho, and have answered her questions. As of the date of this filing, the
Company has not been contacted regarding additional information requested by or
any determination by the Department of Finance.


Item 2.
Changes in Securities


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:
Effective January 19, 2004, Gary Clayton submitted his resignation as Vice President of
Engineering and as a member of the Board of Directors. Mr. Clayton cited the termination
of custom automation product sales and personal reasons for his resignation.



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


(a) Exhibits


The following documents are
furnished as exhibits to this Form 10-QSB. Exhibits marked with an asterisk are
filed herewith. The remainder of the exhibits have been previously filed with
the Commission and are incorporated herein by reference.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Number |  | Exhibit
|------ |  | -------
|      
|       |  |        

|10.1 |  | Employment
      Agreement dated as of January 1, 2004 between R-Tec Holding Inc., R-Tec
      Corporation, and Michael T. Montgomery, Interim President and CEO, and Chief
      Financial Officer.*
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.2 |  | R-Tec Holding,
      Inc., 2000 Stock Option Plan, adopted by the registrants Board of Directors
      on December 12, 2000, filed with the Commission on Form S-8 on October 2,
      2001, and incorporated herein by reference.
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|31 |  | Rule 13a-14(a)
      Certification, as adopted pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.*
|-- |  | ----------------------------------------------------------------------------------------------------------------

|32 |  | Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002.*
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------

|99.1 |  | Form NT 10-Q,
      Notification of inability to timely file form 10-Q or 10-QSB, filed on May
      17, 2004 with the Commission, and incorporated herein by reference.
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|13
|--

|(b) Reports on Form 8-K.


The Company did not file
any reports on Form 8-K during the quarter ending March 31, 2004.


SIGNATURES


In
accordance with the 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. 
      /S/ MICHAEL T. MONTGOMERY
      
      Michael T. Montgomery 
      Interim President and CEO 
      Chief Financial Officer
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|14
|--

|INDEX TO EXHIBITS
|-----------------

|Number |  | Exhibit
|------ |  | -------
|      
|       |  |        

|10.1 |  | Employment
Agreement dated as of January 1, 2004 between R-Tec Holding Inc., R-Tec Corporation, and
Michael T. Montgomery.                             Interim President and CEO, and Chief
Financial Officer.*
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.2 |  | R-Tec
Holding, Inc., 2000 Stock Option Plan, adopted by the registrants Board of Directors on
December 12, 2000, filed with                             the Commission on Form S-8 on
October 2, 2001, and incorporated herein by reference.
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|31 |  | Rule
13a-14(a) Certification, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.*
|-- |  | ----------------------------------------------------------------------------------------------------

|32 |  | Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.*
|-- |  | ------------------------------------------------------------------------------------------------------------------------

|99.1 |  | Form
NT 10-Q, Notification of inability to timely file form 10-Q or 10-QSB, filed on May 17,
2004 with the Commission, and                             incorporated herein by reference
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|* |  | Filed
Herewith
|- |  | --------------

|15
|--