Pro-Tech Industries (PTCK) 10-Q 2010 Q3 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 September 30, 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)

 (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 ¨ No x

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 o 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  November 15, 2010
Common stock, $0.001 par value	18,532,808

PRO-TECH INDUSTRIES, INC.

INDEX TO FORM 10-Q FILING

September 30, 2010

TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION

		Page  Numbers
PART I - FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited)	3
Item 2.	Management Discussion & Analysis of Financial Condition and Results of Operations	22
Item 3	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29
PART II - OTHER INFORMATION
Item1	Legal Proceedings	30
Item1A	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3.	Defaults Upon Senior Securities	33
Item 4.	Removed and Reserved	33
Item 5	Other information	33
Item 6.	Exhibits	33
	Signature	34

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

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 and nine months ended September 30, 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 September 30, 2010 (Unaudited) and December 31, 2009	4
Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2010 and 2009	5
Unaudited Condensed Consolidated Statement of Cash Flows for the nine months  ended September 30, 2010 and 2009	6-7
Notes to Unaudited Condensed Consolidated Financial Statements	7 ~21

3

PRO-TECH INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2010 (unaudited)			December 31, 2009
ASSETS
Current Assets:
Cash and cash equivalents	$	243,500		$	186,894
Contract receivable, net of allowance for doubtful accounts  as of September 30, 2010 and December 31, 2009, of $100,000 and $50,000, respectively		2,685,301			2,659,979
Costs and estimated earnings in excess of billings		406,313			123,185
Note receivable – related party		-			77,000
Inventory		169,052			200,238
Other current assets		230,492			154,386
Deferred financing cost, net		56,281			-
Discontinued operations		786,027			1,433,283
Total current assets		4,576,966			4,834,965
Property plant and equipment, net		238,375			298,141
Other Assets:
Intangibles, net of  accumulated amortization as of  September 30, 2010 and December 31, 2009, of $283,979 and $181,431, respectively		-			102,548
Deposits		10,856			10,856
Discontinued Operations		334,327			335,584
Total assets		5,160,524			5,582,094
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable and accrued expenses		2,224,532			2,249,449
Short term note payable		41,475			-
Notes payable – current portion		265,623			184,512
Accruals on uncompleted contracts		252,768			197,514
Reserve for loss on uncompleted contracts		-			87,431
Line of credit		1,000,000			900,000
Warrant and derivative liability		441,045			-
Discontinued operations		374,491			579,094
Total current liabilities		4,599,934			4,243,000
Long -Term Liabilities:
Notes payable- others  – long term portion		215,880			332,580
Discontinued Operations		93,525			81,491
Total Long Term Liabilities		309,405			414,071
Series A 10% convertible redeemable preferred stock, no par value, 40,000 shares authorized; 23,000 and 0 issued and outstanding, (net) at September 30, 2010 and December 31, 2009, respectively		309,401			-
Stockholders' Equity (Deficit):
Preferred stock, undesignated, no par value; 1,960,000 shares authorized, no shares issued and outstanding		-			-
Common Stock, $0.001 par value; 70,000,000 shares authorized;  18,532,808 and 18,593,880  shares issued and outstanding at September 30, 2010 and December 31, 2009,  respectively		18,532			18,594
Additional paid in capital		1,282,330			1,421,467
Accumulated deficit		(1,359,078	)		(515,038	)
Total stockholders’ equity (deficit)		(58,216	)		925,023
Total liabilities and stockholders' equity (deficit)	$	5,160,524		$	5,582,094

See accompanying notes to these unaudited condensed consolidated financial statements

4

PRO-TECH INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

 (UNAUDITED)

	Three Months Ended September 30, 2010			Three Months Ended September 30, 2009			Nine months Ended September 30, 2010			Nine months Ended September 30, 2009
Net revenue	$	3,732,221		$	3,640,221		$	10,892,160		$	11,272,860
Cost of sales		2,403,483			2,152,192			7,444,510			6,830,657
Gross profit		1,328,738			1,488,029			3,447,650			4,442,203
Operating Expenses:
Depreciation and amortization (Note G & H)		42,260			46,643			215,267			125,773
Selling, general and administrative		1,053,581			1,709,639			3,478,513			4,937,000
Total Operating Expenses		1,095,841			1,756,282			3,693,780			5,062,773
Income (Loss) from Operations		232,897			(268,253	)		(246,130	)		(620,570	)
Other Income (Expense):
Gain on change in fair value of derivative liability		(131,217	)		-			72,610			-
Interest expense, net		(57,148	)		(23,675	)		(113,826	)		(69,735	)
Total Other Income (Expense)		(188,365	)		(23,675	)		(41,216	)		(69,735	)
Income (loss) income before income taxes		44,532			(291,929	)		(287,346	)		(690,305	)
Income tax benefit (expense)		-			56,996			80,490			86,472
Income(loss) from continuing operations		44,532			(234,933	)		(206,856	)		(603,833	)
Income(loss) from discontinued operations		(122,639	)		166,655			(610,822	)		432,823
Net Income(Loss)		(78,107	)		(68,277	)		(817,678	)		(171,010	)
Preferred stock dividends and amortized discount		142,957			-			248,055			-
Net Income(loss) attributable to common shareholders	$	(221,064	)	$	(68,277	)	$	(1,065,733	)	$	(171,010	)
Net income (loss) per share  from continuing operations:
Basic	$	0.00		$	(0.01	)	$	(0.01	)	$	(0.03	)
Diluted	$	0.00		$	(0.01	)	$	(0.01	)	$	(0.03	)
Net income (loss) per share:
Basic	$	(0.01	)	$	0.00		$	(0.04	)	$	(0.01	)
Diluted	$	(0.01	)	$	0.00		$	(0.04	)	$	(0.01	)
Net income (loss) per share attributable to common shareholder:
Basic	$	(0.01	)	$	0.00		$	(0.06	)	$	(0.01	)
Diluted	$	(0.01	)	$	0.00		$	(0.05	)	$	(0.01	)
Weighted average common shares outstanding (Note A)		18,502,924			17,872,500			18,393,346			17,667,079

See accompanying notes to these unaudited condensed consolidated financial statements

5

PRO-TECH INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

	Nine months ended September 30,
	2010			2009
Cash Flows From Operating Activities:
Net income (loss) from operations	$	(817,678	)	$	(171,010	)
Income (loss) from discontinued operations		(610,822	)		432,824
Income (loss) from continuing operations		(206,856	)		(603,834	)
Adjustments to reconcile net  income (loss) to net cash provided by operating activities:
Depreciation and amortization		170,304			128,153
Amortization of deferred financing costs paid by stock		23,734			-
Bad debt write off		53,680			130,704
Accrual for bad debt allowance		50,000			(76,000	)
Change in fair value of warrant liability and reset derivative		(72,610	)		-
Amortization of deferred compensation		30,620			109,125
Accruals (reversal) of loss against uncompleted contracts		(87,431	)		(20,995	)
Deferred tax liability (asset)		(80,490	)		(106,198	)
(Increase) decrease in:
Contract receivable		(129,001	)		1,788,076
Inventory		31,187			-
Deferred finance cost		(28,142	)		-
Other current assets, net		894			114,295
Costs and estimated earnings in excess of billings		(283,128	)		(190,124	)
Billings in excess of costs and estimated earnings		55,254			(525,449	)
Increase (decrease) in:
Accounts payable and accrued expenses, net		115,660			(301,821	)
Net Cash (Used In) Provided by in Continuing Operating Activities		(356,325	)		445,932
Net Cash Used in Discontinued Operating Activities		(166,913	)		(512,665	)
Net Cash Used in Operating Activities		(523,238	)		(66,733	)
Cash Flows From Investing Activities:
Purchase of property and equipment		(7,990	)		(124,807	)
Net Cash Used In Continuing Investing Activities		(7,990	)		(124,807	)
Net Cash Provided by Discontinued Investing Activities		-			9,043
Net Cash Used In Investing Activities		(7,990	)		(115,764	)
Cash Flows From Financing Activities:
Proceeds from short term borrowings		17,500			-
Proceeds from sale of convertible redeemable preferred stock		575,000			-
Payments of long term debt		(116,700	)		(138,082	)
Proceeds from line of credit		100,000			314,500
Net Cash Provided by Continuing Financing Activities		575,800			176,418
Net Cash Provided by (Used In) Discontinued Financing Activities		12,034			(38,790	)
Net Cash Provided by Financing Activities		587,834			137,628
Net increase (decrease) in Cash And Cash Equivalents		56,606			(44,869	)
Cash and cash equivalents at beginning of period		186,894			86,895
Cash and cash equivalents at the end of period	$	243,500		$	42,026

See accompanying notes to these unaudited condensed consolidated financial statements

6

PRO-TECH INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)

(continued)

	Nine months ended September 30,
	2010		2009
Supplemental Disclosures of Cash Flow Information:
Cash paid during period for interest	$	113,826	$	46,060
Cash paid during period for taxes	$	-	$	-
Non-cash Investing and Financing Activities:
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
Fair value of warrants issued with series A redeemable preferred stock	$	264,730	$	-
Beneficial conversion feature of series A redeemable preferred stock	$	513,655	$	-
Preferred stock dividend – non-cash	$	26,363	$	-
Amortization of BCF transferred to additional paid in capital	$	221,693	$	-

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

September 30, 2010

(UNAUDITED)

NOTE A - BUSINESS DESCRIPTION

General

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. However, the results from operations for the nine months period ended September 30, 2010, are not necessarily indicative of the results that may be expected for the year ended December 31, 2010. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated December 31, 2009 financial statements and footnotes thereto included in the Company's Form 10-K filed with the Securities and Exchange Commission (the “SEC”).

Business and Basis of Presentation

The Company was originally incorporated under the laws of the State of Nevada on April 4, 2007 under the name Meltdown Massage and Body Works, Inc. (“Meltdown”) and formerly operated as a development stage company. On December 31, 2008, Meltdown merged with and into Pro-Tech Fire Protection Systems Corp. (“Pro-Tech”).  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 Company Articles of Incorporation on May 11, 2009.  The Company is now known as Pro-Tech Industries, Inc. and the  ticker symbol is PTCK.

The unaudited condensed consolidated financial statements include the accounts of Meltdown, Pro-Tech and Conesco, Inc., the operating subsidiaries (collectively, the “Company”).

The Company’s operating subsidiary, Pro-Tech, was incorporated under the laws of the State of California on May 4, 1995. Pro-Tech 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, Pro-Tech offers “Day Work” services, including inspecting, testing, repairing and servicing of same.

On January 16, 2009, the Company acquired Conesco, Inc. (“Conesco”) in a stock for stock exchange.  Conesco has been a provider of commercial flooring products, installation, maintenance and design consultation services to businesses throughout Northern California since 1993

On July 31, 2010, the Company entered into a letter of intent to sell the stock of Conesco, Inc. to its prior owner upon the terms and subject to the conditions of a definitive agreement.  The final terms of the definitive agreement are in the process of being finalized and management projects to complete the sale in the final quarter of 2010.  The letter of intent is non-binding and either side may terminate with written notice.  These unaudited condensed consolidated financial statements include disclosure of the results of operations for Conesco, for all periods presented, as discontinued operations.  All significant inter-company accounts and transactions have been eliminated in consolidation.

All significant intercompany balances and transactions have been eliminated in consolidation.

NOTE B – REVERSE MERGER AND CORPORATE RESTRUCTURE

On December 31, 2008, the Company consummated a reverse merger by entering into a share exchange agreement (the “Share Exchange”) with the stockholders of Pro-Tech, pursuant to which the stockholders of Pro-Tech exchanged all of the issued and outstanding capital stock of Pro-Tech for 10,100,000 shares of common stock of the Company representing approximately 74%  of the Company’s outstanding capital stock, Meltdown shareholders retained the 3,500,000 shares of previously issued shares of common stock.

As a result of the Share Exchange, there was a change in control of the Company. In accordance with SFAS No. 141, the Company was the acquiring entity. In substance, the Share Exchange is a recapitalization of the Company’s capital structure rather than a business combination.

8

For accounting purposes, the Company accounted for the transaction as a reverse acquisition with the Pro-Tech as the surviving entity. The total purchase price and carrying value of net assets acquired was $-0-.  The Company did not recognize goodwill or any intangible assets in connection with the transaction. Prior to the Share Exchange, the Company was an inactive corporation with no significant assets and liabilities.

All reference to Common Stock shares and per share amounts have been retroactively restated to effect the reverse acquisition as if the transaction had taken place as of the beginning of the earliest period presented.

The total consideration paid was $3,500 and the significant components of the transaction are as follows:

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

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

The Company has entered into a LOI with the former owner of Conesco, Inc. to buy all of the outstanding shares of Conesco.  The accompanying unaudited condensed consolidated financial statements include the historical financial condition, results of operations and cash flows of Pro-Tech showing Conesco as a discontinued operation through July 31, 2010.

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.

9

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 $169,052 and $200,238 at September 30, 2010 and December 31, 2009, respectively.

Advertising

The Company follows the policy of charging the costs of advertising to expenses incurred. The Company incurred $15,507 and $22,538 of advertising costs for the nine months ended September 30, 2010 and 2009, respectively.

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	5-7 years
Automobiles	5 years
Computer Software	3 years
Office equipment and furniture	3-7 years
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 reevaluation 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 ASC 360-10-15-3 “Impairment of Disposal of long-lived Assets”. The Statement 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.

10

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 $100,000 and $50,000 as of September 30, 2010 and December 31, 2009, respectively.

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 and nine months ended September 30, 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 reported a net loss for the three months ended September 30, 2009 and the nine months ended September 30, 2010 and 2009, the effects of the shares issuable upon exercise of outstanding warrants, options and convertible securities as of September 30, 2010 and 2009 have not been considered in the diluted net loss per common share since these dilutive securities would reduce the loss per common share and become anti-dilutive.  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.

The following reconciliation of net income and share amounts used in the computation of income (loss) per share for the three months ended September 30, 2010:

	Three months ended September 30, 2010
Net income from continuing operations used in computing basic net income	$	(78,107	)
Less: Preferred stock dividend and amortized warrant and  discount		(142,957	)
Net loss from continuing operations in computing diluted net loss per share	$	(221,064	)

     The weighted average shares outstanding used in the basic net income per share computations for the three months ended September 30, 2010 was 18,502,924.  In determining the number of shares used in computing diluted loss per share, the Company added approximately 2,464,000 potentially dilutive securities for the three months ended September 30, 2010. The potentially dilutive securities added were mostly attributable to the warrants, and convertible preferred shares outstanding.  As a result, the diluted loss per share for the three months ended September 30, 2010 was $0.00.

Derivative financial instruments

On October 1, 2001, the Company adopted Accounting Standards Codification subtopic 815-10, Derivatives and Hedging (“ASC 815-10”), which requires that all derivative instruments be recognized in the financial statements at fair value. The adoption of ASC 815-10 did not have a significant impact on the results of operations, financial position or cash flows during the three month period ended September 30, 2010 and 2009.

The Company uses derivative financial instruments for trading purposes also. Credit risk related to the derivative financial instrument is managed by periodic settlements. Changes in fair value of derivative financial instruments are recorded as adjustments to the assets or liabilities being hedged in the statement of operations or in accumulated other comprehensive income (loss), depending on whether the derivative is designated and qualifies for hedge accounting, the type of hedge transaction represented and the effectiveness of the hedge.

Effect of Related Prospective Accounting Pronouncement

Accounting Standards Codification subtopic 815-40, Derivatives and Hedging,; Contracts in Entity’s own Equity (“ASC 815-40”) became effective for the Company on October 1, 2009.  The Company’s Series A (convertible) Preferred Stock has certain reset provisions that require the Company to reduce the conversion price of the Series A (convertible) Preferred Stock if the Company issues equity at a price less than the conversion price.  Upon the effective date, the provisions of ASC 815-40 required a reclassification to liability based on the reset feature of the agreements if the Company sells equity at a price below the conversion price of the Series A Preferred Stock.

11

Therefore, in accordance with ASC 815-40, the Company determined the fair value of the initial reset provision of $453,711 at April 15, 2010 using the Black-Scholes formula assuming no dividends, a risk-free interest rate of 4.00%, expected volatility of 176.1%, and expected life of 1 years. The net value of the reset provision at the date of adoption of ASC 815-40 was recorded as a reset derivative liability on the balance sheet in the amount of $453,711 and a reduction to series A convertible redeemable preferred stock.  Changes in fair value are recorded as non-operating, non-cash income or expense at each reporting date.  The Company issued additional warrants which increased the reset provision by $59,944 in August 2010.  The addition was used in the calculation for the reset values at September 30, 2010.

The fair value of the reset provision of $441,044 at September 30, 2010 was determined using the Black Scholes Option Pricing Model with the following assumptions:

Dividend yield:	-0-	%
Volatility	211.4	%
Risk free rate:	4.00	%

The change in fair value of the reset derivative and warrant liability resulted in a current quarter non operating charge to operations of $131,217.  

Stock Based Compensation

The Company adopted the fair value recognition provisions Accounting Standard Codification sub-topic 718-10 (ASC 718-10) Compensation, to account for compensation costs under our stock option plans. In adopting SFAS No. 123(R), we 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.

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 these unaudited condensed 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. The Company did have financial assets measured at fair value on a recurring basis, refer to note T.

12

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

In March 2010, the FASB issued new accounting guidance, under ASC Topic 605 on Revenue Recognition.  This standard provides that the milestone method is a valid application of the proportional performance model for revenue recognition if the milestones are substantive and there is substantive uncertainty about whether the milestones will be achieved.  Determining whether a milestone is substantive requires judgment that should be made at the inception of the arrangement.  To meet the definition of a substantive milestone, the consideration earned by achieving the milestone (1) would have to be commensurate with either the level of effort required to achieve the milestone or the enhancement in the value of the item delivered, (2) would have to relate solely to past performance, and (3) should be reasonable relative to all deliverables and payment terms in the arrangement.  No bifurcation of an individual milestone is allowed and there can be more than one milestone in an arrangement.  The standard is effective for interim and annual periods beginning on or after June 15, 2010.  The Company is currently evaluating the impact the adoption of this guidance will have on its consolidated financial statements.

In February 2010, the FASB issued ASU No. 2010-09, which updates the guidance in ASC 855, Subsequent Events, such that companies that file with the SEC will no longer be required to indicate the date through which they have analyzed subsequent events. This updated guidance became effective immediately upon issuance and was adopted as of the first quarter of 2010.

In February 2010 the FASB issued Update No. 2010-08 Technical Corrections to Various Topics (“2010-08”). 2010-08 represents technical corrections to SEC paragraphs within various sections of the Codification. Management is currently evaluating whether these changes will have any material impact on its financial position, results of operations or cash flows.

In January 2010 the FASB issued Update No. 2010-06 Fair Value Measurements and Disclosures—Improving Disclosures about Fair Value Measurements (“2010-06”). 2010-06 requires new disclosures regarding significant transfers between Level 1 and Level 2 fair value measurements, and disclosures regarding purchases, sales, issuances and settlements, on a gross basis, for Level 3 fair value measurements. 2010-06 also calls for further disaggregation of all assets and liabilities based on line items shown in the statement of financial position. This amendment is effective for fiscal years beginning after December 15, 2010 and interim periods within those fiscal years. The Company is currently evaluating whether adoption of this standard will have a material impact on its consolidated financial position, results of operations or cash flows.

In January 2010 the FASB issued Update No. 2010-05 Compensation—Stock Compensation—Escrowed Share Arrangements and Presumption of Compensation  (“2010-05”). 2010-05 re-asserts that the Staff of the Securities Exchange Commission (the “SEC Staff”) has stated the presumption that for certain shareholders escrowed share represent a compensatory arrangement. 2010-05 further clarifies the criteria required to be met to establish a position different from the SEC Staff’s position. The Company does not believe this pronouncement will have any material impact on its consolidated financial position, results of operations or cash flows.

In January 2010 the FASB issued Update No. 2010-04 Accounting for Various Topics—Technical Corrections to SEC Paragraphs (“2010-04”). 2010-04 represents technical corrections to SEC paragraphs within various sections of the Codification. Management is currently evaluating whether these changes will have any material impact on its consolidated financial position, results of operations or cash flows.

In January 2010 the FASB issued Update No. 2010-02 Accounting and Reporting for Decreases in Ownership of a Subsidiary—a Scope Clarification  (“2010-02”) an update of ASC 810  Consolidation . 2010-02 clarifies the scope of ASC 810 with respect to decreases in ownership in a subsidiary to those of a subsidiary or group of assets that are a business or nonprofit, a subsidiary that is transferred to an equity method investee or joint venture, and an exchange of a group of assets that constitutes a business or nonprofit activity to a non-controlling interest including an equity method investee or a joint venture. Management does not expect adoption of this standard to have any material impact on its consolidated financial position, results of operations or operating cash flows. Management does not intend to decrease its ownership in any of its wholly-owned subsidiaries.

In January 2010 the FASB issued Update No. 2010-01 Accounting for Distributions to Shareholders with Components of Stock and Cash—a consensus of the FASB Emerging Issues Task Force (“2010-03”) an update of ASC 505  Equity . 2010-03 clarifies the treatment of stock distributions as dividends to shareholders and their affect on the computation of earnings per shares. Management does not expect adoption of this standard to have any material impact on its consolidated financial position, results of operations or operating cash flows.

13

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 at September 30, 2010 and December 31, 2009 consist of the followings:

	September 30, 2010			December 31, 2009
Contracts receivables	$	2,484,222		$	2,396,783
Retention receivables		301,079			313,196
Allowance for doubtful accounts		(100,000	)		(50,000	)
	$	2,685,301		$	2,659,979

NOTE E – UNCOMPLETED CONTRACTS

At September 30, 2010 and December 31, 2009, costs, estimated earnings, and billings on uncompleted contracts are summarized as follows:

	September 30, 2010			December 31, 2009
Costs incurred to date on uncompleted contracts	$	3,110,917		$	16,495,273
Estimated earnings		1,771,837			2,760,852
		4,882,754			19,256,125
Less: billed revenue to date		4,729,209			19,330,455
Under (over) billings, net	$	153,545		$	(74,329	)
Costs and estimated earnings in excess of billings	$	406,313		$	123,185
Less: accruals on uncompleted contracts		(252,768	)		(197,514	)
Under (over) billings, net	$	153,545		$	(74,329	)

NOTE F – BACKLOG

The following schedule summarizes changes in backlog on contracts from January 1, 2009 through September 30, 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.  The Conesco figures are not included in the table below, refer to not A and note U.

Backlog balance at January 1, 2009	$	4,089,892
New contracts for the nine months ended September 30, 2009		9,626,581
Add: contract adjustments		833,711
Less: revenue for the nine months ended September 30, 2009		(11,272,860	)
Backlog balance at September 30, 2009	$	3,277,324

Backlog balance at January 1, 2010	$	8,324,093
New contracts for the nine months ended September 30, 2010		7,400,345
Add: contract adjustments		197,698
Less: revenue for the nine months ended September 30, 2010		(10,892,160	)
Backlog balance at September 30, 2010	$	5,029,976

NOTE G – PROPERTY AND EQUIPMENT

Major classes of property and equipment at September 30, 2010 and December 31, 2009 consist of the followings:

14

	September 30, 2010		December 31, 2009
Vehicles	$	196,948	$	196,949
Leasehold improvements		237,013		232,628
Office equipments		211,902		208,279
Tools and other equipment		228,672		228,672
		874,535		866,528
Less: accumulated depreciation		636,160		568,387
Net Property and Equipment	$	238,375	$	298,141

Depreciation expense was $67,756 and $67,366 for the nine months ended September 30, 2010 and 2009, respectively and $10,727 and $15,893 for the three months ended September 30, 2010 and 2009, respectively.

NOTE H – – INTANGIBLE ASSETS AND GOODWILL

Intangibles consist of a non-compete agreement and the customer list.

The following summarizes intangible assets at September 30, 2010 and December 31, 2009:

	September 30, 2010		December 31, 2009
Intangibles: Customer List	$	283,979	$	283,979
Less: accumulated amortization		283,979		181,431
Net Intangibles	$	-	$	-

On January 16, 2009, the Company entered into 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 Accounting Standards Codification 805-10, Business Combinations (ASC 805-10), 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 ASC 350 during the twelve months ended December 31, 2009 and beyond until the value of the asset is deemed impaired.  Goodwill valued at $331,075 has been shown under discontinued operations.

NOTE I – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities at September 30, 2010 and December 31, 2009:

15

	September 30, 2010		December 31,2009
Accounts payable	$	2,027,521	$	2,170,134
Accrued payroll and vacation		18,882		(11,915	)
Accrued payroll taxes		49,393		74
Other liabilities		128,736		55,666
Total	$	2,224,532	$	2,213,959

NOTE J – BANK LINES 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 O).  The line of credit bears interest at the Bank rate minus 0.5%, per annum, with interest due and payable monthly and expires on September 30, 2010.  The balance outstanding under the line of credit at September 30, 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 September 30, 2010 and December 31, 2009, the Company was not in compliance with certain bank loan covenants.  The Company executed a one year extension on the line of credit on October 12, 2010.  As part of the agreement, the line was reduced to $975,000 effective on the date of signing.

NOTE K – NOTES PAYABLE

Notes payable at September 30, 2010 and December 31, 2009 are as follows:

	September 30, 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 O).	$	209,960	$	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 O).		170,001		205,083
Note Payable to Viking Supply, 5% interest per annum, unsecured, 7 payments of $4,919.10 plus interest and a final payment of $4,298.20 plus interest		23,975		-
Note Payable to Roebbelen Construction, interest at 6.0% per annum, unsecured, monthly payment of $6,245.40 for 18 months		101,542		-
Note payable to two individuals, interest at 9.0% per annum, the notes are unsecured, with principal and interest due on or about June 30, 2010.  Company is in default on payment of these notes.		17,500		-
Total notes payable		522,978		517,092
Less: current portion		307,098		184,512
Notes payable – long term	$	215,880	$	332,580

Aggregate maturities of long-term debt as of September 30, 2010 are as follows:

Year ended	Amount
September 30, 2011	$	307,098
September 30, 2012		146,827
September 30, 2013		55,054
September 30, 2014		13,999
Total	$	522,978

16

NOTE L – PREFERRED STOCK

We have designated 40,000 shares of preferred stock as Series A convertible redeemable preferred stock no par value, which may be issued in one or more sub-series, and have authorized the issuance of 23,000 shares of Series A convertible redeemable preferred stock. The Series A Preferred Stock is convertible into shares of our common stock at a conversion price of $0.50 per share, subject to adjustment for customary anti-dilution provisions. Holder may redeem the Series A Preferred Stock partially or in full at the purchase price subject to the holder’s conversion rights or redemption rights. The Series A Preferred Stock accrues dividends at an annual rate of 10% per annum, payable quarterly, either in cash or, at our election, shares of our common stock.

During April 2010, we sold 23,000 shares in a private placement at a price of $25 per share.  The total purchase price was $575,000 and the proceeds to our company, net of commissions paid to our investment advisor, were approximately $523,125.  The investors received 575,000 warrants to purchase common stock. Each warrant is exercisable for a period of five years, with an exercise price of $0.50.  Since the Series A convertible redeemable preferred stock may ultimately be redeemed at the option of the holder, the carrying value of the preferred stock, net of discount and accumulated dividends, has been classified as temporary equity on the balance sheet at September 30, 2010.

As part of the raise the Company paid a cash commission of $51,875 as well as issuing 133,928 shares of its common stock, valued at the time of issuance at $51,875, which was shown as deferred finance cost.  During the three and nine month periods ending September 30, 2010 the Company amortized $26,150 and $47,469, respectively.

In July 2010, the Company amended the purchase and warrant agreement to amend the strike price on the warrants from $0.50 to $0.35 per share.  All other terms remained the same.  This amendment increased the warrants by 321,429 to a total of 821,429 warrants.

In accordance with Emerging Issues Task Force (“EITF”) No.00-27, “Application of EITF Issue No. 98-5, ‘Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Rates’, to Certain Convertible Instruments ”,  a portion of the proceeds were allocated to the warrants based on their relative fair value, which totaled $264,730 using the Black Scholes option pricing model. Further, we attributed a beneficial conversion feature of $513,655 to the Series A preferred shares based upon the difference between the effective conversion price of those shares and the closing price of our common shares on the date of issuance. The assumptions used in the Black Scholes model are as follows:  (1) dividend yield of 0%; (2) expected volatility of 176.1%, (3) weighted average risk-free interest rate of 4%, and (4) expected life of 1 year as the conversion feature and warrants are immediately exercisable. The expected term of the warrants represents the estimated period of time until exercise and is based on historical experience of similar awards and giving consideration to the contractual terms. The amounts attributable to the warrants and beneficial conversion feature, aggregating $513,655, have been recorded as a discount and deducted from the face value of the preferred stock. Since the preferred stock is classified as temporary equity, we are amortizing the discount over the period of one year (the initial redemption date) as a charge to additional paid-in capital (since there is a deficit in retained earnings). The charge to additional paid in capital for 2010 was $221,692.

NOTE M – CAPITAL STOCK

The Company is authorized to issue 70,000,000 shares of common stock with $0.001 par value per share. As of September 30, 2010 and December 31, 2009, the Company had  18,593,880 and 18,532,808 shares of common stock issued and outstanding respectively.  During the nine months ended September 30, 2010, the Company recorded compensation cost of approximately $30,619 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.

In April 2010, the Company sold 23,000 shares of Series A 10% Redeemable Convertible Preferred Stock, no par value, for $575,000 to two accredited investors.  The investors also received 575,000 warrants to purchase shares of common stock at $0.50 per share.  The warrants expire five years from date of issuance, April 2015.  The warrants and strike price were adjusted in August.  The warrants are now priced at $0.35 and have increased to 821,429 warrants.

17

NOTE N – WARRANTS

Transactions involving our warrant issuances are summarized as follows:

	2010				2009
	Number		Weighted Average Exercise Price		Number		Weighted Average Exercise Price
Outstanding at beginning of the period		-	$	-		-	$	-
Granted during the period		821,429		0.35		-		-
Exercised during the period		-		-		-		-
Terminated during the period		-		-		-		-
Outstanding at end of the period		821,429	$	0.35		-	$	-
Exercisable at end of the period		821,429	$	0.35		-	$	-

The number and weighted average exercise prices of our options and warrants outstanding as of September 30, 2010 is as follows:

Range of Exercise Prices		Remaining Number Outstanding		Weighted Average Contractual Life (Years)		Weighted Average Exercise Price
$	0.35		821,429		4.50	$	0.35

NOTE O - 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 September 30, 2010 and 2009, the Company incurred and charged to operations $8,829 and $33,817, respectively, in connection with air travel services provided by the entities to the Company. There were no payables owed to the entities at September 30, 2010 and December 31, 2009, respectively.

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 P - COMMITMENTS AND CONTINGENCIES

Operating Lease Commitments

The Company leases office space under non-cancelable operating leases that expire through December 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:

	Amount
2011	$	217,752
2012		50,445
2013		10,084
2014		1,496
Total	$	279,777

For the nine months ended September 30, 2010 and 2009, rent expense was $121,644 and $135,309, respectively.  For the nine months ended September 30, 2010 and 2009, vehicle lease expense was $128,865 and $178,271, respectively.

18

Litigation

In September 2010, a law suit was filed against the Company and others by Falcon Technologies, Inc. and its subsidiaries.  The essence of the plaintiff’s suit is that the Company actions allegedly violated a merger agreement between Falcon and other parties and, consequently, was party to defrauding Falcon.  The Company believes there is currently a settlement in place for these allegations in which no party admitted to any wrong doing, and, in addition, denies the allegations and will vigorously defend the action.  It is also the Company’s position that this lawsuit is without merit and will seek all remedies available to it under the aforementioned settlement agreement.

NOTE Q – 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.  Refer to note A and note U.

Summarized financial information by line of business for the nine months ended September 30, 2010 and 2009, as taken from the internal management system previously discussed, is listed below.

Revenue	Three months ended				Nine months ended
	September 30, 2010		September 30, 2009		September 30, 2010		September 30, 2009
Fire Protection/Alarm & Detection	$	3,030,000	$	2,217,000	$	7,383,000	$	7,615,000
Telecommunications		699,000		1,208,000		2,686,000		3,233,000
Electrical		3,000		215,000		823,000		425,000
Total	$	3,732,000	$	3,640,000	$	10,892,000	$	11,273,000

Gross Profit	Three months ended					Nine months ended
	September 30, 2010			September 30, 2009		September 30, 2010			September 30, 2009
Fire Protection/Alarm & Detection	$	1,395,000		$	1,166,000	$	3,300,000		$	3,605,000
Telecommunications		(28,000	)		273,000		344,000			778,000
Electrical		(38,000	)		48,000		(196,000	)		60,000
Total	$	1,329,000		$	1,487,000	$	3,448,000		$	4,443,000

Operating Income (Loss)	Three months ended						Nine months ended
	September 30, 2010			September 30, 2009			September 30, 2010			September 30, 2009
Fire Protection/Alarm & Detection	$	821,000		$	284,000		$	1,431,000		$	930,000
Telecommunications		(132,000	)		164,000			50,000			402,000
Electrical		(72,000	)		(30,000	)		(377,000	)		(121,000	)
Corporate		(384,000	)		(686,000	)		(1,350,000	)		(1,832,000	)
Total	$	233,000		$	(268,000	)	$	(246,000	)	$	(621,000	)

Depreciation/Amortization	Three months ended					Nine months ended
	September 30, 2010			September 30, 2009		September 30, 2010		September 30, 2009
Fire Protection/Alarm & Detection	$	(2,000	)	$	7,000	$	13,000	$	21,000
Telecommunications		-			3,000		9,000		3,000
Electrical		-			-		1,000		-
Corporate		44,000			36,000		192,000		102,000
Total	$	42,000		$	46,000	$	215,000	$	126,000

19

Interest (Income)Expense	Three months ended				Nine months ended
	September 30, 2010		September 30, 2009		September 30, 2010			September 30, 2009
Fire Protection/Alarm & Detection	$	1,000	$	-	$	(5,000	)	$	-
Telecommunications		-		-		-			-
Electrical		-		-		-			-
Corporate		56,000		24,000		119,000			70,000
Total	$	57,000	$	24,000	$	114,000		$	70,000

Assets

	September 30, 2010		December 31, 2009
Fire Protection/Alarm & Detection	$	3,198,000	$	2,435,000
Telecommunications		580,000		609,000
Electrical		169,000		721,000
Corporate		958,000		758,000
Discontinued Operations		256,000		1,059,000
TOTAL	$	5,161,000	$	5,582,000

Capital Expenditures

	September 30, 2010		September 30, 2009
Fire Protection/Alarm & Detection	$	-	$	13,900
Telecommunications		-		-
Electrical		-		-
Corporate		7,990		110,910
TOTAL	$	7,990	$	124,810

NOTE R - MAJOR CUSTOMERS AND SUPPLIERS

The Company had two customers accounting for 37% of the total revenue for the nine months ended September 30, 2010 and two customers which accounted for 42% of the total revenue for the nine months ended September 30, 2009. The Company had two customers accounting for 39% of the total revenue for the three months ended September 30, 2010 and two jobs which accounted for 33% of the total revenue for the three months ended September 30, 2009.  The Company often has multiple jobs running under some customers, but the jobs will have different owners and therefore should not necessarily be considered one customer from the standpoint of concentration of risk.

Purchases from the Company’s largest vendor accounted for 46% of materials purchases for the nine months ended September 30, 2010 and from its three largest vendors were approximately 60% for the nine months ended September 30, 2009.  Purchases from the Company’s largest vendor accounted for 50% of purchases for the three months ended September 30, 2010 and from its three largest vendors were approximately 66% for the three months ended September 30, 2009.  There are multiple vendors available to get materials and the Company does not run a risk of shortage due to the loss of any of the vendors.

NOTE S – 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 $57,300, for the nine months ended September 30, 2010 and 2009, respectively.  In April 2010, the Company temporarily suspended the matching portion of the 401(k) plan.

NOTE T — FAIR VALUE

ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

20

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed is determined based on the lowest level input that is significant to the fair value measurement.

Items recorded or measured at fair value on a recurring basis in the accompanying consolidated financial statements consisted of the following items as of September 30, 2010:

	Total			Quoted Prices in Active Markets for Identical Instruments Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3 (A)
Liabilities
Warrant liability	$	(199,813	)		-		-	$	(199,813	)
Reset derivative		(241,232	)		-		-		(241,232	)
Total	$	(441,045	)	$	-	$	-	$	(441,045	)

(A)   Fair value is estimated based on internally-developed models or methodologies utilizing significant inputs that are unobservable from objective sources.

Level 3 Liabilities comprised of our bifurcated reset provision contained within our Series C stock and the fair value of issued warrants with reset provisions.

The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities as of September 30, 2010:

	Warrant Liability			Reset Derivative
Balance, December 31, 2009	$	-		$	-
Total (gains) losses
Warrants issued with Redeemable Preferred Series A		264,730			-
Convertible Redeemable Preferred Series A		-			248,924
Mark-to-market at September 30, 2010:
- Series A Preferred Stock Reset Derivative		-			(7,692	)
- Warrants issued with Convertible Redeemable Preferred Series A		(64,917	)		-
Transfers in and/or out of Level 3		—			—
Balance, September 30, 2010	$	199,813		$	241,232
Total gain for the nine month period included in earnings relating to the liabilities held at September 30, 2010	$	64,917		$	7,692

NOTE U - SUBSEQUENT EVENTS

On October 13, the Company executed an extension with its bank for 1 year on its line of credit.  The terms remained the same.  The bank asked for a payment of $25,000 and reduced the limit on the line to $975,000.  There will be two more payments of $25,000 due to the bank by December 31, 2010 and March 31, 2011 reducing the line of credit limit to $925,000.

21

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 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.).

Pro-Tech Fire services include:

22

	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
	Fire Extinguisher and Hood suppression systems serve, installation, and inspections for Nevada

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.

23

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

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:

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 11 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

Nine months ended September 30, 2010 Compared to Nine months ended September 30, 2009

24

Revenue

Revenues were $10,892,160 for the nine months ended September 30, 2010,  a decrease of $380,700, or 3.4%, from revenues of $11,272,860 for the nine months ended September 30, 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 nine months ended September 30, 2010 and 2009 were approximately $7,383,000 or 68% and $7,615,000 or 68% 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 nine months ended September 30, 2010 and 2009 was approximately $2,686,000 or 25% and $3,233,000 or 29% of total revenue, respectively.  The large contract that has supported this group is starting to wind down.  While there could be additional opportunities with this customer, management is reviewing how to gain traction into other areas where this segment has specialized licensing opportunities that some of the competition does not have at its disposable.  Management is exploring the means to leverage these opportunities and relationships in these trying times.

Electrical segment revenue for the nine months ended September 30, 2010 and 2009 was approximately $823,000 or 8% and $425,000 or 4% of total revenue, respectively.  The increase in revenue was due primarily organic growth and recognition of revenue from over billings, under billings and the accrual for losses on projects projected at December 31, 2009.   The current market segment where are electrical group specializes is slow.  We are currently using our electrical group within our other segments while we wait for their niche market to come back.

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 $7,444,510 or 68% of revenue for the nine months ended September 30, 2010, compared to $6,830,657 or 61% 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 nine months ended September 30, 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 division.   The multi-segment history of our company is rather limited since this is only the 7th quarter with all of our segments up in operation. The historical trend of the last seven 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 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.

Fire Life Safety segment cost of revenue and cost of revenue as a percentage of revenue for the nine months ended September 30, 2010 and 2009 was approximately $4,083,000 and 55% and $4,010,000 and 53%, respectively.  The dollar increase in our cost of revenue is due to the corresponding increase in cost of revenue during the nine months ended September 30, 2010.  The minor change 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.

Telecommunication segment cost of revenue and cost of revenue as a percentage of revenue for the nine months ended September 30, 2010 and 2009 was approximately $2,342,000 and 87% and $2,455,000 and 76%, respectively.   The dollar decrease in cost of revenue is primarily due to the reduction in sales.  The decrease in cost of revenue as a percentage of revenue was due to the blend of project revenue attributable to our existing operations, plus the cost of initial expansion into additional segments of the telecommunications market.  Management believes, but cannot guarantee, that some of these costs should be better leveraged as this area of telecommunications grows.

Electrical segment cost of revenue and cost of revenue as a percentage of revenue for the nine months ended September 30, 2010 and 2009 was approximately $1,019,000 and 124% and $365,000 and 86%, respectively.  The dollar increase in our cost of revenue is due to the corresponding increase in revenue during the nine months ended September 30, 2010.  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 believes it 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 $3,478,513 for the nine months ended September 30, 2010 compared to $4,937,000 for the nine months ended September 30, 2009. The selling, general and administrative cost related to revenues decreased to 31.9% for nine months ended September 30, 2010 as compared to 43.8% for the nine months ended September 30, 2009, despite having a smaller revenue base in 2010.

25

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 levels, consolidation of rents and an older fleet which has reduced our vehicle leasing costs.

Depreciation and amortization

Depreciation and amortization expense increased to $215,267 for the nine months ended September 30, 2010 compared to $125,733 in the nine months ended September 30, 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 finalized in August 2010.  Depreciation expense increased due to leasehold improvements put into the property leased in Sacramento for all of the Sacramento operations.  It also includes the amortization of the financing costs of the Series A preferred stock.

Interest

Net interest expense increased to $113,826 for the nine months ended September 30, 2010 compared expense of $69,735 for the nine months ended September 30, 2009. This change was primarily due to the increase in interest expense due to full use of the line of credit for working capital purposes.

Income Tax

Income tax benefit decreased to $80,490 for the nine months ended September 30, 2010 from $86,472 for the nine months ended September 30, 2009.  This is a $5,982 benefit due mainly to the movement of the section 481a adjustment of $424,814 from deferred status at September 30, 2009 to current at September 30, 2010.  This is offset by the current loss incurred in the nine months ended September 30, 2010, which eliminates any potential deferred tax asset.

Three Months Ended September 30, 2010 Compared to Three Months Ended September 30, 2009

Revenue

Revenues were $3,732,221 for the three months ended September 30, 2010; an increase of $92,000, or 3%, from revenues of $3,640,221 for the three months ended September 30, 2009. This increase was primarily driven by increases in the fire protection segment, offset by a decrease in the telecommunications and electrical segments.  Management is optimistic about the results in the fire segment, but the slow economy is still being watched as we try to increase revenues throughout all of our segments.

Fire Life Safety segment revenue for the three months ended September 30, 2010 and 2009 were approximately $3,030,000 or 81% and $2,217,000 or 61% of total revenue, respectively.  The increase in revenue was due to jobs starting that had been waiting in backlog.  This segment continues to make headway in garnering contracts and has had a recent increase in bid activity in this segment.  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 September 30, 2010 and 2009 was approximately $699,000 or 19% and $1,208,000 or 33% of total revenue, respectively.  The decrease in revenue was due primarily to the winding down of the state project this segment has been working on.  Management is reviewing how to gain traction into areas where this segment has specialized licensing opportunities that some of the competition does not have at its disposable. Management hopes, but cannot guarantee, that they will be able to increase revenues for this segment through these means.

Electrical segment revenue for the three months ended September 30, 2010 and 2009 was approximately $3,000 or 0% and $215,000 or 6% of total revenue, respectively.  The current market segment where are electrical group specializes is slow.  We are currently using our electrical group within our other segments while we wait for their niche market to come back.  

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 $2,403,483 or 64% of revenue for the three months ended September 30, 2010, compared to $2,152,192 or 59% for the same period of the prior year.  The decrease as a percentage of revenue is due to the blend of project revenue attributable to our existing operations and the fire protection segment becoming a larger piece of the revenue.    The current economy is not allowing companies to produce margins from the past and we are no exception.  We are seeking out other segments of the market to allow us to try and increase our margins.  All segments of our company are being monitored closely to keep margins in line with management’s expectations.

26

Fire Life Safety segment cost of revenue and cost of revenue as a percentage of revenue for the three months ended September 30, 2010 and 2009 was approximately $1,635,000 and 54% and $1,051,000 and 47%, respectively.  The dollar increase in our cost of revenue is due to the corresponding increase in revenue during the three months ended September 30, 2010, as well as the increase in cost of revenue as a percentage of revenue was due to the blend of project revenue attributable to our existing operations.

Telecommunications segment cost of revenue and cost of revenue as a percentage of revenue for the three months ended September 30, 2010 and 2009 was approximately $727,000 and 104% and $935,000 and 77%, respectively.  The dollar decrease in our cost of revenue is due to the corresponding decrease in revenue during the three months ended September 30, 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 cost of initial expansion into additional segments of the telecommunications market.  This segment started new business lines and has incurred heavy startup costs.  Management hopes but cannot assure these costs should start to normalize as the revenues increase and wash out the startup costs.

Electrical power segment cost of revenue and cost of revenue as a percentage of revenue for the three months ended September 30, 2010 and 2009 was approximately $41,000 and 1,367% and $167,000 and 78%, respectively.  The dollar decrease in our cost of revenue is due primarily to reduced revenues during the three months ended September 30, 2010.  The increase as a percentage of revenue is due primarily to the blend of project revenue attributable to our existing operations.  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 $1,053,581 for the three months ended September 30, 2010 compared to $1,709,639 for the three months ended September 30, 2009. The selling, general and administrative cost related to revenues decreased to 28.1% for three months ended September 30, 2010 as compared to 47% for the three months ended September 30, 2009.

The decrease is primarily a result of a decrease in administrative payroll, travel related expenses for vehicles, airfare, fuel and hotels.  Management has taken a hard look at these costs and continues to make cuts and adjustments to keep these costs in line as we continue to increase revenue and margin levels.

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

Depreciation and amortization

Depreciation and amortization expense decreased to $42,260 for the three months ended September 30, 2010 compared to $46,643 in the three months ended September 30, 2009.  The decrease came primarily from the end of intangible amortization related to discontinued operations.  This amortization finalized in August 2010.  It was partially offset by the amortization of the financing costs of the Series A preferred stock.

Interest

Net interest expense increased to $57,148 for the three months ended September 30, 2010 compared expense of $23,675 for the three months ended September 30, 2009. This increase was primarily increased charges due to slow pay of invoices and timeliness of payments to vendors.

Income Tax

There was no income tax benefit or expense for the three months ended September 30, 2010 compared to an income of $56,996 for the three months ended September 30, 2009. This is due to the net loss position of the Company and no subsequent realization of any deferred tax assets until positive earnings are gained.

Liquidity and Capital Resources

Liquidity:

For the nine months ended September 30, 2010, we experienced a net loss from continuing operations of $206,856 and a net loss of $610,822 from discontinued operations.  At September 30, 2010, we had $243,500 in cash.  Accounts receivable, net of allowances for doubtful accounts, were $2,685,301 at September 30, 2010.

27

At September 30, 2010, we had negative working capital of $22,968, compared to working capital of $591,965 at December 31, 2009. The ratio of current assets to current liabilities decreased to 1:1 at September 30, 2010 compared to 1.14:1 at December 31, 2009.  Cash used by continuing operations during the nine months ended September 30, 2010 was $356,325 as compared to cash provided by continuing operations of $445,932 for the nine months ended September 30, 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 September 30, 2010 included cash of $243,500 and $2,685,301 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 nine months ended September 30, 2010, we had cash used of $356,325 from our continuing operating activities, primarily as a result of our net loss from continuing operations of $206,856, an increase in costs in excess of billings of $283,128, a decrease in deferred tax liabilities of $80,490 and decrease in accrual for loss against uncompleted contracts of $87,431, primarily offset by increase in billing in excess of cost of $55,254, depreciation and amortization of $170,304, bad debt allowance and write offs of $103,680 and by increase in accounts payable of $115,660 offset by reduction for gain on fair value change of warrants of $72,610.  By comparison, net cash provided by continuing operating activities was $445,932 for the nine months ended September 30, 2009.  This was primarily driven by a large increase in receivables in that quarter.

There was limited investing activity from continuing operations during the nine months ended September 30, 2010.    The activity consisted of upgrading security monitors at the Sacramento offices.  The investing activity during 2009 consisted of the purchase of computers and equipment, and the build out of the Company’s new offices of approximately $124,807.

Financing activity from continuing operations for 2010 consisted of payments on long term debt obligations of $116,700 offset by line of credit borrowings of $100,000 and the sale of Series A preferred stock with gross proceeds of $575,000 and short term notes of $17,500.  For 2009, financing activity from continuing operations consisted of payments on long term debt obligations of $138,082 offset by line of credit borrowings of $314,500.

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 September 30, 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 fourth 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 October 13, 2010, our company executed a new credit facility decreasing the line to $975,000.  The interest rate remains at .5% less than the lender’s index rate, currently 4.5% and the maturity date was reset to September 30, 2011.  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.  As part of the new agreement, we are required to pay down $25,000 by December 31, 2010 and March 31, 2011.

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.

28

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 September 30, 2010 on these two notes are $209,960 and $170,001, respectively.

During the quarter the Company executed notes with two vendors to replace outstanding invoices and allow payments over time.  The Company is paying between 5-6% on these obligations and it has proven to help keep a positive relationship with these vendors.  The notes are pay able over 8 and 18 months.

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

Evaluation of Disclosure Controls and Procedures. Under the supervision and with the participation of our management, including our President, Chief Financial Officer and Secretary, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this report. Based upon that evaluation, our President, Chief Financial Officer and Secretary concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

29

b) Changes in Internal Control over Financial Reporting.

During the Quarter ended September 30, 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:

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.

30

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.

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.. 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.

31

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.

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.

Compliance With Changing Regulation Of Corporate Governance And Public Disclosure Will Result In Additional Expenses And Pose Challenges For Our Management Team.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations promulgated thereunder, the Sarbanes-Oxley Act and SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the U.S. public markets. Our management team will need to devote significant time and financial resources to comply with both existing and evolving standards for public companies, which will lead to increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities.

32

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

In April 2010, the Company sold 23,000 shares of Series A 10% Redeemable Convertible Preferred Stock, no par value, for $575,000 to two accredited investors.  The investors also received 575,000 warrants to purchase shares of common stock at $0.50 per share.  The warrants expire five years from date of issuance, April 2015.  The agreement was modified in August to increase the warrants to 821,629 and reduced the price to $0.35 per share as well as the conversion price for the Series A Preferred stock.  As part of the raise the Company paid a cash commission of $51,875 as well as issuing 133,928 shares of its common stock, valued at the time of issuance at $51,875.

The above offering and sale was made in reliance upon the exemption from registration under Rule 506 of Regulation D promulgated under the Securities Act of 1933 and/or Section 4(2) of the Securities Act of 1933, based on the following: (a) the investors confirmed to us that they were “accredited investors,” as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933 and had such background, education and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in the securities; (b) there was no public offering or general solicitation with respect to the offering; (c) the investors were provided with certain disclosure materials and all other information requested with respect to our company; (d) the investors acknowledged that all securities being purchased were “restricted securities” for purposes of the Securities Act of 1933, and agreed to transfer such securities only in a transaction registered under the Securities Act of 1933 or exempt from registration under the Securities Act; and (e) a legend was placed on the certificates representing each such security stating that it was restricted and could only be transferred if subsequent registered under the Securities Act of 1933or transferred in a transaction exempt from registration under the Securities Act of 1933.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

There were no defaults upon senior securities during the period ended September 30, 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.

(2)   Incorporated by reference to the Company’s filing on Form 10-K, as filed with the Securities and Exchange Commission on April 15, 2010.

(3)  Filed herein.

33

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: November 15, 2010	By:	/s/ Donald Gordon
	Donald Gordon
	Chief Executive Officer

Registrant	Pro-Tech Industries, Inc.
Date: November 15, 2010	By:	/s/ Michael Walsh
	Michael Walsh
	Chief Financial Officer (Principal Financial Officer)

34