R-tec Holding (RTHG) 10QSB 2004 Q2 Quarterly report (small business)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, 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 June 30, 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	82-0515707
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
287 N. Maple Grove Rd., Boise, Idaho	83704
(Address of principal executive offices)	(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 June 30, 2004 of the Company’s common stock:  29,914,079 

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 2	Changes in Securities	12
Item 4	Submission of a Matter to a Vote of Security Holders	12
Item 5	Other Information “Changes in Directors and Officers”, and “Relocation of Corporate Offices”	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 June 30, 2004, (unaudited) and December 31, 2003
2)	Consolidated Statement of Operations for the periods ending June 30, 2004, (unaudited) and June 30, 2003 (unaudited)
3)	Consolidated Statement of Cash Flows for the periods ending June 30, 2004, (unaudited) and June 30, 2003 (unaudited)
4)	Notes to Financial Statements

3

R-TEC HOLDING, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET

As of June 30, 2004 (Unaudited) and December 31, 2003

							June 30, 2004			December 31, 2003
Current assets
			Cash				$	26,808			$	36,565
			Accounts receivable (net of $--allowance for doubtful accounts)					108,326				57,573
			Income taxes receivable					—				11,625
			Insurance claim receivable					—				68,986
			Inventory					39,318				36,200
			Prepaid expenses					12,535				16,990
						Total current assets		186,987				227,939
Equipment and leasehold improvements, at cost, net of accumulated depreciation								504,261				618,340
Other assets, at cost, net of accumulated amortization								1,163				6,214
						Total assets	$	692,411			$	852,493
Current liabilities
			Accounts payable				$	208,494			$	291,931
			Accrued expenses					93,755				114,425
		Notes and leases payable, current portion						540,336				1,056,700
		Notes payable to related parties, current portion						—				100,000
					Total current liabilities			842,585				1,563,056
Accrued preferred dividends payable								—				211,616
Accrued interest payable								97,461				—
Notes and leases payable								570,900				—
Notes payable to related parties								300,000				100,000
					Total liabilities			1,810,946				1,874,672
Shareholders’ deficit
	Series A cumulative convertible preferred stock, par value $0.23437 per share, 5,000,000 authorized, 74,756 and 2,646,094 shares issued and outstanding, respectively							23,950				619,350
	Common stock, no par value per share,60,000,000 authorized, 29,914,079 and 22,878,994 shares issued and outstanding, respectively							3,748,645				2,924,804
	Additional paid-in capital							538,123				538,123
	Accumulated deficit							(5,429,253	)			(5,104,456	)
				Total shareholders’ deficit				(1,118,535	)			(1,022,179	)
				Total liabilities and shareholders’ deficit			$	692,411			$	852,493

4

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

Three Months Ended June 30, 2004 and June 30, 2003 (unaudited)

				Three Months Ended June 30,						Six Months Ended June 30,
				2004			2003			2004			2003
Revenues				$	222,438		$	491,297		$	499,938		$	791,928
Operating costs					159,198			363,440			350,073			742,481
			Gross profit (loss)		63,240			127,857			149,865			49,447
Selling, general and administrative expenses					276,707			321,523			424,137			631,832
Research and development					4,212			33,992			8,778			59,063
			Operating loss		(217,679	)		(227,658	)		(283,050	)		(641,448	)
Interest expense					35,505			83,237			74,074			161,087
Loss before income taxes and extraordinary item					(253,184	)		(310,895	)		(357,124	)		(802,535	)
Income taxes expense					—			—			—			—
		Net loss before extraordinary item			(253,184	)		(310,895	)		(357,124	)		(802,535	)
Extraordinary item					49,155			—			49,155			—
			Net loss		(204,029	)		(310,895	)		(307,969	)		(802,535	)
Preferred stock dividends					2,249			14,627			16,828			29,291
	Net loss available to common shareholders			$	(206,278	)	$	(325,522	)	$	(324,797	)	$	(831,826	)
Net loss per common share				$	(0.01	)	$	(0.01	)	$	(0.01	)	$	(0.04	)
Weighted average shares outstanding					28,832,444			22,090,121			25,855,719			22,043,986

5

R-TEC HOLDING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS

Six Months Ended June 30, 2004 and June 30, 2003, (unaudited)

						2004			2003
Cash flows from operating activities
	Net loss					$	(307,969	)	$	(802,535	)
	Adjustments to reconcile net loss to net cash used by operating activities
			Depreciation and amortization				119,339			131,034
			Options issued for consulting services				—			24,000
			Notes payable issued for deferred compensation				100,000			—
			Changes in assets and liabilities
				Accounts receivable			(50,753	)		370,896
				Income taxes receivable			11,625			—
				Insurance claim receivable			68,986			—
				Costs and estimated earnings in excess of billings on uncompleted contracts			—			(33,461	)
				Prepaid expenses			4,454			68,754
				Inventory			(3,118	)		(15,306	)
				Accounts payable			(83,437	)		173,709
				Accrued expenses			76,791			(17,339	)
				Billings in excess of costs and estimated earnings on uncompleted contracts			—			(61,594	)
					Net cash used by operating activities		(64,082	)		(161,842	)
Cash flows from investing activities
		Purchase of equipment and other assets					(212	)		(182	)
Cash flows from financing activities
		Proceeds from debt					61,877			75,000
		Payments on debt					(7,340	)		(37,682	)
					Net cash provided by financing activities		54,537			37,318
					Net decrease in cash		(9,757	)		(124,706	)
Beginning cash							36,565			172,572
					Ending cash	$	26,808		$	47,866
Supplemental disclosures of cash flow information
		Interest paid				$	4,185		$	72,897
		Noncash investing and financing activities
			Accounts payable forgiven			$	49,155
			Preferred stock dividends payable			$	16,828		$	29,290
			Common stock issued through conversion of preferred stock and accrued preferred dividends			$	595,400		$	40,772
			Accrued preferred stock dividends payable converted to common stock			$	228,445		$	9,022
			Notes payable issued for deferred compensation			$	100,000		$	—

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R-TEC HOLDING, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS

June 30, 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 six month period ended June 30, 2004.  The Company issued 2,410,000 stock options under the plan during the six months ended June 30, 2003.  Our auditors have informed us that certain options granted to members of the board of directors and officers of the Corporation and audit committee members fall within the options covered by the plan, resulting in options being granted in excess of those permitted under the plan.  We are currently working to resolve this issue through negotiations with the holders of those options. 

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:

		Six Months Ended June 30,
		2004			2003
Net Loss as Reported		$	(324,797	)	$	(831,826	)
Deduct: stock based compensation expense determined under fair market value method, net of tax		$	41,716		$	7,525
Pro forma net loss		$	(366,513	)	$	(839,351	)
Loss per share:
	Basic and diluted – as reported	$	(.01	)	$	(.04	)
	Basic and diluted – pro forma	$	(.01	)	$	(.04	)

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

		Six Months Ended June 30,
		2004	2003
Weighted Average:
	Risk-free interest rate	5.00%	5.00%
	Expected life	10 years	10 years
	Expected volatility	293%	293%
	Expected dividends	None	None

NOTE B – EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Equipment and leasehold improvements consists of:

Equipment	$	908,815
Vehicles		2,633
Office equipment and furnishings		77,749
Leasehold improvements		118,484
		1,107,681
Accumulated depreciation and amortization		(603,420	)
	$	504,261

NOTE C – OTHER ASSETS

Intangible assets consist of:

Software	$	76,326
Accumulated amortization		(75,163	)
	$	1,163

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 of $39,318.

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.

8

NOTE F – DEBT RESTRUCTURING

During June 2004, the Company restructured ten of the notes payable.  The amount of principal owed on these notes payable as of the restructure date was approximately $771,000.  The restructure resulted in an elimination of the accrued interest owing as of that date, and a reduction in interest rates from approximately 12% to 8%.  The maturity dates were extended to May 28, 2006.  Of the ten notes, seven had common stock conversion features which were eliminated with the restructure.  The three remaining notes, with principal balances of $200,000, are related party notes payable.

The Company has accounted for the restructuring of these notes in accordance with Statement of Financial Accounting Standards No. 15. This standard requires that the Company determine the total current obligation under the notes, principal and interest, and compare this current obligation to the future cash payments under the restructuring.  In performing this analysis, the Company determined the cash requirements under the new terms exceeded the amounts related to the existing obligation.  Accordingly, no gain on the restructure was recorded.  The future cash requirements exceeded the existing obligation by approximately $26,000.  This difference will be recorded as interest expense over the remaining period of the restructured obligation.

NOTE G – EXTRAORDINARY ITEM

In accordance with Statement of Financial Accounting Standards No. 15, the Company recorded a troubled debt restructuring gain of $49,155 during June 2004.  The gain is the result of negotiations with various vendors regarding amounts owing on accounts payable balances.  The per share gain is $.002 for the three and six-months ended June 30, 2004.

NOTE H – PREFERRED STOCK CONVERSION

During the current quarter, the Series A preferred shareholders and the Company agreed to allow conversion of the preferred stock into common as set forth in the underlying agreements.  The conversion resulted in accrued and unpaid dividends to be included in the conversion.  The Series A preferred stock was converted to common stock at a conversion price of $.117185 per share.  Of the total outstanding Series A preferred stock amounting to 2,646,094 shares, the Company converted 2,571,338 shares into common stock of 7,030,285 shares.  There are 74,756 shares of Series A preferred stock yet to be converted as of June 30, 2004.

NOTE I – POTENTIAL SALE OF STOCK

On June 14, 2004 the Board of Directors of the Company approved a preliminary transaction through which substantially all authorized and unissued capital of the Company will be sold to Farris McMullin in exchange for shares of stock in ConectL Corporation, an Idaho corporation. Faris McMullin is the President and Chairman of ConectL Corporation and its primary shareholder.  No activity related to this event has been recorded as of June 30, 2004, as the parties are still conducting due diligence and finalizing terms of the agreement.

NOTE J – SUBSEQUENT EVENT

During July 2004, the Company vacated the main headquarters and terminated the underlying lease.  The Company has approximately $25,000 of unamortized leasehold improvements remaining as of the lease termination.  This remaining leasehold value will be charged to expense in the quarter ending September 30, 2004.

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

RESULTS OF OPERATIONS

          Revenues for the period ending June 30, 2004 were $222,438, compared to $491,297 for the period ending June 30, 2003. The decrease of  $268,859, or 55% is primarily due to the elimination of sales of custom automation projects, ending December 2003.

          The Company’s operating expenses were reduced from $363,440, for the period ending June 30, 2003, to $159,198, for the same period ending June 30, 2004, a reduction of  $204,242, or 56%. The decrease is again attributable to the elimination of sales of custom automation projects and related costs for these sales.

          Gross profit remained relatively constant as a percent of sales, with gross profit of $63,240, or 28% of sales for the period ending June 30, 2004, and $127,857, or 26% of sales for the same period ending 2003.

          Selling, general and administrative expenses decreased from $321,523, for the period ending June 30, 2003, to $276,707, for the period ending June 30, 2004, a decrease of $44,816, or 14%. The decrease is reflective of the Company’s continued efforts to control overhead costs. Included in the $276,707 for the current period, is a one-time charge for deferred compensation of $100,000 for present and prior services, as approved by the Board of Directors. Deducting the one-time charge of $100,000 would have resulted in a decrease of $144,816 in selling, general and administrative expenses, or 45%, compared to the period ending June 30, 2003.

          Net loss decreased from $310,895 for the period ending June 30, 2003, to $204,029, a decrease of $106,866, or 34%. The decrease in net loss is attributable to a reduction in interest expense arising from the replacement of matured, convertible notes, with new two-year non-convertible notes for certain noteholders and a respective reduction in interest rates. In addition, we recognized an Extraordinary Item gain of $49,155 from our efforts to restructure and settle accounts payable at a reduced percent of the balance owed. 

               In the current quarter ending June 30, 2004, our Series A preferred shareholders converted their shares of preferred stock, to common stock, inclusive of their accrued preferred stock dividends. This action resulted in a reduction in accrued preferred dividends for the quarter from $14, 627 at June 30, 2003, to $2,249 at June 30, 2004. Effective for future periods, we will not incur preferred dividend expense, a savings of approximately $4,888 per month.

LIQUIDITY AND CAPITAL RESOURCES

          There were no commitments for capital expenditures during the quarter ended June 30, 2004.

          Our current ratio increased from .15 for the period ending December 31, 2003, to .22, for the period ending June 30, 2004. The increase was primarily due to the change of certain convertible notes that had matured, to new two-year notes, as previously discussed, resulting in a reduction of notes payable, current portion, of $516,364. In addition, the conversion of accrued preferred dividends payable of $211,616 to common stock resulted in a decrease of $211,616 in liabilities.

          We anticipate that we will need to continue to seek funding as we are not yet generating enough revenues to sustain operations. Additionally, our accounts payable balance at June 30, 2004 of $208,494, is comprised of approximately $123,000 that is over 90 days past due. We will continue to seek settlements with some of our past due vendors in an attempt to reduce our older vendor payables. We have been successful in negotiating new notes with some of our convertible note holders, whose notes had matured, but we still have some convertible noteholders who have not yet agreed to enter into new notes. These remaining convertible notes represent a current liability of approximately $478,959. We have also borrowed from Conectl Corporation on a short term note payable,  approximately $61,000, as of June 30, 2004 to help pay off vendor settlements and provide some funding for ongoing operations. The note with Conectl, dated April 16, 2004, has a maturity date of July 31, 2004.

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MANAGEMENT’S PLAN OF OPERATION

          We recognize that one of our most critical issues is the need for adequate working capital for operations and retirement of debt obligations. Through our efforts to reduce operational expenses, with the elimination of sales of certain non-profitable operations relating to custom automation sales, and efforts to reduce overhead costs, we believe we have been successful in reducing our capital burn rate.  As evidenced by our Consolidated Statement of Cash Flows, herein incorporated, for the period ending June 30, 2004, operations have eroded our capital base by only approximately $10,000, compared to approximately $120,000 for the same period ending 2003. Our focus on our GCI™ products and related interconnect products with associated machine shop operations, have helped us achieve this reduction in our capital burn rate.

          Our machine shop, which was originally acquired to support the machining of sockets for interconnect customers, has gone to the high tech business community of the city of Boise offering contract services.  The manager of our machine shop has a solid business reputation in the Boise area and his personal contacts have assisted in increasing our sales for contract services. The machine shop is now operating profitably and is a net contributor to the cash flow of the Company. 

          The Company’s management is of the opinion that the future of R-Tec primarily lies in the interconnect business. Through the Company’s efforts to grow the interconnect business and corresponding research with our customers, the resulting findings suggest that with the Company’s patented technology, the interconnect business has the potential to become a high volume business with substantial gross margins. Because the Company’s production plant is already operational, management does not feel the Company will experience any significant additional capital requirements as we increase sales through the remainder of 2004 and into 2005. Although current financial statements indicate low gross margins on operations, this is primarily a result of underutilization of related fixed assets. Management believes that operation of our production facility for GCI™ products may become more profitable with higher volumes than we are currently producing.

          Management’s primary goal is to get the company on a firm footing and then, to promote the future. The Company has not yet achieved a positive cash flow and the ability to survive without additional operating capital. However, this position appears to be improving. Due to the Company’s operating losses in recent years, the Company many not be able to raise money through outside investment or non-equity financing. As a result, the Company is currently pursuing a conservative management philosophy that promotes managing cash flow to minimize capital exposure, while focusing on sales of our high margin interconnect products, including our patented GCI™ products and associated sockets.

          While the Company is implementing a conservative capital management approach, management is also pursuing an aggressive marketing and sales effort to begin a transition toward measurable, increased sales. With the addition of David Ries as VP of Sales and Marketing, we fully expect that we will see a positive curve on sales numbers as the year progresses.  Mr. Ries has significant experience in marketing within the high tech business sector.  One result of this transition is the fact that there are currently customers preparing to test our GCI™ products for various stages of their IC (integrated circuit) operations, including their characterization labs, high-volume production facilities, and burn-in testing facilities.

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Item 3. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

          Evaluation of Disclosure Controls and Procedures:Under the supervision of our management, including the chief executive officer and chief financial officer we conducted an evaluation of the effectiveness of the design and operation 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, the chief executive officer and chief financial officer have concluded that our disclosure controls and procedures are effective. There were not changes in our internal control over financial reporting during the quarter ended June 30, 2004 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

          On July 9, 2004, Doug Hastings received a subpoena from the Idaho Department of Finance to testify, personally and on behalf of the Corporation, regarding various matters relating to investment security matters from prior periods. Subsequent to the subpoena and testimony, the Department requested additional information, that has been furnished to it. Previous information relating to the Department and its request for information from us has been disclosed in our previous filings, i.e., December 31, 2003 10-KSB, and March 31, 2003 10-QSB, and are herein incorporated by reference.

Item 2. Changes in Securities

               As previously approved by our Board of Directors, our  Series A Preferred stockholders converted 2,571,338 of their shares of preferred stock and accrued preferred stock dividends to common stock.

The resulting conversion was as follows:

Date	Preferred Shares		Accrued Preferred Dividends			Common Shares
06/29/2004		2,571,338		$	228,444.57		7,030,285

The described stock transactions were free of restricted legends under the provisions of Section 4(2) of the Securities Act of 1933, as amended or Rule 144K of the Securities and Exchange Commission thereunder.

Item 3: Defaults Upon Senior Securities

               Nothing to Report

Item 4: Submission of Matters to a Vote of Security Holders

          On June 15, 2004, a special meeting of our shareholders was held to discuss the possibility of selling the remaining shares of authorized but unissued shares to Faris McMullin in exchange for ten percent (10%) of the authorized capital of ConectL Corporation. The shareholders authorized our directors and officers to conclude due diligence and consummate the transaction. If consummated, the proposed transaction will give Mr. McMullin control of R-Tec Holding, Inc. The voting tabulation for the special meeting was as follows: a) number of shares represented by shareholders present, 19,629,401 or 69.7%, b) number of votes in favor, 17,505,583, c) number of votes opposed, 1,823,818, and d) number of votes abstaining, 300,000. 

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Item 5: Other Information

Changes in Directors and Officers

          The following changes and appointments in Directors and Officers have occurred:

a)	Effective June 14, 2004, Clyde B. Crandall was nominated and elected to fill the currently vacant seat on our Board of Directors, and to serve on the Board of Directors until our next regularly scheduled annual meeting of shareholders. Mr. Crandall was also nominated and elected to serve as the chair of our Audit Committee.
b)	Effective July 27, 2004, Robert C. Montgomery resigned as Corporate Secretary.
c)	Effective July 7, 2004, Ann Marie Baird was appointed as Corporate Secretary.

          Clyde Crandall, C.P.A., at present is president and senior partner in the Boise CPA firm of Crandall, Swenson & Gleason, Chtd., and is heavily involved in services that the firm renders to its non-profit and other business clients. Previously, Mr. Crandall served as the audit manager for Fox & Company (now Grant Thornton), with offices in Boise, Idaho and Casper Wyoming. As Audit Manager for Fox’s offices, Mr. Crandall was responsible for the quality control of audit engagements and financial statements issued as a result of those engagements. He also served as an Instructor and Manager for Fox’s National Staff Training courses which were designed to teach auditing procedures to nearly 250 professionals joining the firm each year. Mr. Crandall received his B.S. in Accounting from Brigham Young University in 1971 and is a member of the American Institute of CPA’s and Idaho Society of CPA’s.

          Ann Marie Baird has served as office manager/bookkeeper for Exact Research with offices in Boise, Idaho, for the past 16 years. Other experience includes serving as office manager/bookkeeper for O’Neill Enterprises. Ms. Baird received Business Accounting and Private Secretarial Degrees from the Kinman Business University in Spokane, Washington.

Relocation of Corporate Offices and Machine Shop

          Effective August 1, 2004, our corporate offices and machine shop operations were relocated to the building leased by the ConectL Corporation at 287 N. Maple Grove Rd., Boise, Idaho 83704. Our interconnect plant will remain in its current location at 704 Ralstin, Meridian, Idaho 83642.

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	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	Form 8-K, for information relating to a special meeting of Shareholders, filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 with the Commission on Jun 18, 2004, and is incorporated herein by reference.

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(b) Reports on Form 8-K.

          On June 18, 2004, we filed a Form 8-K, which is incorporated herein by reference, and reported the following items:

a)	The nomination and election of Clyde B. Crandall on June 14, 2004, to the Board of Directors and nomination and election to serve as Chairman of our Audit Committee.
b)	A special meeting of our shareholders that was held on June  15, 2004, to discuss the possibility of selling our remaining authorized but unissued shares to Faris McMullin.

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

Chief Financial Officer

Interim President and CEO

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INDEX TO EXHIBITS

Number	Exhibit
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	Form 8-K, for information relating to a special meeting of Shareholders, filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 with the Commission on June 18, 2004, and is incorporated herein by reference.

* Filed Herewith

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