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


                                   FORM 10-QSB


(Mark One)

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

     For the quarterly period ended June 30, 2001

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

     For the transition period from _________________ to _________________


                         Commission file number: 0-30463



                               R-Tec Holding, Inc.
                 [Exact name of business issuer in its charter]

Idaho                                                82-0515707
(State or other jurisdiction of                      (I.R.S. Employer
incorporation of organization)                       Identification No.)


1471 E. Commercial Ave., Meridian, Idaho             83642
(Address of principal executive offices)             (Zip Code)

Issuers Telephone Number: (208) 887-0953             Fax: (208) 888-1757

The  number of  shares  of common  stock  outstanding  as of June 30,  2001,  is
18,283,917.

Transitional Small Business Disclosure Format (Check one): Yes [ ]  No [X]

                                      -1-

<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,  difficulties in
manufacturing new products in large volume,  economic viability of our customers
and vendors,  changes in  legislation,  the ability to obtain  adequate  capital
funding for product development and expansion, and the availability of qualified
employees.


Item 1. Financial Statements:

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

     The Consolidated  Financial  Statements of the Company for the three months
and six months ended June 30, 2001 and 2000.

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

Financial Results of Operations:

     Revenues  continued  to  increase  through  the  second  quarter  of  2001,
supported by stronger than expected sales in the engineered  automation  sector.
Sales growth in the IC (Integrated  Circuit)  testing sector remained  positive,
but growth  was  moderate,  as  research  and  development  continued  in design
modifications and specific applications testing. Revenues were also supported by
revenue  recognition of work in process  contracts  from the company's  software
solutions  division in Utah.  Net income of $137,158  represents a fully diluted
net income to shareholders of $.01 per common share.

     Sales for the three months ended June 30, 2001 were $1,147,216, compared to
$392,330  for the period  ending  June 30,  2000,  resulting  in an  increase of
$754,886 or 192%.  Operating  expenses are comprised  mostly of direct costs for
materials and labor for design and  production.  Operating  expenses were 58% of
sales for the period  ending  June 30,  2001  compared  to 101% of sales for the
period ending June 30, 2000.

     Selling, general and administrative expenses were $332,382, or 29% of sales
for the three months  ending June 30, 2001,  compared to $62,460 or 16% of sales
for the same period  ended June 31, 2000.  The increase in selling,  general and
administrative  expenses was due  primarily to the  addition of  management  and
marketing  personnel and additional expenses related to legal,  accounting,  and
other professional fees.

     Net income for the three months ended June 30, 2001 was $137,158,  compared
to a net loss of ($90,340)  for the same period ended June 30, 2000.  Management
feels the  increase in net

                                      -2-

<PAGE>


income is due to the  increase  in sales  revenues  and also to an  increase  in
profit margins per job costing analyses.

     Management is aware of the current,  substantial  economic  downturn in the
technology  sectors as  evidenced  by numerous  lowered  sales  projections  and
earnings  reports.  Many of these technology  companies  represent  existing and
potential clients for R-Tec Holding's operating  subsidiaries.  Management feels
that as budgetary restraints within these companies are mandated, especially for
capital  expenditures,  sales within R-Tec's engineered  automation and software
solutions  divisions  will be negatively  impacted.  It is  anticipated  that IC
testing  product sales will continue to grow but only at a moderate  rate.  This
sector  accounts  for only 14% of total sales  revenues  and is not  expected to
offset  the  slowing  of  sales  growth  in the  other  product  sectors.  It is
anticipated  therefore,  that third and fourth  quarter sales and  corresponding
earnings will be reduced from current levels due to the general  economic trends
in the technology sectors.

Acquisitions

R-Tec Machine Tool, Inc.

     On July 3, 2001, the Company  acquired  R-Tec Machine Tool,  Inc., an Idaho
corporation,  pursuant to a Share Exchange and  Reorganization  Agreement by and
between the Company and the four individual shareholders of R-Tec Machine Tool.

     Under the terms of the  Agreement,  the  parties  agreed to be bound by and
accept the fair market  value  placed on R-Tec  Machine  Tool  obtained  from an
independent  business  appraisal.  Consideration for the acquisition was 291,248
shares of the common  stock of the  Company  valued at $1.00 per share which the
parties agree and acknowledge was the fair market value of the Company's  shares
as of the date of the  Agreement.  The  Agreement  provides for each of the four
R-Tec Machine Tool  shareholders to receive equal shares of the Company's common
stock in the  transaction.  Two of R-Tec Machine Tool  shareholders,  Douglas G.
Hastings  and  Gary  A.  Clayton,   are  also  officers,   directors  and  major
shareholders  of the Company.  The other two  shareholders of R-Tec Machine Tool
are Walter T. Hinkle and Joseph E.  Hawkins.  R-Tec Machine Tool leases space in
the same building used by the Company as its primary business location.

     Pursuant  to the  Agreement,  the  Company  acquired  all of the issued and
outstanding  stock of R-Tec Machine Tool. The Company now owns all of the assets
of R-Tec  Machine Tool and is subject to all of its  liabilities.  The principle
assets  include  machine  tool  equipment.  The assets  acquired  were valued at
approximately $195,500 as of the June 30, 2001, unaudited balance sheet date.

     The R-Tec  Machine  Tool  assets  include  various  pieces of machine  tool
equipment  such as mills and lathes.  This equipment is used in the machining of
component  parts for  various  high tech  products  including  the  sockets  and
automation  equipment produced by the Company's  subsidiary,  R-Tec Corporation.
R-Tec Corporation has been the major customer of R-Tec Machine Tool. Significant
other  customers  include  Micron  Technology,  Hewlett  Packard  and SCP Global
Technologies.

     The Company has entered into 5-year employment contracts with Walter Hinkle
and Joseph Hawkins for $69,050 each in annual compensation.

                                      -3-

<PAGE>


     This  information was filed with the Securities and Exchange  Commission on
Form 8-K on July 18,  2001.  This  respective  Form 8-K will be  attached to the
10QSB filing for the quarter  ending  September  30, 2001.

Browland, LaMeire & Associates, Inc.

     On July 17, 2001, the Company acquired certain assets from Browand, LaMeire
&  Associates,  Inc.,  an  Oregon  corporation,  pursuant  to an Asset  Purchase
Agreement by and between the Company and Browand,  LaMeire & Associates  and its
two shareholders,  Bill Browand and Jeanette LaMeire. The Agreement culminated a
lengthy period of discussion and negotiation between the parties.

     Under the terms of the Agreement, the Company acquired certain assets which
include  the client list and  industry  contacts,  and  certain  items of office
equipment and inventory. Consideration for the acquisition was 380,000 shares of
the common  stock of the  Company  valued at $1.00 per share  which the  parties
agree and  acknowledge  was the fair market value of the Company's  shares as of
the date of the Agreement. The Agreement provides for the shares to be issued in
the name of Browand,  LaMeire & Associates,  Inc. Both  shareholders of Browand,
LaMeire and Associates have previously  signed  employment  contracts with R-Tec
Corporation,  a wholly owned subsidiary of the Company. Bill Browand is employed
as Vice President of Sales for R-Tec  Corporation.  Jeanette LaMeire is employed
as Vice  President of  Marketing  and is also on the board of directors of R-Tec
Corporation.  Bill Browand has also been  appointed to the board of directors of
the Company to fill the vacancy left by the resignation of John R. Hansen, Jr.

     The Company now owns the purchased  assets free and clear of liabilities or
liens  of any  nature.  The  office  equipment  and  inventory  were  valued  at
approximately  $14,000 as of December 31, 2000. The value of the client list and
industry contacts was reached through negotiations between the parties.

     Browand,  LaMeire & Associates  has been the marketing firm for the Company
for several years prior to this Agreement. The Company's management entered into
lengthy  discussions  and  negotiations  with  Browand,   LaMeire  &  Associates
believing  that an in-house  sales and marketing  unit would be more  effective.
Management sought to acquire more direct control of its marketing activities and
believed the acquisition  would strengthen the relationship  between the Company
and its customers and tie the customers more closely to the Company.  Management
also  believes  the  hiring  of the  two  shareholders  of  Browand,  LaMeire  &
Associates will make the marketing efforts more streamlined and efficient. A few
of the  significant  companies  included  in the  customer  list  are  Motorola,
Anadigics, Micron Technology, Hewlett Packard, Lucent Technologies, Intel, 3com,
Transmeta and SCP Global Technologies.

     This  information was filed with the Securities and Exchange  Commission on
Form 8-K on August 1, 2001.

                                      -4-

<PAGE>


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 June
30, 2001 and June 30, 2000.

     Current  assets  were  $1,580,081  for the  period  ending  June 30,  2001,
compared to $815,664 for the period  ending  December  31, 2000,  an increase of
$764,417, or 95%, respectively. The resulting current ratio was 2.34 at June 30,
2001,  compared to 1.27 at December 31, 2000.  The increase in current assets at
June 30, 2001,  over December 31, 2000, was due primarily to an increase in cash
accounts of $296,204 and accounts receivable of $322,904.

Liquidity:

     Management  believes that adequate  funding exists for current  operations,
but is aware of the  negative  impact  on cash  flow  that  will  occur if sales
decrease during the next several quarters of operations.  Therefore,  management
cannot  guarantee  that  adequate cash flow from  operations  will exist to fund
operations in subsequent quarters.  Currently,  the Company does not have a line
of credit,  but could use this  financial  vehicle  as a means of  strengthening
liquidity.

Funding and Capital Resources:

     Capital resources have been increased by the sale of common stock through a
Private Placement  Memorandum.  Sales of common stock for the period ending June
30, 2001, yielded capital funding of $174,900. It is anticipated that additional
capital  funding will be needed to increase cash accounts to offset the decrease
in sales revenues in the short term.

     On June 30, 2001, the Company's  Private  Placement  Memorandum for capital
funding  expired.  It is anticipated  that private  placements  with  accredited
investors  as a capital  funding  vehicle  will  replace the  Private  Placement
Memorandum.

Plan of Operation:

     In  anticipation  of  slower  technology  sales  and to  maximize  existing
resources,  management  has made the following  operating  decisions.  Effective
Sept. 1, 2001,  R-Tec  Corporation and R-Tec  Interconnect,  Inc. will be merged
into one  operating  entity  which will be R-Tec  Corporation.  All  operational
activities  will  therefore be  consolidated  within the one operating  unit and
overseen by the existing  management group. No additional  management  personnel
will be needed under the  consolidation.  In addition,  effective  July 1, 2001,
R-Tec Holding, Inc. acquired R-Tec Machine Tool, Inc., which will be merged into
the  operating  unit,  R-Tec  Corporation.  With the  addition of the  machining
capabilities  acquired,  R-Tec  Corporation  will continue to move closer to its
longer term goal of production  and quality  control  capabilities,  both in the
engineered automation and IC testing products sectors.

                                      -5-

<PAGE>


     Along  with the  addition  of the  machining  capabilities,  R-Tec Corp has
acquired a Micro Machining  Center (MMC) for use in the research and development
of and production of IC testing  products.  It is  anticipated  that as with the
acquired  machining  capabilities,  the MMC will help maximize job profitability
through lower than outsourced  costs.  Full  production  capability from the MMC
should begin within the fourth quarter of 2001. Management will also continue to
seek additional  funding for plant expansion and production line construction of
plating capabilities for the IC testing products. The initial plant expansion is
estimated to be  approximately  $400,000 and the  production  line  expansion is
estimated to be approximately $300,000.

     In order to expand product lines and to stabilize revenue flows, management
is currently  directing  engineering  development to create and produce standard
products.  These standard  products will  incorporate  products  within both the
engineered  automation  and IC testing  products  sectors.  It is expected  that
standard product sales will help minimize the cyclical sales cycles prevalent in
standard  automation.  It is also expected that standard  products within the IC
testing  products  sector will allow for  economies  of scale in  production  to
maintain corporate financial profit margin goals.

     Management  anticipates that additional capital funding will be required to
move  forward  with  existing   operations  and  to  further  the  research  and
development  of several new  products,  i.e.,  GCI Flex and GCI II, both product
advancements of GCI(TM),  and the Intorcorp motor. Capital funding may be sought
through a combination  of but not limited to:  private  placements to accredited
investors,   warrants,   secondary  stock  offerings,  and  strategic  financial
alliances.

                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings: None

Item 2. Changes in Securities:

Private Placement Memorandum Stock Issuances:

     During the second  quarter of 2001,  the Company  received cash from common
stock through its Private Placement Memorandum, as follows:

Date           Shares          Cash Consideration         Shareholder
----           ------          ------------------         -----------
04/20/01       10,000              $ 10,000               Red, LLC
06/15/01       25,000              $ 25,000               James J. Cron
06/15/01       25,000              $ 25,000               Robert L. White
06/30/01       15,000              $ 15,000               Brian White
06/30/01       24,900              $ 24,900               Chris White
06/30/01       50,000              $ 50,000               Ronald L. Spencer
06/30/01       25,000              $ 25,000               Alan D. Spencer

Totals        174,900              $174,900

                                      -6-

<PAGE>


Other Stock Issuances:

     During  the second  quarter of 2001,  the  Company  issued  stock for other
considerations as follows:

Date           Shares           Consideration             Shareholder
----           ------           -------------             -----------
06/29/01        3,334           Professional Services     Dave Stewart
06/30/01       15,000           Employment                Michael T. Montgomery

Totals         18,334


Stock Option Plan:

     The Company has a stock option plan, which allows employees,  directors and
consultants of the Company to receive stock options.  The Board of Directors set
aside  2,000,000  shares  of common  stock for  issuance  upon  exercise  of the
options.  The  Company  has  awarded  382,000  stock  options to  employees  and
directors  during 2001. The stock options vest 100% on the first  anniversary of
the grant notice at a strike price of $1 per share.

     The stock options are  exercisable by the optionee as to all or any part of
the stock then vested by  delivery to the Company of written  notice of exercise
and payment of the purchase price as provided by the plan.

     The Board of Directors maintains the right to change,  suspend or terminate
the plan at any time,  without notice, and in its sole discretion as provided by
the plan.


Item 3: Defaults Upon Senior Securities: None

Item 4: Submission of Matters to a Vote of Security Holders: None

Item 5: Other Information.

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

     (a)  No exhibits

     (b)  No Form 8K filings

                                      -7-

<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: Aug. 10, 2001                   By /s/ Douglas G. Hastings
                                         ---------------------------------------
                                         Douglas G. Hastings, President and CEO



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

                                      -8-

<PAGE>


                      R-TEC HOLDING, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
              As of June 30, 2001 (Unaudited) and December 31, 2000

<TABLE>
<CAPTION>
                                                                      June        December
                                                                    30, 2001      31, 2000
                                                                   -----------    ---------
<S>                                                                <C>            <C>
Current assets
      Cash                                                         $   372,838    $  76,634
      Accounts receivable (net of $-- allowance
          for doubtful accounts)                                       834,428      511,524
      Costs and estimated earnings in excess
          of billings on uncompleted contracts                         333,904      202,530
      Income taxes receivable                                           15,295       15,295
      Inventory                                                         19,678         --
      Prepaid expenses                                                   1,630        3,094
      Notes receivable, current portion                                  2,308        6,587
                                                                   -----------    ---------
               Total current assets                                  1,580,081      815,664

Equipment and leasehold improvements, at cost,
      net of accumulated depreciation                                  308,738      106,834
Other assets                                                            48,575       17,397
Notes receivable, less current portion                                  18,066       14,663
                                                                   -----------    ---------

               Total assets                                        $ 1,955,460    $ 954,558
                                                                   ===========    =========

Current liabilities
      Accounts payable                                             $   196,762    $ 334,142
      Accrued expenses                                                 225,563      102,161
      Accrued preferred dividends payable                               65,576       36,517
      Billings in excess of costs and estimated
          earnings on uncompleted contracts                                529       94,663
      Leases payable, current portion                                   13,458       12,020
      Notes payable, current portion                                   109,320         --
      Notes payable to related parties, current portion                 65,000       65,000
                                                                   -----------    ---------
               Total current liabilities                               676,208      644,503

Lease payable, less current portion                                     17,994       28,036
Notes payable to related parties, less current portion                 100,000      100,000
                                                                   -----------    ---------
               Total liabilities                                       794,202      772,539

Shareholders' equity
      Series A cumulative convertible preferred stock, par value
          $0.234 per share, 5,000,000 authorized, 2,781,564
          shares issued and outstanding                                651,100      651,100
      Common stock, no par value per share,
          30,000,000 authorized, 18,267,362 and 17,373,128
          shares issued and outstanding  at June 30, 2001
          and December 31, 2000, respectively                        1,174,965      280,731
      Additional paid-in capital                                       107,439      107,439
      Accumulated deficit                                             (772,246)    (857,251)
                                                                   -----------    ---------
               Total shareholders' equity                            1,161,258      182,019
                                                                   -----------    ---------

               Total liabilities and shareholders' equity          $ 1,955,460    $ 954,558
                                                                   ===========    =========
</TABLE>

                             See accompanying notes

                                      -9-

<PAGE>

                          R-TEC HOLDING, INC. AND SUBSIDIARY
                         CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                               Three Months Ended June 30,     Six Months Ended June 30,
                                                   2001           2000            2001            2000
                                               ------------    -----------    ------------    -----------
<S>                                            <C>             <C>            <C>             <C>
Revenues                                       $  1,147,216    $   392,330    $  1,846,387    $   751,667

Operating costs                                     661,688        396,629       1,109,353        682,065
                                               ------------    -----------    ------------    -----------

               Gross profit                         485,528         (4,299)        737,034         69,602

Selling, general and administrative expenses        332,382         62,460         617,535        240,163
Research and development                                195          7,698             195          7,698
                                               ------------    -----------    ------------    -----------

               Operating income (loss)              152,951        (74,457)        119,304       (178,259)

Interest expense                                     (3,708)        (6,217)         (8,550)        (7,840)
Interest income                                       2,527           --             3,962           --
Other                                                  --              471            --            1,001
                                               ------------    -----------    ------------    -----------
                                                     (1,181)        (5,746)         (4,588)        (6,839)
                                               ------------    -----------    ------------    -----------

Income (loss) before income taxes                   151,770        (80,203)        114,716       (185,098)
Income taxes                                              2           --               652           --
                                               ------------    -----------    ------------    -----------

               Net income (loss)                    151,768        (80,203)        114,064       (185,098)

Preferred stock dividends                            14,610         10,137          29,059         10,137
                                               ------------    -----------    ------------    -----------

               Net income (loss) available
                 to common shareholders        $    137,158    $   (90,340)   $     85,005    $  (195,235)
                                               ============    ===========    ============    ===========

Net income (loss) per common share             $       0.01    $     (0.01)   $       0.00    $     (0.02)
Weighted average shares outstanding              18,116,471      8,533,594      17,881,100      8,533,594
</TABLE>

                             See accompanying notes

                                      -10-

<PAGE>


                      R-TEC HOLDING, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
        For the Periods Ended June 30, 2001 and June 30, 2000 (Unaudited)

                                                         Six Months Ended June,
                                                            2001         2000
                                                         ---------    ---------
Cash flows from operating activities
  Net income (loss)                                      $ 114,064    $(185,098)
  Adjustments to reconcile net loss to net
    cash provided used by operating activities
    Depreciation and amortization                           35,048       11,437
    Sale refund through issuance of note payable              --         58,706
    Common stock issued for services                         3,334
    Common stock bonuses                                    15,000
    Changes in assets and liabilities
      Accounts receivable                                 (322,904)       9,098
      Costs and estimated earnings in excess
        of billings on uncompleted contracts              (131,374)      30,428
      Inventory                                            (19,678)        --
      Prepaid expenses                                       1,464         (468)
      Accounts payable                                    (137,380)     (86,260)
      Accrued expenses                                     123,402      (27,611)
      Billings in excess of costs and estimated
        earnings on uncompleted contracts                  (94,134)     (17,584)
      Income taxes payable                                    --         (7,640)
                                                         ---------    ---------
               Net cash used by operating activities      (413,158)    (214,992)

Cash flows from investing activities
  Purchase of equipment and other assets                  (144,491)     (48,629)
                                                         ---------    ---------
               Net cash used by investing activities      (144,491)     (48,629)
                                                         ---------    ---------

Cash flows from financing activities
  Collections on loans                                         876        1,023
  Proceeds from preferred stock                               --        393,650
  Proceeds from common stock                               875,900         --
  Net borrowings on line of credit                            --         36,000
  Payments on debt                                         (22,923)    (119,569)
                                                         ---------    ---------
               Net cash provided by financing activities   853,853      311,104
                                                         ---------    ---------

               Net increase in cash                        296,204       47,483
Beginning cash                                              76,634        3,609
                                                         ---------    ---------

               Ending cash                               $ 372,838    $  51,092
                                                         =========    =========


Supplemental disclosures of cash flow information
  Interest paid                                          $   8,550    $   2,633
  Noncash investing and financing activities
    Sale refund through issuance of note payable         $    --      $  58,706
    Equipment acquired through note payable              $ 123,639    $    --

                                      -11-

<PAGE>


                      R-TEC HOLDING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             June 30, 2001 and 2000

NOTE A - 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.

NOTE B - EQUIPMENT

Equipment consists of:

     Equipment                                                   $ 309,932
     Vehicles                                                       31,171
     Office equipment and furnishings                               17,731
     Leasehold improvements                                         45,720
                                                                 ---------
                                                                   404,554
     Accumulated depreciation and amortization                     (95,816)
                                                                 ---------
                                                                 $ 308,738
                                                                 =========

NOTE C - ACQUISITIONS

On July 3, 2001,  the  Company  acquired  R-Tec  Machine  Tool,  Inc.,  an Idaho
corporation,  pursuant to a Share Exchange and  Reorganization  Agreement by and
between the Company and the four individual  shareholders of R-Tec Machine Tool,
Inc.

Under the terms of the  Agreement,  the parties agreed to be bound by and accept
the fair market  value  placed on R-Tec  Machine  Tool,  Inc.  obtained  from an
independent  business  appraisal.  Consideration for the acquisition was 291,248
shares of the common  stock of the  Company  valued at $1.00 per share which the
parties agree and acknowledge was the fair market value of the Company's  shares
as of the date of the  Agreement.  The  Agreement  provides for each of the four
R-Tec Machine Tool,  Inc.  shareholders to receive equal shares of the Company's
common stock in the transaction. Two of R-Tec Machine Tool shareholders, Douglas
G.  Hastings  and  Gary A.  Clayton,  are also  officers,  directors  and  major
shareholders  of the Company.  The other two  shareholders of R-Tec Machine Tool
are Walter T. Hinkle and Joseph E. Hawkins.  R-Tec Machine Tool, Inc.  currently
leases space in the same  building  used by the Company as its primary  business
location.

Pursuant  to  the  Agreement,  the  Company  acquired  all  of  the  issued  and
outstanding  stock of R-Tec Machine Tool. The Company now owns all of the assets
of R-Tec  Machine Tool and is subject to all of

                                      -12-

<PAGE>


                      R-TEC HOLDING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             June 30, 2001 and 2000

its liabilities. The principle assets include machine tool equipment. The assets
acquired  were  valued  at  approximately  $195,500  as of the  June  30,  2001,
unaudited  balance  sheet date.

The R-Tec Machine  Tool,  Inc.  assets  include  various  pieces of machine tool
equipment  such as mills and lathes.  This equipment is used in the machining of
component  parts for  various  high tech  products  including  the  sockets  and
automation  equipment produced by the Company's  subsidiary,  R-Tec Corporation.
R-Tec Corporation has been the major customer of R-Tec Machine Tool. Significant
other  customers  include  Micron  Technology,  Hewlett  Packard  and SCP Global
Technologies.

The Company,  through its  subsidiaries,  currently  provides custom  automation
services and IC  interconnect  devices for the high-tech  industry.  It provides
custom solutions  through  prototype  development,  tooling,  manufacturing  and
consulting services. R-Tec Interconnect, Inc., also a subsidiary of the Company,
designs and  manufactures  burn-in  sockets,  high  performance test sockets and
interconnect  devices  for  the  IC  chip  industry.   Management  believes  the
acquisition  of  R-Tec  Machine  Tool  will  enable  the  Company,  through  its
subsidiaries,  to more effectively  manufacturer and produce its products.  This
information was filed with the Securities and Exchange Commission on Form 8-K on
July 18, 2001.

The Company has entered into 5-year employment  contracts with Walter Hinkle and
Joseph Hawkins who are each currently paid $69,050 in annual compensation.

On July 17, 2001, the Company  acquired  certain assets from Browand,  LaMeire &
Associates, Inc., an Oregon corporation, pursuant to an Asset Purchase Agreement
by and  between  the  Company  and  Browand,  LaMeire &  Associates  and its two
shareholders,  Bill  Browand  and  Jeanette  LaMeire.

Under the terms of the  Agreement,  the Company  acquired  certain  assets which
include the client list and industry contacts, certain items of office equipment
and  inventory.  Substantially,  all of the purchase price related to the client
list and industry contacts. Consideration for the acquisition was 380,000 shares
of the common  stock of the Company  valued at $1.00 per share which the parties
agree and  acknowledge  was the fair market value of the Company's  shares as of
the date of the Agreement. The Agreement provides for the shares to be issued in
the name of Browand,  LaMeire & Associates,  Inc. Both  shareholders of Browand,
LaMeire and Associates have previously  signed  employment  contracts with R-Tec
Corporation,  a wholly owned subsidiary of the Company. Bill Browand is employed
as Vice President of Sales for R-Tec  Corporation.  Jeanette LaMeire is employed
as Vice  President of  Marketing  and is also on the board of directors of R-Tec
Corporation.  Bill Browand has also been  appointed to the board of directors of
the Company.

Browand,  LaMeire & Associates  has been the marketing  firm for the Company for
several  years  prior  to this  Agreement.  A few of the  significant  companies
included  in the  customer  list are  Motorola,  Anadigics,  Micron  Technology,
Hewlett Packard,  Lucent  Technologies,  Intel,  3com,

                                      -13-

<PAGE>


                      R-TEC HOLDING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             June 30, 2001 and 2000

Transmeta  and SCP  Global  Technologies.  This  information  was filed with the
Securities and Exchange Commission on Form 8-K on August 1, 2001.

NOTE D - STOCK OPTION PLAN

The Company has a stock  option  plan,  which allows  employees,  directors  and
consultants of the Company to receive stock options.  The Board of Directors set
aside  2,000,000  shares  of common  stock for  issuance  upon  exercise  of the
options.  The  Company  has  awarded  382,000  stock  options to  employees  and
directors  during 2001. The stock options vest 100% on the first  anniversary of
the grant notice at a strike price of $1 per share.

The stock options are  exercisable  by the optionee as to all or any part of the
stock then vested by delivery to the Company of written  notice of exercise  and
payment of the purchase price as provided by the plan.

The Board of Directors  maintains the right to change,  suspend or terminate the
plan at any time,  without notice, and in its sole discretion as provided by the
plan. The Company accounts for these plans under APB Opinion No. 25, "Accounting
for Stock Issued to Employees."


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