Pro-Tech Industries (PTCK) 10-Q 2010 Q1 Quarterly report

U.S. Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x Quarterly Report Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2010

¨ Transition Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act

For the transition period from N/A to N/A

 Commission File No. 000-53013

Pro-Tech Industries, Inc.

(Name of small business issuer as specified in its charter)

Nevada	20-8758875
State of Incorporation	IRS Employer Identification No.

8550 Younger Creek DR, #2

Sacramento, CA 95828

 (Address of principal executive offices)

 (916) 388-0255

(Issuer’s telephone number)

(Meltdown Massage & Body Works, Inc.)

(Former name or Former Address if Changes Since Last Report)

Securities registered under Section 12(b) of the Exchange Act:

None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $0.001 par value per share

(Title of Class)

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

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non–accelerated filer. See definition of “accelerated filer large accelerated filer” and “Smaller reporting company”in Rule 12b–2 of the Exchange Act. (Check one):

Large accelerated filer  ¨   Accelerated filer  ¨   Non–Accelerated filer  ¨ Smaller reporting companyx

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b–2 of the Exchange Act).  Yes  ¨    No  x

Transitional Small Business Disclosure Format (check one): Yes ¨ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at  May 24, 2010
Common stock, $0.001 par value	18,074,852

PRO-TECH INDUSTRIES, INC.

INDEX TO FORM 10-Q FILING

MARCH 31, 2010

TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION

		Page  Numbers
PART I - FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statement of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management Discussion & Analysis of Financial Condition and Results of Operations	20
Item 3	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26
PART II - OTHER INFORMATION
Item1	Legal Proceedings	27
Item1A	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Removed and Reserved	30
Item 5	Other information	30
Item 6.	Exhibits	30
	Signature	32
CERTIFICATIONS
Exhibit 31 – Management certification
Exhibit 32 – Sarbanes-Oxley Act

2

PART I FINANCIAL INFORMATION

Item 1. Interim Unaudited Condensed Consolidated Financial Statements and Notes to Interim Unaudited Condensed Consolidated Financial Statements

Pro-Tech Industries, Inc.

(Formerly Meltdown Massage and Body Works, Inc.)

General

The accompanying reviewed interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q.  Therefore, they do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders' equity in conformity with generally accepted accounting principles.  Except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2009.  In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.  Operating results for the three months ended March 31, 2010 are not necessarily indicative of the results that can be expected for the year ending December 31, 2010.

Index to Financial Statements

	Page
Condensed Consolidated Balance Sheets as of March 31, 2010 (Unaudited) and December 31, 2009	4
Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2010 and 2009	5
Unaudited Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2010 and 2009	6
Notes to Unaudited Condensed Consolidated Financial Statements	8 ~20

3

PRO-TECH INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2010			December 31, 2009
	(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	152,210		$	172,490
Contract receivable, net of allowance for doubtful accounts  as of March 31, 2010 and December 31, 2009, of $110,000 and $60,000, respectively		3,720,887			3,850,051
Costs and estimated earnings in excess of billings		396,230			306,073
Note receivable – related party		77,000			77,000
Inventory		248,968			273,968
Other current assets		158,537			155,386
Total current assets		4,753,832			4,834,968
Property and equipment:		874,041			874,041
Less: accumulated depreciation		600,578			571,394
Net property and equipment		273,463			302,647
Other Assets:
Intangibles, net of  accumulated amortization as of  March 31, 2010 and December 31, 2009, of $228,761 and $181,431, respectively		55,218			102,548
Goodwill		331,075			331,075
Deposits		10,856			10,856
Total assets	$	5,424,444		$	5,582,094
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable and accrued expenses	$	3,519,602		$	2,713,840
Notes payable – others –current portion		216,728			213,394
Accruals on uncompleted contracts		445,781			244,763
Reserve for loss on uncompleted contracts		-			90,514
Deferred tax liability		-			80,490
Line of credit		1,000,000			900,000
Total current liabilities		5,182,111			4,243,000
Long -Term Liabilities:
Notes payable- others  – long term portion		358,527			414,071
LT Deferred tax liability		-			-
Commitments and contingencies		-			-
Stockholders' Equity (Deficit):
Common Stock, $0.001 par value; 70,000,000 shares authorized; 18,074,852 and 17,997,213 shares issued and outstanding at March 31, 2010 and December 31, 2009, respectively		18,594			18,594
Paid in capital		1,432,866			1,421,467
Accumulated deficit		(1,567,654	)		(515,038	)
Total stockholders’ equity (deficit)		(116,194	)		925,023
Total liabilities and stockholders' equity (deficit)	$	5,424,444		$	5,582,094

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

4

PRO-TECH INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

	Three Months Ended March 31, 2010			Three Months Ended March 31, 2009
Net revenue	$	4,109,946		$	4,405,174
Cost of sales		3,724,156			2,592,028
Gross profit		385,790			1,813,146
Operating Expenses:
Selling, general and administrative		1,403,193			1,571,857
Depreciation and amortization		76,514			36,623
Total Operating Expenses		1,479,707			1,608,480
(Loss) Income from Operations		(1,093,917	)		204,666
Other Income (Expense):
Interest income(expense), net		(39,190	)		(22,020	)
Total Other Expenses		(39,190	)		(22,020	)
(Loss) Income before income taxes		(1,133,107	)		182,646
Income taxes (benefit)		(80,490	)		60,316
Net Income (Loss)	$	(1,052,617	)	$	122,330
Net income (loss) per common share
Basic	$	(0.06	)	$	0.01
Diluted	$	(0.06	)	$	0.01
Weighted average common shares outstanding		18,022,600			17,933,333

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

5

PRO-TECH INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

(UNAUDITED)

	2010			2009
Cash Flows From Operating Activities:
Net income (loss) from operations	$	(1,052,617	)	$	122,330
Adjustments to reconcile net  income (loss) to net cash provided by operating activities:
Depreciation and amortization		76,514			36,623
Bad debt write off		35,314			4,828
Accrual for bad debt allowance		50,000			-
Deferred tax liability, net		(80,490	)		(21,363	)
Stock issued to employees and board of directors		11,400			-
Stock issued for services		-			12,000
Accruals (reversal) of loss against uncompleted contracts		(90,514	)		(6,576	)
(Increase) decrease in:
Contract receivable		43,851			(147,928	)
Inventory		25,000			-
Other current assets, net		(3,152	)		130,862
Costs and estimated earnings in excess of billings		(90,157	)		46,826
Billings in excess of costs and estimated earnings		201,018			(122,581	)
Increase (decrease) in:
Accounts payable and accrued expenses, net		809,097			(261,231	)
Net Cash Used In Operating Activities		(64,736	)		(206,210	)
Cash Flows From Investing Activities:
Cash received on purchase of subsidiary		-			9,043
Purchase of property and equipment		-			(10,520	)
Net Cash Used In Investing Activities		-			(1,477	)
Cash Flows From Financing Activities:
Payments of long term debt		(55,544	)		(45,205	)
Net proceeds from line of credit		100,000			181,227
Net Cash Provided by Financing Activities		44,456			136,023
Net Decrease in Cash And Cash Equivalents		(20,280	)		(71,664	)
Cash and cash equivalents at beginning of period		172,490			86,895
Cash and cash equivalents at the end of period	$	152,210		$	15,232
Supplemental Disclosures of Cash Flow Information:
Cash paid during period for interest	$	30,808		$	20,936
Cash paid during period for taxes	$	-		$	-

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

6

PRO-TECH INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

(continued)

	2010		2009
Non-cash Investing and Financing Activities:
Shares issued for compensation	$	11,400	$	12,000
Acquisition:
Current assets acquired	$	-	$	338,435
Equipment and other assets acquired		-		6,505
Intangible assets acquired		-		615,054
Liabilities assumed		-		(578,994	)
Shares issued as consideration	$	-	$	381,000

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

7

PRO-TECH INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010

(Unaudited)

NOTE A - SUMMARY OF ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the preparation of the accompanying condensed consolidated financial statements follows.

Business and Basis of Presentation

Pro-Tech Fire Protection Systems Corp. (“Pro-Tech”) was incorporated on May 4, 1995 under the laws of the State of California to engage in any lawful corporate undertaking, including, but not limited to; installation, repair and inspections of fire protection systems in commercial, military and industrial settings.

Pro-Tech Fire Protection Systems is a full-service contractor serving the western United States, with offices in California and Nevada. Services include estimating, designing, fabricating, and installing all types of standard and specialty water-based fire protection systems. In addition, the company offers “Day Work” services, including inspecting, testing, repairing and servicing of same.

The Company serves the new construction market, as well as customers retro-fitting, upgrading or repairing their existing facilities, bringing existing facilities to current standards (for example, installing sprinklers at a customer’s expanded storage warehouse, etc.).

NOTE B - MERGER AND CORPORATE RESTRUCTURE

On December 31, 2008, the stockholders of Pro-Tech Fire Protection Systems Corp. (“Pro-Tech”) entered into an agreement for the exchange of common stock (“Acquisition Agreements”, “the Transaction”, or “Merger”) with the Company. The Company had a total of 70,000,000 authorized shares with a par value of $0.001 per share and 3,500,000 shares issued and outstanding as of December 31, 2008.

The Company’s year end for accounting purposes was December 31, 2008. As a result of the Merger, there was a change in control of the public entity. In accordance with Statement of Financial Accounting Standards 141, Pro-Tech is deemed to be the acquiring entity. While the transaction is accounted for using the purchase method of accounting, in substance the Merger is a recapitalization of Pro-Tech’s capital structure

For accounting purposes, the Company accounted for the transaction as a reverse acquisition and Pro-Tech is the surviving entity. The total purchase price and carrying value of net assets acquired was $3,500. The Company did not recognize goodwill or any intangible assets in connection with the transaction. As of the date of the Agreement, the Company was an inactive corporation with no significant assets and liabilities.

Effective with the Acquisition Agreements, all previously outstanding common stock owned by Pro-Tech’s stockholders were exchanged for an aggregate of 10,100,000 shares of the Company’s common stock, $0.001 par value (“the Common Stock”).  As part of the Transaction it was agreed that, all outstanding shares would remain outstanding. The effect of the Transaction was that 3,500,000 shares of Common Stock would be retained.

The value of the stock issued was the historical cost of the Company's net tangible assets of $3,500, which did not differ materially from their fair value. The total consideration paid of $3,500 is summarized further below.

	December 31, 2008
Common stock retained	$	3,500
Assets acquired		(-	)
Liabilities assumed		-
Total consideration paid	$	3,500

8

In accordance with Statement of Position 98-5 (“SOP 98-5”), the Company expensed $3,500 as organization costs.

On May 8, 2009, the Company’s stockholders approved a name change from Meltdown Massage and Body Works, Inc. to Pro-Tech Industries, Inc. which became effective with the filing of an amendment to the our Articles of Incorporation on May 11, 2009.  The Company is now known as Pro-Tech Industries, Inc. and the new ticker symbol is PTCK.

NOTE C - SUMMARY OF ACCOUNTING POLICIES

Revenue Recognition

The Company recognizes revenues from fixed-price and modified fixed-price construction contracts on the percentage-of-completion method, measured by the percentage of cost incurred to date to estimated total cost for each contract. That method is used because management considers total cost to be the best available measure of progress on the contracts. Because of inherent uncertainties in estimating costs, it is at least reasonably possible that the estimates used will change within the near term. The Company also recognizes revenue from non-fixed price (time and materials) contracts.  The revenue from these contracts is billed monthly and is based on actual time and material costs which have occurred on the job for the billing period.

Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs, and depreciation. Selling, general, and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability may result in revisions to costs and income, which are recognized in the period in which the revisions are determined. Changes in estimated job profitability resulting from job performance, job conditions, contract penalty provisions, claims, change orders, and settlements, are accounted for as changes in estimates in the current period.

Revenue on contracts can be derived from different disciplines and is accounted for on a consolidated basis by job to see overall performance, as well as the ability to break the job down by discipline to see how each contributes to the overall performance of the job.

The asset, “Costs and estimated earnings in excess of billings on uncompleted contracts”, represents revenues recognized in excess of amounts billed. The liability, “Billings in excess of costs and estimated earnings on uncompleted contracts,” or “accruals on uncompleted contracts” represents billings in excess of revenues recognized.

Contract Receivables

Contract receivables are recorded when invoices are issued and are presented in the balance sheet net of the allowance for doubtful accounts. Contract receivables are written off when they are determined to be uncollectible. The allowance for doubtful accounts is estimated based on the Company’s historical losses, the existing economic conditions in the construction industry, and the financial stability of its customers.

Inventory

The Company maintains an inventory which primarily consists of small parts such as sprinkler heads, gaskets, pipe joints, junction boxes, outlets, etc. which comes from closed jobs or economical buying opportunities.  They get used for repair work or filler when jobs run short. The inventory on hand was $248,968 and $273,968 at March 31, 2010 and December 31, 2009, respectively.

Advertising

The Company follows the policy of charging the costs of advertising to expenses incurred. The Company incurred $10,166 and $10,997, of advertising costs for the three months ended March 31, 2010 and 2009, respectively.

9

Income Taxes

In accordance with Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) deferred income taxes are the result of the expected future tax consequences of temporary differences between the financial statement and tax basis of assets and liabilities. Generally, deferred income taxes are classified as current or non-current in accordance with the classification of the related asset or liability. Items that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse. A valuation allowance is provided against deferred income tax assets in circumstances where management believes the recoverability of a portion of the assets is not reasonably assured. Losses incurred, if any, are carried forward as applicable Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) and the Internal Revenue Code and potentially may be used to offset taxable net income generated in the future. The Company had previously elected to be treated as a subchapter “S” corporation for federal tax purposes.  The reverse merger caused the Company to lose its subchapter “S” corporation status.  The Company became responsible for $849,628 in deferred income that carried forward from 2007 when Pro-Tech was forced to change from cash to accrual based taxpayer.  Pro-Tech took a 481a election to spread the acceleration over 4 years.  The Company provides for income taxes based on pre-tax earnings reported in the consolidated financial statements. Certain items such as depreciation are recognized for tax purposes in periods other than the period they are reported in the consolidated financial statements.  Following the reverse merger status, beginning, January 1, 2009, the Company became a C-Corp and subject to standard quarterly taxes provisions.  Results of operations may not be comparable to prior results.

Cash Equivalents

For purposes of the Statements of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity date of three months or less to be cash equivalents.

Property and Equipment

Property and equipment are stated at cost and depreciated over their estimated useful lives of 3 to 10 years using the straight-line method as follows:

Construction equipment	5-7years
Automobiles	5 years
Computer Software	3 years
Office equipment and furniture	3-7years
Leasehold improvements	life of the lease agreement where appropriate

Maintenance and repairs to automobiles, equipment, furniture and computers is expensed as incurred.  There is no re-evaluation of useful life as most of the assets are short term in nature and the repairs or maintenance are in the normal course of the operating life of the asset.  Upon disposal of assets, the Company reduces the asset account and the accumulated depreciation account for the balances at that point in time.  The difference between the amounts received greater than the book value is recognized as a gain and if the amount is less than the book value is recognized as a loss.  Depreciation is not included in cost of goods sold.

Long-Lived Assets

The Company has adopted Accounting Standards Codification subtopic 360-10, Property, Plant and Equipment (“ASC 360-10”). ASC 360-10 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period.  The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should any impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset.  ASC 360-10 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell.

Concentrations of Credit Risk

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist  primarily of cash, cash equivalents and receivables.  The Company places its cash and temporary cash investments with credit quality institutions.  At times, such investments may be in excess of the FDIC insurance limit. The Company periodically reviews its contract receivables in determining its allowance for doubtful accounts. The allowance for doubtful accounts was $110,000 and $60,000 as of March 31, 2010 and December 31, 2009, respectively.

10

Basic and Diluted Earnings (Loss) Per Share

Basic and diluted income or loss per common share is based upon the weighted average number of common shares outstanding during the three months ended March 31, 2010 and 2009, under the provisions of Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”), “Earnings Per Share” and as amended/superseded in “Compensation” (“ASC 718-10”). As the Company had net loss for the three months ended March 31, 2010 and net income for the three months ended March 31, 2009. The Company did not have any common stock equivalents issued or outstanding as of March 31, 2010 or for any other earlier period.  Non-vested shares have been excluded as common stock equivalents in the diluted earnings per share because they are either anti-dilutive, or their effect is not material.

Stock Based Compensation

The Company adopted Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”), Accounting for Stock-Based Compensation, to account for compensation costs under our stock option plans. In adopting ASC 718-10, company elected to use the modified prospective method to account for the transition from the intrinsic value method to the fair value recognition method. Under the modified prospective method, compensation cost is recognized from the adoption date forward for all new stock options granted and for any outstanding unvested awards as if the fair value method had been applied to those awards as of the date of grant. We had no outstanding unvested awards at the adoption date or earlier period. The Company uses the fair value method for equity instruments granted to non-employees and uses the Black Scholes model for measuring the fair value. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the periods in which the related services are rendered.

Comprehensive Income

The Company adopted Accounting Standards Codification subtopic 220-10, Comprehensive Income (“ASC 220-10”). ASC 220-10 establishes standards for the reporting and displaying of comprehensive income and its components. Comprehensive income is defined as the change in equity of a business during a period from transactions and other events and circumstances from non-owners sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. ASC 220-10 requires other comprehensive income (loss) to include foreign currency translation adjustments and unrealized gains and losses on available for sale securities.

Segment Information

Accounting Standards Codification subtopic Segment Reporting 280-10 (“ASC 280-10”) establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders. ASC 280-10 also establishes standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions how to allocate resources and assess performance. The information disclosed herein materially represents all of the financial information related to the Company’s principal operating segment.

Use of Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly actual results could differ from those estimates.

Fair Value

In January 2008, the Company adopted the Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) which defines fair value for accounting purposes, establishes a framework for measuring fair value and expands disclosure requirements regarding fair value measurements. The Company’s adoption of ASC 825-10 did not have a material impact on its consolidated financial statements. Fair value is defined as an exit price, which is the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date. The degree of judgment utilized in measuring the fair value of assets and liabilities generally correlates to the level of pricing observability. Financial assets and liabilities with readily available, actively quoted prices or for which fair value can be measured from actively quoted prices in active markets generally have more pricing observability and require less judgment in measuring fair value. Conversely, financial assets and liabilities that are rarely traded or not quoted have less price observability and are generally measured at fair value using valuation models that require more judgment. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency of the asset, liability or market and the nature of the asset or liability. At March 31, 2010 and December 31, 2009 the Company did not have any financial assets measured at fair value on a recurring basis.

11

Reclassifications

Certain reclassifications have been made to conform prior period data to the current presentation. These reclassifications had no effect on reported income.

New Accounting Pronouncements

On February 24, 2010, Financial Accounting Standards Board  (“FASB”) the FASB issued guidance in the “Subsequent Events” topic of the FASC to provide updates including: (1) requiring the company to evaluate subsequent events through the date in which the financial statements are issued; (2) amending the glossary of the “Subsequent Events” topic to include the definition of “SEC filer” and exclude the definition of “Public entity”; and (3) eliminating the requirement to disclose the date through which subsequent events have been evaluated. This guidance was prospectively effective upon issuance. The adoption of this guidance did not impact the Company’s results of operations of financial condition.

In January 2010, the FASB issued FASB ASU 2010-06, “Improving Disclosures about Fair Value Measurements”, FASB to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires new disclosures on the transfers of assets and liabilities between Level 1 (quoted prices in active market for identical assets or liabilities) and Level 2 (significant other observable inputs) of the fair value measurement hierarchy, including the reasons and the timing of the transfers. Additionally, the guidance requires a roll forward of activities on purchases, sales, issuance, and settlements of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). The guidance became effective for us with the reporting period beginning January 1, 2010, except for the disclosure on the roll forward activities for Level 3 fair value measurements, which will become effective for us with the reporting period beginning July 1, 2011. Other than requiring additional disclosures, adoption of this new guidance did not have a material impact on our financial statements.

In October 2009, the FASB issued FASB ASU No. 2009-13, Revenue Recognition (Topic 605): “Multiple Deliverable Revenue Arrangements – A Consensus of the FASB Emerging Issues Task Force.” This standard provides application guidance on whether multiple deliverables exist, how the deliverables should be separated and how the consideration should be allocated to one or more units of accounting. This update establishes a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence, if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific or third-party evidence is available. ASU 2009-13 may be applied retrospectively or prospectively for new or materially modified arrangements in fiscal years beginning on or after June 15, 2010, with early adoption permitted.  The Company is currently assessing the impact on its consolidated financial position and results of operations

12

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not, or are not believed by management to, have a material impact on the Company’s present or future consolidated financial statements.

NOTE D – CONTRACT RECEIVABLES

Contract receivables consist of the followings:

	March 31, 2010			December 31, 2009
Contracts receivables	$	3,250,537		$	3,245,701
Retention receivables		580,349			664,350
Less: Allowance for doubtful Accts		(110,000	)		(60,000	)
	$	3,720,886		$	3,850,051

NOTE E – UNCOMPLETED CONTRACTS

At March 31, 2010 and December 31, 2009, costs, estimated earnings, and billings on uncompleted contracts are summarized as follows:

	March 31, 2010			December 31, 2009
Costs incurred to date on uncompleted contracts	$	8,153,160		$	19,169,775
Estimated earnings		1,176,529			3,422,931
		9,329,689			22,592,706
Less: billed revenue to date		(9,379,240	)		(22,531,396	)
Net	$	(49,551	)	$	61,310
Costs and estimated earnings in excess of billings	$	396,230		$	306,073
Less: accruals on uncompleted contracts		(445,781	)		(244,763	)
Net	$	(49,551	)	$	61,310

NOTE F – BACKLOG

The following schedule summarizes changes in backlog on contracts from January 1, 2009 through March 31, 2010. Backlog represents the amount of revenue the Company expects to realize from work to be performed on uncompleted contracts in progress at year end and from contractual agreements on which work has not yet begun.

Backlog balance at January 1, 2009	$	4,089,892
New contracts for the year ended December 31, 2009		23,556,981
Add: contract adjustments		1,672,307
Less: revenue for the year ended December 31, 2009		(18,609,920	)
Backlog balance at December 31, 2009	$	10,709,260
New contracts for the quarter ended March 31, 2010		2,454,515
Add: contract adjustments		373,413
Less: revenue for the quarter ended March 31, 2010		(4,109,946	)
Backlog balance at March 31, 2010	$	9,427,242

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NOTE G – PROPERTY AND EQUIPMENT

Major classes of property and equipment at March 31, 2010 and December 31, 2009 consist of the followings:

	March 31, 2010			December 31, 2009
Vehicles	$	196,948		$	196,948
Leasehold improvements		232,629			232,629
Office equipments		215,792			215,792
Tools and other equipment		228,672			228,672
		874,041			874,041
Less: accumulated depreciation		(600,578	)		(571,394	)
Net Property and Equipment	$	273,463		$	302,647

Depreciation expense was $29,184 and $10,998 for the three months ended March 31, 2010 and 2009, respectively.

NOTE H – INTANGIBLE ASSETS AND GOODWILL

Total identifiable intangible assets acquired and their carrying values at March 31, 2010 are:

	Gross Carrying Amount		Accumulated Amortization/ Impairment			Net		Residual Value		Weighted Average Amortization Period (Years)
Amortized Identifiable Intangible Assets: Jones Fire non compete	$	20,000	$	(20,000	)	$	-		-		5.0
Total Amortized identifiable Intangible Assets		20,000		(20,000	)		-				5.0
Total	$	20,000	$	(20,000	)	$	-	$	-

Total identifiable intangible assets acquired and their carrying values at March 31, 2010 are:

	Gross Carrying Amount		Accumulated Amortization/ Impairment			Net		Residual Value		Weighted Average Amortization Period (Years)
Intangible Assets and Goodwill:
Amortized Identifiable Intangible Assets: Conesco backlog, customer lists	$	283,979	$	(228,761	)	$	55,218	$	-		1.5
Total Amortized identifiable Intangible Assets		283,979		(228,761	)		55,218				1.5
Goodwill - Conesco		331,075		-			331,075		-
Total	$	615,054	$	(228,761	)	$	386,293	$	-

Total amortization expense charged to operations for the three months ended March 31, 2010 and 2009 was $47,330 and $25,625, respectively. Estimated amortization expense as of March 31, 2010 is as follows:

Period Ended December 31, 2010	$	55,218
Total	$	55,218

The Company does not amortize goodwill. The Company recorded goodwill in the amount of $331,075 as a result of the acquisitions of Conesco, Inc. during the year ended December 31, 2009.   The Company evaluates goodwill for impairment based on the fair value of the operating business units to which this goodwill relates at least once a year. The Company generally determines the fair value of a reporting unit using a combination of the income approach, which is based on the present value of estimated future cash flows, and the market approach, which compares the business unit's multiples to its competitors. At March 31, 2010, the Company has determined that the value of Conesco’s goodwill is fairly valued.

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The estimated fair value of our goodwill could change if the Company is unable to achieve operating results at the levels that have been forecasted, the market valuation of our business decreases based on transactions involving similar companies, or there is a permanent, negative change in the market demand for the services offered by the Company. These changes could result in a further impairment of the existing goodwill balance that could require a material non-cash charge to our results of operations.

On January 16, 2009, the Company entered in to an agreement for the exchange of common stock (“merger”) with the shareholders of Conesco (“Conesco Shareholders”) and Conesco, Inc. (“Conesco”).  The Company issued 3,000,000 restricted shares of its common stock valued at $381,000 in exchange for all outstanding shares of Conesco. Conesco became a wholly owned subsidiary of the Company.

The total purchase price and carrying value of net assets acquired was $381,000.  The Company recognized customer list as intangible assets in connection with the transaction. At the time of the acquisition, there was no active market for the Company’s common stock. As a result, the Company’s management estimated the fair value of the shares issued based on a valuation model, which management believes approximates the fair value of the net assets acquired.

In accordance with Financial Accounting Standard (SFAS) No. 141, Business Combinations, the total purchase price was allocated to the estimated fair value of assets acquired and liabilities assumed. The estimate of fair value of the assets acquired was based on management’s estimates.  The Company plans to utilize a valuation specialist to re-estimate these values in the near future and accordingly, these value estimates may change in the near future.  The total purchase price was allocated to the assets and liabilities acquired as follows:

Cash and other current assets	$	338,435
Equipment and other assets		6,505
Intangible assets		615,054
Liabilities		(578,994	)
Total purchase price	$	381,000

Intangibles of $615,054 represented the excess of the purchase price over the fair value of the net tangible assets acquired.  The Company will amortize the intangibles over 5 years and will review the value of the intangibles to account for any possible impairment as per guidance in SFAS 142 during the twelve months ended December 31, 2009 and beyond until the value of the asset is deemed impaired.

The following data presents unaudited pro forma revenues, net loss and basic and diluted net loss per share of common stock for the Company as if the acquisitions discussed above, had occurred on January 1, 2008.  The Company has prepared these pro forma financial results for comparative purposes only.  These pro forma financial results may not be indicative of the results that would have occurred if the Company had completed these acquisitions at the beginning of the periods shown below or the results that will be attained in the future.

	Year Ended December 31, 2008
	As Reported		Pro Forma Adjustments			Pro Forma
Revenues	$	16,487,525	$	1,016,187		$	17,503,712
Net income (loss)	$	6,578	$	(123,681	)	$	(117,103	)
Net loss per common share outstanding - basic & diluted	$	.00	$	.00		$	(.01	)
Weighted average common shares outstanding - basic & diluted		10,100,000					10,100,000

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NOTE I – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities at:

	March 31, 2010			December 31, 2009
Accounts payable	$	3,372,694		$	2,674,443
Accrued payroll and vacation		(7,999	)		(16,343	)
Accrued payroll taxes		63,851			74
Other liabilities		91,056			55,666
Total	$	3,519,602		$	2,713,840

NOTE J – BANK LINE OF CREDIT

The Company has a line of credit with Westamerica Bank in the amount of $1,000,000.  The line of credit is secured by substantially all of the assets of the Company and guaranteed by the Company’s principal stockholders. In addition, entities owned and controlled by the Company’s principal stockholders are co-makers of the line of credit and have pledged substantially all of the assets as security for the line of credit (see Note N).  The line of credit bears interest at the Bank rate minus 0.5%, per annum, with interest due and payable monthly and expires on June 30, 2010.  The balance outstanding under the line of credit at March 31, 2010 and December 31, 2009 amounted to $1,000,000 and $900,000 respectively, leaving a balance available on the line of $0 and $100,000, respectively. The Company is required to maintain certain bank loan covenants.  At March 31, 2010 and December 31, 2009, the Company was not in compliance with certain bank loan covenants.

NOTE K – NOTES PAYABLE

Notes payable at March 31, 2010 and December 31, 2009 are as follows:

	March 31, 2010			December 31, 2009
Note payable to Bank, interest at 7.76% per annum; secured by substantially all of the Company’s assets; with monthly principal and interest payments of $13,133.99, due February, 2012. The Note is guaranteed by the Company’s principal stockholders. In addition, entities owned and controlled by the Company’s principal stockholders are co-makers of the Note and have pledged substantially all of their assets as security for the Note (see Note N).	$	278,583		$	312,009
Note payable to Bank, interest at 5.5% per annum; secured by substantially all of the Company’s assets; with monthly principal and interest payments of $4,785.24, due December, 2013. The Note is guaranteed by the Company’s principal stockholders. In addition, entities owned and controlled by the Company’s principal stockholders are co-makers of the Note and have pledged substantially all of their assets as security for the Note (see Note N).		193,519			205,083
Note payable to Bank, interest at 8.0% per annum; secured by substantially all of the Conesco assets; with monthly principal and interest payments of $3,766.86, due August, 2012. The Note is guaranteed by the Company’s principal stockholders.		103,152			110,373
Total note payable		575,254			627,465
Less: current portion		(216,728	)		(213,394	)
Notes payable – long term	$	358,526		$	414,071

Aggregate maturities of long-term debt as of March 31, 2010 are as follows:

Year ended	Amount
March 31, 2011	$	216,728
March 31, 2012		217,791
March 31, 2013		98,732
March 31, 2014		42,003
Total	$	575,254

NOTE L – CAPITAL STOCK

The Company is authorized to issue 70,000,000 shares of common stock with $0.001 par value per share. As of March 31, 2010 and December 31, 2009, the Company had 18,074,852 shares of common stock issued and outstanding.  During the three months ended March 31, 2010, the Company recorded compensation cost of approximately $11,400 relating to shares issued during the year ended December 31, 2009 and vested during the quarter ended March 31, 2010, after adjustments for the termination and service changes etc.

NOTE M - RELATED PARTY TRANSACTIONS

Two primary stockholders of the Company are co-owners of an entity that provides charter air services, and on occasion, the Company utilizes this entity for air travel services in connection with the Company’s contracting.  During the three months ended March 31, 2010 and 2009, the Company incurred and charged to operations $2,311 and $23,457, respectively, in connection with air travel services provided by the entities to the Company. There were no payables owed to the entities at March 31, 2010 and December 31, 2009, respectively.

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The entities are co-makers of a line of credit and a note payable and have pledged substantiality all of their assets to secure the line of credit (See Note J) and note payable (see Note K).

NOTE N - COMMITMENTS AND CONTINGENCIES

Operating Lease Commitments

The Company leases office space under non-cancelable operating leases that expire through November 2011.

The Company also leases vehicles from Enterprise Fleet Services under non-cancelable operating leases expiring through March 2013.

Future minimum lease payments for the above leases over the next four years are as follows:

2010	$	268,608
2011		139,112
2012		16,495
2013		4,489
Total	$	428,704

For the three months ended March 31, 2010 and 2009, rent expense was $40,332 and $40,837, respectively.  For the three months ended March 31, 2010 and 2009, vehicle lease expense was $55,444 and $75,024, respectively.

Litigation

The Company is not currently in any litigation.

Surety Bonds

A certain number of our construction projects require us to maintain a surety bond.  The bond surety company requires additional guarantees for issuance of the bonds.  The two officers (former owners) of Pro-Tech have both personally guaranteed these bonds.  There is currently not remuneration to the officers for these guarantees.

NOTE O – SEGMENT INFORMATION

The Company is managed by specific lines of business including fire protection and alarm and detection, electrical, telecommunications and flooring. The Company’s management makes financial decisions and allocates resources based on the information it receives from its internal management system on each of its lines of business. Certain other expenses associated with the public company status are reported at the Meltdown parent company level, not within the subsidiaries. These expenses are reported separately in this footnote. The Company’s management relies on the internal management system to provide sales and cost information by line of business.

Summarized financial information by line of business for the three months ended March 31, 2010 and 2009, as taken from the internal management system previously discussed, is listed below.

Revenue
	March 31, 2010		March 31, 2009
Fire Protection/Alarm & Detection	$	1,563,000	$	3,238,000
Telecommunications		1,245,000		712,000
Flooring		657,000		327,000
Electrical		645,000		128,000
Total	$	4,110,000	$	4,405,000

Gross Profit
	March 31, 2010			March 31, 2009
Fire Protection/Alarm & Detection	$	553,000		$	1,446,000
Telecommunications		258,000			219,000
Flooring		(158,000	)		142,000
Electrical		(265,000	)		6,000
Total	$	388,000		$	1,813,000

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Operating Income (Loss)
	March 31, 2010			March 31, 2009
Fire Protection/Alarm & Detection	$	(149,000	)	$	453,000
Telecommunications		139,000			130,000
Flooring		(278,000	)		99,000
Electrical		(367,000	)		(50,000	)
Corporate		(440,000	)		(427,000	)
Total	$	(1,095,000	)	$	205,000

Depreciation/Amortization
	March 31, 2010		March 31, 2009
Fire Protection/Alarm & Detection	$	7,000	$	7,000
Telecommunications		5,000		-
Flooring		1,000		-
Electrical		-		-
Corporate		64,000		30,000
Total	$	77,000	$	37,000

Interest
	March 31, 2010		March 31, 2009
Fire Protection/Alarm & Detection	$	-	$	-
Telecommunications		-		-
Flooring		5,000		5,000
Electrical		-		-
Corporate		34,000		17,000
Total	$	39,000	$	22,000

Assets	As of		As of
	March 31, 2010		December 31, 2009
Fire Protection/Alarm & Detection	$	2,978,000	$	2,435,000
Telecommunications		883,000		609,000
Flooring		787,000		1,059,000
Electrical		323,000		721,000
Corporate		453,000		758,000
TOTAL	$	5,424,000	$	5,582,000

Capital Expenditures	As of		As of
	March 31, 2010		December 31, 2009
Fire Protection/Alarm & Detection	$	-	$	11,000
Telecommunications		-		-
Flooring		-		-
Electrical		-		-
Corporate		-		11,000
TOTAL	$	-	$	11,000

NOTE P- MAJOR CUSTOMERS AND SUPPLIERS

The Company had one customer who accounted for $1,236,367 or 30% of the billings for the three months ended March 31, 2010 two customers who accounted for $1,168,954 or 27% of revenue for the three months ended March 31, 2009.

The Company had two vendors who accounted for $416,293 or 33% of the materials purchases for the three months ended March 31, 2010 and two vendors who accounted for $390,574 or 44% of material costs for the three months ended March 31, 2009.
 

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NOTE Q – EMPLOYEE BENEFITS PLAN

The Company sponsors a defined contribution 401(k) plan covering substantially all full-time employees, which provides for the Company matching the participant's elective deferral up to 3% of their annual gross income. The Company's expense for the plan was $13,298 and $20,122, for the three months ended March 31, 2010 and 2009, respectively.

NOTE R - SUBSEQUENT EVENTS

NONE

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Unless otherwise noted, references in this Form 10-Q to “Pro-Tech”, “we”, “us”, “our”, and the “Company” means Pro-Tech Industries, Inc., a Nevada corporation.  Our principal place of business is located at 8550 Younger Creek Drive #2, Sacramento, CA 95828.  Our telephone number is (916) 388-0255.

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this registration statement. Portions of this document that are not statements of historical or current fact are forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations and intentions. The cautionary statements made in this registration statement should be read as applying to all related forward-looking statements wherever they appear in this registration statement. From time to time, we may publish forward-looking statements relative to such matters as anticipated financial performance, business prospects, technological developments and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. All statements other than statements of historical fact included in this section or elsewhere in this report are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Important factors that could cause actual results to differ materially from those discussed in such forward-looking statements include, but are not limited to, the following: changes in the economy or in specific customer industry sectors; changes in customer procurement policies and practices; changes in product manufacturer sales policies and practices; the availability of product and labor; changes in operating expenses; the effect of price increases or decreases; the variability and timing of business opportunities including acquisitions, alliances, customer agreements and supplier authorizations; our ability to realize the anticipated benefits of acquisitions and other business strategies; the incurrence of debt and contingent liabilities in connection with acquisitions; changes in accounting policies and practices; the effect of organizational changes within the Company; the emergence of new competitors, including firms with greater financial resources than ours; adverse state and federal regulation and legislation; and the occurrence of extraordinary events, including natural events and acts of God, fires, floods and accidents.

Forward-looking statements involve risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors and risks that could affect our results and achievements and cause them to materially differ from those contained in the forward-looking statements include those identified in the section titled “Risk Factors” in the Company’s Annual Report on Form 10-K for the period ended December 31, 2009, as well as other factors that we are currently unable to identify or quantify, but that may exist in the future.

In addition, the foregoing factors may affect generally our business, results of operations and financial position. Forward-looking statements speak only as of the date the statement was made. We do not undertake and specifically decline any obligation to update any forward-looking statements.

OVERVIEW

On December 31, 2008, we executed an agreement with Pro-Tech Fire Protection Systems Corp (“Pro-Tech Fire” or “Pro-Tech Fire Protection Systems”), and our company(the "Agreement"), whereby pursuant to the terms and conditions of that Agreement, Pro-Tech Fire shareholders acquired ten million one hundred thousand (10,100,000) shares of our common stock, whereby Pro-Tech Fire would become a wholly owned subsidiary of our company.  The predecessor to our company was incorporated in the State of Nevada on April 4, 2007, and was a development stage company with the principal business objective of becoming a chain of professional body treatment and skin care service centers.  On May 8, 2009 at our annual meeting, the stockholders and board of directors approved and officially changed our name to Pro-Tech Industries, Inc.

Pro-Tech Fire was incorporated on May 4, 1995 under the laws of the State of California to engage in any lawful corporate undertaking, including, but not limited to; installation, repair and inspections of fire protection systems in commercial, military and industrial settings.

PRO-TECH FIRE PROTECTION SYSTEMS CORP

Pro-Tech Fire Protection Systems is a full-service contractor serving the western United States, with offices in California and Nevada. Services include estimating, designing, fabricating, and installing all types of standard and specialty water-based fire protection systems. In addition, our company offers “Day Work” services, including inspecting, testing, repairing and servicing of same.

We serve the new construction market, as well as customers retro-fitting, upgrading or repairing their existing facilities, bringing existing facilities to current standards (for example, installing sprinklers at a customer’s expanded storage warehouse, etc.).

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Pro-Tech Fire services include:

¨ Commercial, Special Hazards, and Industrial Overhead Wet Pipe, Dry Pipe, Pre-Action, Deluge, and Foam

¨ New Installations, Retro-Fits, Upgrades, Repairs, Design, Consultations, and Analysis

¨ Pumps, Hydrants, Backflow Preventers, Underground, Design, and Consultation

¨ 5 Year Certification, Inspections and Testing

¨ 24 Hour Service

¨ Alarm & Detection installation, inspections and repairs, and third party monitoring

¨ Electrical Services including design build, new construction, repairs, inspections and maintenance

¨ Network cabling, system and structure testing and data networking and design

Pro-Tech Telecommunications

Pro-Tech Telecommunications provides inside/outside plant installation/implementation services, telecommunications hardware/software deployment (voice systems), maintenance support services, on-site technicians for telecommunications upgrades, and cable system design services. In addition, Pro-Tech Telecommunications also has a full data networking group that can design, configure, and deploy custom data networking solutions based on individual client needs.  Pro-Tech Telecommunications provides the following services to commercial, government and other business enterprises.

Services Offered:

Infrastructure Systems/Services

¨ Building Riser and Campus Systems

¨ Cabinet and Rack Installation

¨ Cable Tagging and Documentation

¨ Communications Rooms, MDF, IDF

¨ Optical and Copper Cable Installation

¨ Raceway Systems

¨ Wireless Connectivity Solutions

Low Voltage Systems

¨ Security Systems

¨ Fire Alarm

¨ Card Access Control

¨ CATV

¨ Video Surveillance

Network Systems

¨ Enterprise architecture strategy

¨ Systems integration

¨ IT infrastructure, implementation, and support

¨ Network security and remote access solutions

¨ Authentication

Voice Systems

¨ PBX

¨ Key system

¨ VoIP

We differentiate ourselves through our commitment to the highest degree of structure, efficiency and quality practices.  We are experts at providing solutions that precisely fit our client's needs. We do not manufacture equipment and are vendor agnostic when providing equipment solutions (i.e. we will install customer or vendor owned/provided equipment). Our mission is to provide cost-effective, high quality services and solutions to enhance the competitive position of our clients, using creative and innovative approaches.

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Pro-Tech Electrical

Pro-Tech Electrical Services Division is a full service Electrical contractor providing reliable and quality workmanship throughout California. Our capacities are not limited to commercial and industrial project but, to a vast range of electrical construction projects.  Our primary bid focus has been in the areas of heavy commercial such as large distribution centers, commercial retail (shopping centers, etc.), and institutional work (schools, churches, etc.) Our Management strives to provide competitive pricing for the commercial and industrial bid market. We believe we furnish detailed and competitive pricing, value engineering options, and a team approach to our clients.  Pro-Tech Electrical provides the following services to commercial, government and other business enterprises:

Electrical Services

¨ Building riser and campus systems

¨ Underground service upgrades and installation

¨ Installation of power switchboards services, Motor Control Centers (MCC) and/or upgrades.

¨ New emergency generators, controls and transfer switches.

¨ UPS (Uninterruptible Power Systems) and upgrades.

¨ Fuse and Circuit Breaker upgrade and installations

¨ Interior/ exterior Lighting and related controls.

¨ Site lighting installation and upgrades

¨ Security lighting

¨ Industrial electrical projects including explosion proof equipment and installations.

¨ Building riser and campus systems

¨ Load analysis

¨ Commercial and industrial maintenance

Conesco, Inc.

On January 16, 2009, we issued 3,000,000 shares to shareholders of Conesco, Inc. (“Conesco”), as part of an acquisition, whereby Conesco became our wholly owned subsidiary. 

Since 1993, Conesco has been a provider of commercial flooring products, installation, maintenance and design consultation services to businesses throughout Northern California.  In management’s opinion, our work graces some of the most prestigious properties in Northern California and beyond. Conesco’s team approach has earned it a reputation, in management’s opinion, for leading-edge flooring expertise, great service and first-class products.  Conesco, Inc. offers the following products and services:

¨ Professional design and specification consultation

¨ Material and installation of carpet, resilient, ceramic stone, and wood flooring

¨ Material and installation of raised access/Clean Room flooring

¨ Modular wiring and under-floor HVAC delivery systems

¨ Ongoing maintenance services

¨ Green building consultation

¨ Consultation and expertise in complex/unique flooring installations

We believe Conesco, Inc.’s expertise in the field of commercial and industrial flooring has allowed them to work with the following premier building contractors in Northern California:

¨ Roebbelen Contracting

¨ McCarthy Construction

¨ Howard S. Wright

¨ MP Allen

Competition

The competition is divided among many players in our four markets.  The market is highly fragmented and there is not a dominate player in any of the markets.  Two of the larger competitors are as follows:

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Cosco – Cosco is a multifaceted, full service fire protection contractor, providing design, fabrication, installation service and inspection of a wide variety of automatic fire suppression systems.  The company specializes in large construction projects including hospitals, high-rise structures, hotels, large office and manufacturing facilities.  The company maintains experienced staff including engineers, designers, project managers and installers.  Cosco has offices in Los Angeles, San Francisco, Seattle, Fresno, San Diego, and Anchorage.

Tyco/Grinnell (NYSE: TYC) - Tyco International, Ltd. operates as a diversified manufacturing and services company. The company, through its subsidiaries, designs, manufactures, and distributes electronic security and fire protection systems; electrical and electronic components; and medical devices and supplies, imaging agents, pharmaceuticals, and adult incontinence and infant care products. Tyco’s fire and security products and services include electronic security systems, fire detection systems and suppression systems, as well as fire extinguishers and related products. The company’s electrical and electronic components comprise electronic/electrical connector systems; fiber optic components; and wireless devices, such as private radio systems, heat shrink products, circuit protection devices, and magnetic devices.

Employees

We have approximately 66 full time employees including 13 executive and administrative staff, 4 in engineering, 7 in sales and marketing, with the balance working in the field as superintendants, foreman, journeyman or apprentices.

Recent Developments

None

Results of Operations

Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009

Revenue

Revenues were $4,109,946 for the three months ended March 31, 2010, a decrease of $295,228, or 7%, from revenues of $4,405,174 for the three months ended March 31, 2009. This decrease was primarily the results of a slow economy and slower than expected growth of jobs in our Fire Life Safety division.

Fire Life Safety segment revenue for the three months ended March 31, 2010 and 2009 were approximately $1,563,000 or 35% and $3,238,000 or 73% of total revenue, respectively.  The decrease in revenue was due to a slow economy and slower than expected growth of jobs.  Management believes, but cannot guarantee, that this segment’s revenues will increase steadily in the following quarters.

Telecommunication segment revenue for the three months ended March 31, 2010 and 2009 was approximately $1,245,000 or 30% and $712,000 or 16% of total revenue, respectively.  The increase in revenue was due to organic revenue growth.

Specialty construction segment revenue for the three months ended March 31, 2010 and 2009 was approximately $657,000 or 16% and $327,000 or 7% of total revenue, respectively.  The increase in revenue was due to organic growth.

Electrical segment revenue for the three months ended March 31, 2010 and 2009 was approximately $645,000 or 16% and $129,000 or 3% of total revenue, respectively.  The increase in revenue was due primarily to organic growth. 

Cost of Revenue

Cost of revenue consists of direct costs on contracts such as direct labor, design, materials, third party subcontractors, and certain other direct overhead costs.  Our cost of revenue was $3,724,156 or 91% of revenue for the three months ended March 31, 2010, compared to $2,592,027 or 59% for the same period of the prior year.  The dollar increase in our total cost of revenue is due primarily to the corresponding increase in the percentage of cost of sales during the three months ended March 31, 2010. The increase as a percentage of revenue is due to the blend of project revenue attributable to our existing operations and cost overruns incurred by our Electrical and Specialty segments.   The multi-segment history of our company is rather limited since this is only the 5th quarter with all of our segments up in operation. The historical trend of the last five quarters has ranged from approximately 59% to 91%.  The cost of revenue percentage is expected to vary depending on our mix of project revenue and segment revenue.  Our management contends that the completion of the “overrun” jobs in the Electrical and Specialty segments will allow us to get our margins back in line with management’s expectations.  These areas will continue to be monitored closely going forward, as will all of our segments.

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Fire Life Safety segment cost of revenue and cost of revenue as a percentage of revenue for the three months ended March 31, 2010 and 2009 was approximately $1,010,000 and 65% and $1,792,000 and 55%, respectively.  The dollar decrease in our cost of revenue is due to the corresponding decrease in revenue during the three months ended March 31, 2010.  This increase in cost of revenue as a percentage of revenue was due to the blend of project revenue attributable to our existing operations and the more competitive bid environment reducing the margins available on work won.

Wireless communication segment cost of revenue and cost of revenue as a percentage of revenue for the three months ended March 31, 2010 and 2009 was approximately $987,000 and 79% and $493,000 and 69%, respectively.  The dollar increase in our cost of revenue is due to the corresponding increase in revenue during the three months ended March 31, 2010.  This increase in cost of revenue as a percentage of revenue was due to the blend of project revenue attributable to our existing operations.

Specialty construction segment cost of revenue and cost of revenue as a percentage of revenue for the three months ended March 31, 2010 and 2009 was approximately $815,000 and 124% and $185,000 and 57%, respectively.  As discussed above, the dollar increase in our total cost of revenue is due to the corresponding increase in revenue during the three months ended March 31, 2010. The increase as a percentage of revenue is due to the blend of project revenue attributable to our existing operations and certain cost overruns.  Management of the Specialty segment is actively seeking change orders and reviewing certain costs for overcharges in relation to these costs.  Management believes that all costs have been accounted for and anticipates that closer monitoring of the jobs will facilitate eliminating, removing or decreasing overrun potential from future jobs.

Electrical power segment cost of revenue and cost of revenue as a percentage of revenue for the three months ended March 31, 2010 and 2009 was approximately $910,000 and 141% and $122,000 and 95%, respectively.  The dollar increase in our cost of revenue is due to the corresponding increase in revenue during the three months ended March 31, 2010. The increase as a percentage of revenue is due primarily to the blend of project revenue attributable to our existing operations.  This segment had issues with cost overruns on its four primary jobs started in the fourth quarter of 2009.  These overruns continued into the first quarter of 2010.  Management has significantly reduced overhead and other costs and is reviewing the viability of and/or direction to take with this segment to insure that it can contribute to the overall success of our company.

Selling, general and administrative

Selling, general and administrative expenses were $1,403,193 for the three months ended March 31, 2010 compared to $1,571,857 for the three months ended March 31, 2009. The selling, general and administrative cost related to revenues decreased to 34% for three months ended March 31, 2010 as compared to 36% for the three months ended March 31, 2009, despite having a smaller revenue base in 2010.  Current year costs drop to 32% if compared to 2009 revenue.

The decrease is primarily a result of a decrease in legal and accounting expense of approximately $120,000 due to defense of the union and bank lawsuits, for which the union suit has been settled and decrease in accounting fees associated with review and reporting requirements.  We had not previously had audits or reviews done for our quarterly results, causing the reviews of 2009 to add costs.  The remainder of the decrease was primarily attributable to salaries and benefits of reduced staffing.

Management continues to monitor costs in these difficult economic times in order to remove unnecessary overhead.

Depreciation and amortization

Depreciation and amortization expense increased to $76,514 for the three months ended March 31, 2010 compared to $36,623 in the three months ended March 31, 2009.  The increase came primarily from the intangible amortization related to the Conesco purchase, which was initially set up as a sixty month amortization, but was changed to eighteen months after review and analysis by an independent third party.  This amortization will finalize in August 2010.

Interest

Net interest expense increased to $39,190 for the three months ended March 31, 2010 compared to $22,020 for the three months ended March 31, 2009. This increase was primarily due to the full use of the line of credit for working capital purposes as well as new term loans from the bank for Conesco in June 2009.

Income Tax

Income tax benefit increased to $80,490 for the three months ended March 31, 2010 from an expense of $60,316 for the three months ended March 31, 2009. This is approximately a $141,000 higher benefit due mainly to the movement of the section 481a adjustment of $424,814 from deferred status at March 31, 2009 to current at March 31, 2010.  This is offset by the current loss incurred in the three months ended March 31, 2010, which eliminates any potential deferred tax asset.

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Liquidity and Capital Resources

Liquidity:

For the three months ended March 31, 2010, we experienced a net loss of $1,052,617.  At March 31, 2010, we had $152,210 in cash.  Accounts receivable, net of allowances for doubtful accounts, were $3,720,887 at March 31, 2010 which at approximately 78% of current assets is comparable to the 80% it represented at December 31, 2009.

At March 31, 2010, we had negative working capital of $428,279, compared to working capital of $591,968 at December 31, 2009. The ratio of current assets to current liabilities decreased to (.92):1 at March 31, 2010 compared to 1.14:1 at December 31, 2009.  Cash flow used by operations during the three months ended March 31, 2010 was $64,736 as compared to cash used by operations of $206,210 for the three months ended March 31, 2009. Management anticipates, but can provide no assurances, that that our existing capital resources will be adequate to satisfy its capital requirements for the foreseeable future.

Our principal liquidity at March 31, 2010 included cash of $152,210 and $3,720,887 of net accounts receivable. Our management believes, but can provide no assurances, that that our liquidity position remains sufficient enough to support on-going general administrative expense, strategic positioning, and the garnering of contracts and relationships.

Cash Flow

For the three months ended March 31, 2010, we used net cash of $64,736 in our operating activities, primarily as a result of our net loss of $1,052,617, an increase in costs in excess of billings of $90,157, a decrease in deferred tax liabilities of $80,490 and decrease in accrual for loss against uncompleted contracts of $90,514, primarily offset by increase in billing in excess of cost of $201,018, depreciation and amortization of $76,514, bad debt allowance and write offs of $85,314 and by increase in accounts payable of $809,096.  By comparison, net cash used in operating activities was $206,210 for the three months ended March 31, 2009.

There was no investing activity during the three months ended March 31, 2010.  The investing activity during 2009 consisted of the purchase of computers and equipment of approximately $10,520.  This was offset by cash of $9,043 acquired in the Conesco acquisition.

Financing activity for 2010 consisted of payments on long term debt obligations of $55,544 offset by line of credit borrowings of $100,000.  This was all in the normal course of business and note terms.  For 2009, financing activity consisted of payments on long term debt obligations of $45,205 offset by line of credit borrowings of $181,227.  This increase in 2010 of principal payments was primarily due to the addition of the Conesco note payable.

With recent cuts in corporate and selling, general and administrative costs, management anticipates, but can provide no assurances, that our cash flow will be positive for the remainder of 2010.

Capital Resources:

Line of Credit Facility

The line of credit facility is primarily used to fund short-term changes in working capital. The total capacity of the facility at March 31, 2010 was $1,000,000. Our management believes that sufficient liquidity exists but may seek approval to increase the facility or find other funding sources to increase the facility to $1.5 million in the future.  Our management believes an increased line of credit facility would help to provide adequate liquidity and financial flexibility to support our expected growth beginning in the second quarter of 2010 and beyond.

The facility contains customary financial covenants requiring us to maintain certain financial ratios, including an asset coverage ratio and dollars, debt to equity ratio and a tangible net worth requirement. Non-compliance with any of these ratios or a violation of other covenants could result in an event of default and reduce availability under the facility. We are currently not in compliance with our covenants, but have full availability under the facility.

Effective August 10, 2009, our company executed a new credit facility increasing the line to $1,000,000.  The interest rate remains at .5% less than the lender’s index rate, currently 4.5% and the maturity date was reset to June 30, 2010.  With the renewal of this credit facility the lender reset customary financial covenants requiring us to maintain certain financial ratios, including an asset coverage ratio and dollars, debt to equity ratio and a tangible net worth requirement.

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Should the current financing arrangements prove to be insufficient for our current needs; we are willing to go to the capital markets to raise the necessary capital to meet these needs.

Long Term Notes

Long term notes with original principal balances totaling $900,000, were issued through our bank on February 3, 2007 ($650,000) and December 31, 2008, ($250,000). The notes were are payable over 5 years and will be paid off on or about February 1, 2012 and December 31, 2013.  The notes carry interest rates of 7.76% and 5.5% respectively. These notes are held by the same bank the Company uses for its banking and where the line of credit is held.  The current balances at March 31, 2010 on these two notes are $278,583 and $193,519, respectively.

In June 2009, Conesco’s bank termed out its line of credit, into a three year note.  The note is for $120,000 and is due in full in July 2012.  The note carries interest of 8%.  At March 31, 2010, the outstanding balance on this note was $103,152.

Critical Accounting Estimates and Recently Issued Accounting Standards

Please refer to Note C to the financial statements.

Inflation

In the opinion of management, inflation will not have an impact on our company’s financial condition and results of its operations.

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, and results of operations, liquidity or capital expenditures.

Other Considerations

There are numerous factors that affect the business and the results of its operations.  Sources of these factors include general economic and business conditions, federal and state regulation of business activities, the level of demand for product services, the level and intensity of competition in the media content industry, and the ability to develop new services based on new or evolving technology and the market's acceptance of those new services, our ability to timely and effectively manage periodic product transitions, the services, customer and geographic sales mix of any particular period, and our ability to continue to improve our infrastructure including personnel and systems to keep pace with our anticipated rapid growth.

Additional Information

We file reports and other materials with the Securities and Exchange Commission.  These documents may be inspected and copied the Commission’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330.  The Commission maintains a web site at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not hold any derivative instruments and do not engage in any hedging activities.

ITEM 4.  CONTROLS AND PROCEDURES

Our principal executive officer and our principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of the last day of the fiscal period covered by this report, March 31, 2010.  The term disclosure controls and procedures means our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

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Our principal executive officer and our principal financial officer, are responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f).  Our principal executive officer and our principal financial officer  are required to base their assessment of the effectiveness of our internal control over financial reporting on a suitable, recognized control framework, such as the framework developed by the Committee of Sponsoring Organizations (COSO).  The COSO framework, published in Internal Control-Integrated Framework, is known as the COSO Report.  Our principal executive officer and our principal financial officer, have chosen the COSO framework on which to base their assessment.  Based on this evaluation, our principal executive officer and our principal financial officer concluded that our internal control over financial reporting was effective as of March 31, 2010.

Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in our annual reports on Form 10-K for the annual reporting periods through December 31, 2009.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable and not absolute assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of certain events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

b) Changes in Internal Control over Financial Reporting.

During the Quarter ended March 31, 2010, there was no change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not a party to any legal proceedings, there are no known judgments against the Company, nor are there any known actions or suits filed or threatened against it or its officers and directors, in their capacities as such.  We are not aware of any disputes involving the Company and the Company has no known claim, actions or inquiries from any federal, state or other government agency.  We are not aware of any claims against the Company or any reputed claims against it at this time, except as follows:

ITEM 1A - - Risk Factors

You should carefully consider the following risk factors together with the other information contained in this Interim Report on Form 10-Q, and in prior reports pursuant to the Securities Exchange Act of 1934, as amended and the Securities Act of 1933, as amended.  If any of the risks factors actually occur, our business, financial condition or results of operations could be materially adversely affected. In such cases, the trading price of our common stock could decline. We believe there are no changes that constitute material changes from the risk factors previously disclosed in the prior reports pursuant to the Securities Exchange Act of 1934, as amended and the Securities Act of 1933 and include or reiterate the following risk factors:

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Our Common Stock Is Subject To Penny Stock Regulation

Our shares are subject to the provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), commonly referred to as the "penny stock" rule. Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act. The Commission generally defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Rule 3a51-1 provides that any equity security is considered to be penny stock unless that security is: registered and traded on a national securities exchange meeting specified criteria set by the Commission; authorized for quotation on the NASDAQ Stock Market; issued by a registered investment company; excluded from the definition on the basis of price (at least $5.00 per share) or the registrant's net tangible assets; or exempted from the definition by the Commission. Since our shares are deemed to be "penny stock", trading in the shares will be subject to additional sales practice requirements on broker/dealers who sell penny stock to persons other than established customers and accredited investors.

FINRA Sales Practice Requirements May Also Limit A Stockholder's Ability To Buy And Sell Our Stock.

In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority (FINRA) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

We May Not Have Access To Sufficient Capital To Pursue Our Business And Therefore Would Be Unable To Achieve Our Planned Future Growth:

We intend to pursue a growth strategy that includes development of the Company business and technology.  Currently we have limited capital which may be insufficient to pursue our plans for development and growth.  Our ability to implement our growth plans may depend primarily on our ability to obtain additional private or public equity or debt financing.  We are currently seeking additional capital.  Such financing may not be available at all, or we may be unable to locate and secure additional capital on terms and conditions that are acceptable to us.  Our failure to obtain additional capital may have a material adverse effect on our business.

Nevada Law And Our Articles Of Incorporation Protect Our Directors From Certain Types Of Lawsuits, Which Could Make It Difficult For Us To Recover Damages From Them In The Event Of A Lawsuit.

Nevada law provides that our directors will not be liable to our company or to our stockholders for monetary damages for all but certain types of conduct as directors. Our Articles of Incorporation require us to indemnify our directors and officers against all damages incurred in connection with our business to the fullest extent provided or allowed by law. The exculpation provisions may have the effect of preventing stockholders from recovering damages against our directors caused by their negligence, poor judgment or other circumstances. The indemnification provisions may require our company to use our assets to defend our directors and officers against claims, including claims arising out of their negligence, poor judgment, or other circumstances.

Because We Are Quoted On The OTCBB Instead Of An Exchange Or National Quotation System, Our Investors May Have A Tougher Time Selling Their Stock Or Experience Negative Volatility On The Market Price Of Our Stock.

Our common stock is traded on the OTCBB. The OTCBB is often highly illiquid.  There is a greater chance of volatility for securities that trade on the OTCBB as compared to a national exchange or quotation system. This volatility may be caused by a variety of factors, including the lack of readily available price quotations, the absence of consistent administrative supervision of bid and ask quotations, lower trading volume, and market conditions. Investors in our common stock may experience high fluctuations in the market price and volume of the trading market for our securities. These fluctuations, when they occur, have a negative effect on the market price for our securities. Accordingly, our stockholders may not be able to realize a fair price from their shares when they determine to sell them or may have to hold them for a substantial period of time until the market for our common stock improves.

Failure To Achieve And Maintain Effective Internal Controls In Accordance With Section 404 Of The Sarbanes-Oxley Act Could Have A Material Adverse Effect On Our Business And Operating Results.

It may be time consuming, difficult and costly for us to develop and implement the additional internal controls, processes and reporting procedures required by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal auditing and other finance staff in order to develop and implement appropriate additional internal controls, processes and reporting procedures. If we are unable to comply with these requirements of the Sarbanes-Oxley Act, we may not be able to obtain the independent accountant certifications that the Sarbanes-Oxley Act requires of publicly traded companies.

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If we fail to comply in a timely manner with the requirements of Section 404 of the Sarbanes-Oxley Act regarding internal control over financial reporting or to remedy any material weaknesses in our internal controls that we may identify, such failure could result in material misstatements in our financial statements, cause investors to lose confidence in our reported financial information and have a negative effect on the trading price of our common stock.

Pursuant to Section 404 of the Sarbanes-Oxley Act and current SEC regulations, beginning with our annual report on Form 10-K for our fiscal period ended December 31, 2009, we were required to prepare assessments regarding internal controls over financial reporting and beginning with our annual report on Form 10-K for our fiscal period ended December 31, 2009, furnish a report by our management on our internal control over financial reporting. There also can be no assurance that our auditors will be able to issue an unqualified opinion on the effectiveness of our internal control over financial reporting beginning with out annual report on Form 10-K for our fiscal period ending December 31, 2010. Failure to achieve and maintain an effective internal control environment could have a material adverse effect on our stock price.

In addition, in connection with our on-going assessment of the effectiveness of our internal control over financial reporting, we may discover “material weaknesses” in our internal controls as defined in standards established by the Public Company Accounting Oversight Board, or the PCAOB. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The PCAOB defines “significant deficiency” as a deficiency that results in more than a remote likelihood that a misstatement of the financial statements that is more than inconsequential will not be prevented or detected.

In the event that a material weakness is identified, we will employ qualified personnel and adopt and implement policies and procedures to address any material weaknesses that we identify. However, the process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. We cannot assure you that the measures we will take will remediate any material weaknesses that we may identify or that we will implement and maintain adequate controls over our financial process and reporting in the future.

Any failure to complete our assessment of our internal control over financial reporting, to remediate any material weaknesses that we may identify or to implement new or improved controls, or difficulties encountered in their implementation, could harm our operating results, cause us to fail to meet our reporting obligations or result in material misstatements in our financial statements. Any such failure could also adversely affect the results of the periodic management evaluations of our internal controls and, in the case of a failure to remediate any material weaknesses that we may identify, would adversely affect the annual auditor attestation reports regarding the effectiveness of our internal control over financial reporting that are required under Section 404 of the Sarbanes-Oxley Act. Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.

Operating History And Lack Of Profits Which Could Lead To Wide Fluctuations In Our Share Price. The Price At Which You Purchase Our Common Shares May Not Be Indicative Of The Price That Will Prevail In The Trading Market. You May Be Unable To Sell Your Common Shares At Or Above Your Purchase Price, Which May Result In Substantial Losses To You. The Market Price For Our Common Shares Is Particularly Volatile Given Our Status As A Relatively Unknown Company With A Small And Thinly Traded Public Float, Limited

The market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. The volatility in our share price is attributable to a number of factors. First, as noted above, our common shares are sporadically and thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer which could better absorb those sales without adverse impact on its share price. Secondly, we are a speculative or “risky” investment due to our limited operating history and lack of profits to date, and uncertainty of future market acceptance for our potential products. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer. Many of these factors are beyond our control and may decrease the market price of our common shares, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common shares will be at any time, including as to whether our common shares will sustain their current market prices, or as to what effect that the sale of shares or the availability of common shares for sale at any time will have on the prevailing market price.

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Shareholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices could increase the volatility of our share price.

Volatility In Our Common Share Price May Subject Us To Securities Litigation, Thereby Diverting Our Resources That May Have A Material Effect On Our Profitability And Results Of Operations.

As discussed in the preceding risk factors, the market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may in the future be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources.

SHOULD ONE OR MORE OF THE FOREGOING RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD THE UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED, INTENDED OR PLANNED.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS SECURITIES

There were no unregistered sales of securities during the three months ended March 31, 2010.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

There were no defaults upon senior securities during the period ended March 31, 2010.

ITEM 4.  REMOVED AND RESERVED

ITEM 5.  OTHER INFORMATION

None.

ITEM 6.  EXHIBITS

3.1	Certificate of Incorporation (1)
3.2	Bylaws of Pro-Tech Industries, Inc. (1)
14.1	Code of Ethics (2)
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act(3)
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.(3)
32.2	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.(3)
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.(3)

1)   Incorporated by reference to the Company’s filing on Form SB-2, as filed with the Securities and Exchange Commission on June 27, 2007.

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(2)   Incorporated by reference to the Company’s filing on Form 10-K, as filed with the Securities and Exchange Commission on April 15, 2009.

(3)  Filed herein.

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SIGNATURES

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

Registrant	Pro-Tech Industries, Inc.
Date: May 24, 2010	By:	/s/ Donald Gordon
	Donald Gordon
	Chief Executive Officer

Registrant	Pro-Tech Industries, Inc.
Date: May 24, 2010	By:	/s/ Michael Walsh
	Michael Walsh
	Chief Financial Officer (Principal Financial Officer)

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