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

                                   FORM 10-KSB

(Mark one)

         [X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                  SECURITIES EXCHANGE ACT OF 1934
                  For the fiscal year ended January 31, 1999

                                       OR

         [       ]  TRANSITION  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934 For the transition period from
                  _________ to __________

Commission file number 33-5820-LA                     

                                 SETO HOLDINGS, INC.                       
                    (Name of small business issuer in its charter)

Nevada                                                77-00882545       
(State or other jurisdiction of                     (I.R.S. Employer
incorporation or organization)                      Identification No.)

554 North State Road
Briarcliff Manor, New York                      10510            
(Address of principal executive offices)        Zip Code

Issuer's telephone number (914) 923-5000

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

                                                    Name of each exchange on
Title of each class                                  which registered        

       N/A                                     N/A          

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

                              N/A                                 
                                (Title of class)


<PAGE>

                                            INDEPENDENT AUDITORS' REPORT



Board of Directors
Seto Holdings, Inc. and Subsidiaries
(Formerly Semicon Tools, Inc. and Subsidiaries)
Briarcliff Manor, New York


     We have audited the  consolidated  balance  sheet of Seto  Holdings,  Inc.
(formerly  Semicon Tools,  Inc.) and Subsidiaries as of January 31, 1999 and the
related  consolidated  statements of income (loss),  comprehensive  income, cash
flows and changes in  shareholders  equity for the years ended  January 31, 1999
and 1998.  These financial  statements are the  responsibility  of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits. We did not audit the financial statements of DTI
Technology,  SDN BHD and Fuji  Fabrication SDN BHD,  wholly owned  subsidiaries,
which statements  reflect total assets of $959,985 at January 31, 1999 and total
sales for the years ended  January 31, 1999 and 1998 of $675,022  and  $122,777,
respectively.  Those  statements were audited by other auditors whose report has
been  furnished  to us, and our  opinion,  insofar as it relates to the  amounts
included for DTI  Technology,  SDN BHD and Fuji  Fabrication,  SDN BHD, is based
solely on the report of the other auditors.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We  believe  that our  audits  and the  reports  of  other  auditors  provide  a
reasonable basis for our opinion.

     In our opinion,  based on our audits and the report of other auditors,  the
consolidated  financial  statements  referred to above  present  fairly,  in all
material  respects,  the financial  position of Seto  Holdings,  Inc.  (formerly
Semicon Tools,  Inc.) and Subsidiaries as of January 31, 1999 and the results of
their  operations  and their cash flows for the years ended January 31, 1999 and
1998, in conformity with generally accepted accounting principles.





ZELLER WEISS & KAHN
April 28, 1999
Mountainside, New Jersey
                                                                           F-1


<PAGE>



                                       SETO HOLDINGS, INC. AND SUBSIDIARIES
                                 (FORMERLY SEMICON TOOLS, INC. AND SUBSIDIARIES)

                                  CONSOLIDATED BALANCE SHEET - JANUARY 31, 1999






                                                      ASSETS


Current assets:
  Cash                                                        $   66,052
  Accounts receivable, less allowance
   for doubtful accounts of $10,500                              388,464
  Inventory                                                      760,698
  Prepaid expenses and other current assets                       34,310
  Deferred tax asset, current portion                            108,000
                                                               ----------
    Total current assets                                       1,357,524
                                                               ---------

Property and Equipment                                           579,757
                                                               ---------

Other assets:
  Goodwill, net of amortization                                  116,217
  Security deposits                                               15,550
  Deferred tax asset, net of current portion                     216,000
  Loan receivable, officer                                        10,815
                                                              ----------
                                                                 358,582
                                                               ----------

                                                              $2,295,863
                                                              ==========


                                       LIABILITIES AND SHAREHOLDERS' EQUITY


Current liabilities:
  Current portion of long-term debt                           $  145,260
  Notes payable, bank                                            335,000
  Accounts payable                                               266,633
  Accrued expenses                                                44,761
                                                               ----------
    Total current liabilities                                    791,654
                                                               ----------

Long-term debt, net of current portion                           222,847
                                                               ----------

Deferred lease liability                                           4,500
                                                                   -----

Commitments and contingencies

Shareholders' equity:
  Common stock par value $.001; 100,000,000
   shares authorized 10,548,500 shares issued                     10,549
  Additional paid in capital                                   2,779,625
  Currency translation adjustment                            (   119,374)
  Retained earnings (deficit)                                ( 1,378,772)
                                                              ----------
                                                               1,292,028
  Less common shares held in treasury, 49,400
   shares at cost                                                 15,166
                                                             -----------

  Total shareholders equity                                    1,276,862
                                                               ---------

                                                              $2,295,863
                                                              ----------




     See notes to consolidated financial statements.
                                                                           F-2


<PAGE>



                         SETO HOLDINGS, INC. AND SUBSIDIARIES
                   (FORMERLY SEMICON TOOLS, INC. AND SUBSIDIARIES)

                       CONSOLIDATED STATEMENT OF INCOME (LOSS)

                        YEARS ENDED JANUARY 31, 1999 AND 1998









                                                                      1998
                                                    1999            Restated

Net sales                                       $2,646,650         $1,931,606

Cost of sales                                    1,036,651            555,505
                                                ----------         ----------

Gross profit                                     1,609,999          1,376,101

Selling, general and administrative
 expenses                                        1,432,671          1,172,175
                                                ----------         ----------

Income from operations                             177,328            203,926
                                                ----------         ----------

Other income (expenses):
  Interest expense                             (    53,647)       (    35,701)
  Loss on foreign currency exchange            (       900)       (    37,719)
                                                 ----------         ----------
                                               (    54,547)       (    73,420)
                                                 ----------         ----------

Income before income taxes                         122,791            130,506

Deferred income tax (benefit)                  (   109,750)       (   120,500)
                                                 ----------         ----------

Income from continuing operations                  232,541            251,006
                                                 ----------         ----------

Discontinued operations:
  Income from operations of subsidiary           1,017,537            378,580
  Loss on disposal of subsidiary               ( 1,477,040)                   
                                                ----------          ----------

                                               (   459,503)           378,580
                                                 ----------         ----------

Net income (loss)                              ($  226,962)        $  629,586
                                                 ==========         ==========

Earnings per share information:
  Income from continuing operations             $      .02         $      .02
                                                 ----------         ----------

Discontinued operations:
  Income from operations of subsidiary                 .06                .03
  Loss on disposal of subsidiary               (       .09)
                                                 ----------         ----------
                                               (       .03)               .03
                                                 ----------         ----------

  Net income (loss) per share                  ($      .01)        $      .05
                                                 ==========          ==========










     See notes to consolidated financial statements.
                                                                            F-3


<PAGE>



                                     SETO HOLDINGS, INC. AND SUBSIDIARIES
                                (FORMERLY SEMICON TOOLS, INC. AND SUBSIDIARIES)

                                CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

                                     YEARS ENDED JANUARY 31, 1999 AND 1998
























                                                     1999             1998
                                                     ----             ----


Net income (loss)                                 ($226,962)        $629,586

Other comprehensive income, net of tax:
  Foreign currency translation adjustment           466,126        ( 585,500)
                                                   --------         --------

Comprehensive income                               $239,164         $ 44,086
                                                   ========          ========




























     See notes to consolidated financial statements.
                                                                          F-4


<PAGE>



                                     SETO HOLDINGS, INC. AND SUBSIDIARIES
                                (FORMERLY SEMICON TOOLS, INC. AND SUBSIDIARIES)

                                     CONSOLIDATED STATEMENT OF CASH FLOWS

                                     YEARS ENDED JANUARY 31, 1999 AND 1998





<TABLE>
<CAPTION>
<S>                                                                                  <C>               <C>    


                                                                                                          1998
                                                                                         1999           Restated

Operating activities:
  Income form continuing operations                                                   $232,541           $251,006
  Adjustments to reconcile net income to cash
   provided by continuing operations:
     Depreciation and amortization                                                      50,667             42,599
     Compensatory stock issued                                                           5,000
     Loss on foreign currency exchange                                                     900             37,719
     Changes in other operating assets and
      liabilities:
        Accounts receivable                                                         (  85,190)         ( 132,849)
        Inventories                                                                 ( 382,242)         ( 161,318)
        Prepaid expenses and other current assets                                       20,803             26,036
        Deferred tax assets                                                         ( 109,750)         ( 120,500)
        Other assets                                                                     3,861         (   4,072)
        Accounts payable and accrued expenses                                          189,655             68,034
        Deferred lease liability                                                         4,500                   
                                                                                      --------           --------

        Net cash provided by (used in) operating
         activities                                                                 (  69,255)              6,655
                                                                                     --------            --------

Investing activities:
  Purchase of property and equipment                                                ( 341,440)         (  57,140)
  Increase in loan receivable, officer                                              (  10,815)                   
                                                                                     --------            --------

        Net cash used in investing activities                                       ( 352,255)         (  57,140)
                                                                                     --------           --------

Financing activities:
  Proceeds from issuance of common stock                                               120,000                500
  Proceeds from financing                                                              387,352            251,283
  Payment of debt                                                                   ( 140,387)         ( 211,537)
  Purchase of treasury stock                                                        (  15,166)                   
                                                                                     --------            --------

        Net cash provided by financing activities                                      351,799             40,246
                                                                                      --------           --------

Effect of exchange rate changes on cash                                                 29,668                   
                                                                                      --------           --------

Net decrease in cash                                                                (  40,043)         (  10,239)

Cash, beginning of year                                                                106,095            116,334
                                                                                      --------           --------

Cash, end of year                                                                     $ 66,052           $106,095
                                                                                      ========           ========




</TABLE>






     See notes to consolidated financial statements
                                                                            F-5

<PAGE>



                           SETO HOLDINGS, INC. AND SUBSIDIARIES
                    (FORMERLY SEMICON TOOLS, INC. AND SUBSIDIARIES)

                    CONSOLIDATED STATEMENT OF  CHANGES IN SHAREHOLDERS' EQUITY

                                     YEARS ENDED JANUARY 31, 1999 AND 1998


<TABLE>
<CAPTION>
<S>                                    <C>            <C>          <C>          <C>         <C>             <C>      <C>


                                                                                   Equity
                                                                                 adjustment
                                                                    Additional   from foreign    Retained                    Total
                                                         Common      paid in      currency       earnings    Treasury  Shareholders'
                                             Shares       stock       capital     translation   (deficit)     stock        equity
                                             ------       -----       -------     -----------    -------      -----        ------


Balance, January 31, 1997                  9,367,500    $ 9,368     $2,517,945                ($1,781,396)              $  745,917

Shares issued for services                   500,000        500                                                                500

Issuance of shares regarding acquisition
 of subsidiary, Teik Tatt, SDN BHD        10,000,000     10,000      6,614,144                                           6,624,144

Foreign currency translation adjustment
 for the year ended January 31, 1998                                             ($585,500)                            (   585,500)

Net income for the year ended January 31,
 1998                                                                                             629,586                  629,586
                                          ----------     -------     ----------    --------    ----------     -------    ----------

Balance, January 31, 1998                 19,867,500      19,868     9,132,089   ( 585,500)   ( 1,151,810)               7,414,647
Cancellation of shares issued regarding
 acquisition of subsidiary, Teik Tatt,
 SDN BHD                                 (10,000,000)   ( 10,000)  ( 6,614,143)                                        ( 6,624,143)

Issuance of shares regarding acquisition
 of subsidiary, Fuji Fabrication, SDN BHD    100,000         100        99,900                                             100,000

Shares issued for cash                       450,000         450       119,550                                             120,000
Shares issued for services                   131,000         131        42,229                                              42,360

Purchase of treasury stock                                                                                  ($15,166)  (    15,166)

Foreign currency translation adjustment
 for the year ended January 31, 1999                                               466,126                                 466,126

Net loss for the year ended January 31,
 1999                                                                                         (   226,962)             (   226,962)
                                            ----------     -------   ----------   --------     ----------    -------    ----------

Balance, January 31, 1999                   10,548,500     $10,549  $2,779,625   ($119,374)   ($1,378,772)  ($15,166)   $1,276,862
                                            ==========     =======   ==========   ========     ==========    =======    ==========



</TABLE>


     See notes to consolidated financial statements.
                                                                           F-6


<PAGE>



                                     SETO HOLDINGS, INC. AND SUBSIDIARIES
                                (FORMERLY SEMICON TOOLS, INC. AND SUBSIDIARIES)

                                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS









1.      Organization of the Company:

     Seto Holdings, Inc. (the "Company"), a Nevada corporation,  is primarily in
the  business  of selling  small  precision  disposable  diamond  and other base
material tools used to cut and separate  electronic  components and devices.  In
addition, it has three subsidiaries with their own product lines.
  

     One of the Company's wholly-owned  subsidiaries,  East Coast Sales Company,
Inc.  ("ECS") is a Connecticut  corporation  which  distributes  and  fabricates
industrial  ceramic products and distributes clean room supplies and tools. This
company,  which was acquired on January 26, 1990,  was accounted for in a manner
similar to the pooling of interests method of accounting.  The total cost of the
acquisition,  $309,000, was paid for by the issuance of a $300,000 note, bearing
interest at 10% per annum,  and the issuance of 60,000  shares of the  Company's
$.001 par value common stock.

     The  Company's  wholly-owned  subsidiary,  DTI  Technology,  SDN  BHD  is a
Malaysian  company  which  manufactures  a product  line similar to that of Seto
Holdings,  Inc. Seto Holdings,  Inc. acquired the assets of DTI Technology,  SDN
BHD on June 22, 1996. The total cost of the acquisition,  $125,048, was paid for
by the issuance of 300,000 shares of the Company's  $.001 par value common stock
with a negotiated fair value of $.42 per share.


     The Company's other wholly-owned subsidiary,  Fuji Fabrication,  SDN BHD, a
Malaysian  corporation,  manufactures cellular phone replacement  batteries.  On
June 30, 1998,  the Company issued  100,000  shares of its  unregistered  common
shares in exchange for 100% of the outstanding  shares of Fuji Fabrication,  SDN
BHD,  the  value of the  shares  being  $1.00 per  share.  The  acquisition  was
accounted for as a purchase.



2. Summary of significant accounting policies:

     Principles of consolidation:  The consolidated financial statements of Seto
Holdings, Inc. and subsidiaries include all the accounts of Seto Holdings, Inc.,
East Coast Sales Company,  DTI Technology,  SDN BHD and Fuji Fabrication SDN BHD
after elimination of all significant intercompany transactions and accounts. The
financial  statements  give  retroactive  effect to the disposition of Teik Tatt
Holding Co., SDN BHD.









                                                                          F-7


<PAGE>



                                       SETO HOLDINGS, INC. AND SUBSIDIARIES
                                (FORMERLY SEMICON TOOLS, INC. AND SUBSIDIARIES)

                                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS








2.      Summary of significant accounting policies (continued):

        Cash and cash equivalents:
         Cash and cash equivalents include all highly liquid investments with an
           original maturity of three months or less.



        Inventories:
         Inventories,  which consist solely of finished goods, are stated at the
           lower of cost or  market.  Market  is  considered  at net  realizable
           value.

        Per share amounts:
         Net earnings per share are  calculated  by dividing net earnings by the
           weighted  average  shares of common stock of the Company and weighted
           average  of common  stock  equivalents  outstanding  for the  period.
           Common stock equivalents represent the dilutive effect of the assumed
           exercise of certain  outstanding stock options.  The Company uses the
           treasury stock method in its treatment of stock options.

        Foreign currency translation policy:
         For foreign subsidiaries whose functional currency is the local foreign
           currency,  balance sheet accounts are translated at exchange rates in
           effect  at the end of the  year and  income  statement  accounts  are
           translated at average exchange rates for the year . Translation gains
           or losses are  included  as a  separate  component  of  shareholders'
           equity.   Exchange   differences   arising  from   foreign   currency
           translation are included in the profit and loss account.

        Property and equipment:
         Property and equipment are stated at cost. Depreciation of property and
           equipment  is  provided  using  the  straight-line  method  over  the
           following useful lives:



                                                                      Years
           Manufacturing                                               5-20
           Furniture and fixtures                                      7-20
           Other equipment                                             5-14
           Buildings and improvements                                 10-50
           Automotive equipment                                         5




        Expenditures  for major renewals and  betterment  that extend the useful
         lives of property  and  equipment  are  capitalized.  Expenditures  for
         maintenance and repairs are charged to expense as incurred.









                                                                           F-8


<PAGE>



                                      SETO HOLDINGS, INC. AND SUBSIDIARIES
                                 (FORMERLY SEMICON TOOLS, INC. AND SUBSIDIARIES)

                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS









2.      Summary of significant accounting policies (continued):

        Income taxes:
         The Company has  elected to file a  consolidated  corporate  income tax
           return with its subsidiaries. For tax reporting purposes, the Company
           uses certain accelerated depreciation methods which may create timing
           differences  between book and tax income.  Deferred income taxes will
           be reflected for these timing differences.

        Deferred taxation:
         Provision is made by the  liability  method for  taxation  deferred  in
           respect of all timing differences. Deferred tax benefit is recognized
           only when there is reasonable assurance of realization.

        Post retirement benefits:
         OnDecember 31, 1990, the Financial  Accounting  Standards  Board (FASB)
           issued  Statement of Financial  Accounting  Standards (SFAS) No. 106,
           "Employers'  Accounting  for  Post  Retirement  Benefits  Other  Than
           Pensions." SFAS No. 106 requires that companies recognize the cost of
           providing post retirement health care and other non-pension  benefits
           over the employees' service periods,  rather than as the benefits are
           paid. The Company does not provide any  non-pension  post  retirement
           benefits at the present time.

        Allowance for doubtful accounts:
         Anallowance  for  doubtful  accounts  has  been  established  based  on
           management's  review of the outstanding  accounts  receivable balance
           and their determination of possible uncollectible accounts.

        Use of estimates:
         The preparation  of financial  statements in conformity  with generally
           accepted   accounting   principles   requires   management   to  make
           assumptions   that  affect  the   reported   amounts  of  assets  and
           liabilities  and disclosure of contingent  assets and  liabilities at
           the date of the  financial  statements  and the  reported  amounts of
           revenues and expenses  during the reporting  period.  Actual  results
           could differ from those estimates.

        Hire purchase obligations:
         Assets acquired  under an  installment  plan are  capitalized  as fixed
           assets and the  corresponding  obligations are treated as a long-term
           liability.  Financing  charges are  allocated  to the profit and loss
           account over the purchase periods using the "sum of the years digits"
           method  to  give  a  constant  periodical  rate  of  interest  on the
           remaining liabilities.










                                                                           F-9


<PAGE>



                                       SETO HOLDINGS, INC. AND SUBSIDIARIES
                                 (FORMERLY SEMICON TOOLS, INC. AND SUBSIDIARIES)

                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS








3. Nature of operation, risks and uncertainties:

        The Company  currently  has a  minuscule  share of the dicing  blade and
         ceramics  market.  There can be no  assurance  that the Company will be
         able to increase  its market  share or that the market  will  increase.
         Furthermore,  the  Company  faces the  possibility  of  adverse  market
         conditions from technological changes,  shifting product emphasis among
         competitors and the entry of new competitors into the market.



4. Property and equipment:

    Major classifications of property and equipment are as follows:



        Leasehold improvements                                 $   97,516
        Manufacturing equipment                                   977,470
        Office equipment                                           51,269
                                                                ----------
                                                                1,126,255
        Less accumulated depreciation                             546,498
                                                                  -------

                                                               $  579,757
                                                                ==========




5.      Goodwill:

     On January 26, 1990,  the Company  acquired  East Coast Sales  Company (its
wholly-owned subsidiary) for a cost of $309,000. The purchase price exceeded the
fair value of the assets by $134,281 which amount was assigned to goodwill,  and
is being  amortized  on a  straight-line  basis  over forty  years.  Accumulated
amortization of goodwill aggregated $38,757 as of January 31, 1999.

     On June 30, 1998, the Company acquired Fuji Fabrication, SDN BHD for a cost
of $100,000.  The purchase  price  exceeded fair value of the assets by $20,999,
which amount was assigned to goodwill and is being  amortized  over a forty year
period.  Accumulated  amortization of goodwill aggregated $306 as of January 31,
1999.












                                                                        F-10


<PAGE>



                                      SETO HOLDINGS, INC. AND SUBSIDIARIES
                                 (FORMERLY SEMICON TOOLS, INC. AND SUBSIDIARIES)

                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







6. Commitments and contingencies:

     In April 1998,  the Company moved its New York  operations and is currently
obligated  under a lease  agreement  with an entity  owned by an  officer of the
Company  which  expires on April 30,  2013.  Annual rent  expense is as follows:
$60,000  for each of the first five  years,  $66,000 for each of the second five
years  and  $72,000  for each of the  final  five  years.  The  Company  is also
obligated for insurance and the increase in real estate taxes over the base year
as stipulated in the lease.  This lease  requires the following  future  minimum
rental payments:



              January 31, 2000                              $ 60,000
              January 31, 2001                                60,000
              January 31, 2002                                60,000
              January 31, 2003                                60,000
              January 31, 2004                                64,500
              Thereafter                                     640,500
                                                            --------
                                                            $945,000
                                                            ========

        Rent expense amounted to $69,483 for the year ended January 31, 1999.

        The Company also leases three vehicles under operating leases with terms
         expiring  through 1999. Total lease expense was $33,317 and $33,597 for
         the year ended January 31, 1999 and 1998, respectively.



7. Common stock:

        During the year ended  January  31,  1999,  the Company  issued  450,000
         shares of its common  shares with net  proceeds  of  $120,000  upon the
         exercise of certain common stock purchase options.

        The Company  issued  100,000 shares of its common shares to acquire Fuji
         Fabrication,  SDN  BHD  and  1,270,000  shares  to  acquire  Southsonic
         Corporation,  Inc.,  SDN BHD,  1,200,000 of which were  returned to the
         Company and  cancelled  (see Note 1). It also issued  36,000 shares for
         certain consulting and professional services rendered.



8. Notes payable and long-term debt:

        The  Company  has an  outstanding  line of  credit  with  the a bank for
         $500,000.  Interest  is  payable  monthly at a rate of 1% per year over
         prime.  The loan is secured by the personal  guarantee of the Company's
         president  and the assets of Seto  Holdings,  Inc. At January 31, 1999,
         the Company had utilized $335,000 of this line.







                                                                         F-11


<PAGE>



                                      SETO HOLDINGS, INC. AND SUBSIDIARIES
                                (FORMERLY SEMICON TOOLS, INC. AND SUBSIDIARIES)

                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS









8.      Notes payable and long-term debt (continued):

        Long-term debt consists of the following:

                                                          Balance
                                                         January 31,
                                             Rate           1999       Maturity

        Notes payable:
           Bank                    (a)     Prime + 1%     $ 41,291       2001
           Shareholder             (b)            10%      104,816       2002
           Shareholder             (c)            15%      222,000       2004
                                                          --------
                                                           368,107
           Less current portion                            145,260
                                                           -------
                                                          $222,847
                                                          ========


        (a)      The note is payable in monthly installments of $1,989 including
                 interest.  Machinery  and  equipment  with a cost of $57,000 is
                 pledged as collateral.

        (b)      The note is payable in monthly installments of $4,053 including
                 interest.

        (c)      The note is payable as follows:

                               March 15, 1999                       $25,000
                               April 15, 1999                        13,500
                               May 15, 1999                          13,500


             The   remaining   balance  of  $170,000  is  payable  in  monthly
             installments  of  $4,731   beginning  March  15,  1999  through
             February 2003.


        The maturities of these loans are as follows:


                        January 31, 2000                     $145,260
                        January 31, 2001                      102,664
                        January 31, 2002                       63,739
                        January 31, 2003                       51,772
                        January 31, 2004                        4,672












                                                                          F-12


<PAGE>



                                      SETO HOLDINGS, INC. AND SUBSIDIARIES
                                (FORMERLY SEMICON TOOLS, INC. AND SUBSIDIARIES)

                                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS






9. Income taxes:

        Effective  February 1, 1993, the Company adopted  Statement of Financial
         Accounting  Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
         109"),  the  cumulative  effect  of  which  was  not  material  to  the
         consolidated  financial  statements  and  is  therefore  not  presented
         separately.  Under  the  asset and  liability  method of SFAS No.  109,
         deferred tax assets and  liabilities  are recognized for the future tax
         consequences  attributable  to the  differences  between the  financial
         statement carrying amounts of existing assets and liabilities and their
         respective tax bases and operating  loss and tax credit  carryforwards.
         Deferred  tax assets and  liabilities  are measured  using  enacted tax
         rates  expected  to apply to taxable  income in the year in which those
         temporary  differences  are expected to be recovered or settled.  Under
         SFAS No. 109,  the effect on deferred tax assets and  liabilities  of a
         change in tax rates is recognized in income in the period that includes
         the enactment  date;  this effect was  immaterial  for the years ending
         January 31, 1999 and 1998. The deferred tax asset less the deferred tax
         liabilities has been reduced by a valuation  allowance equal to the net
         tax benefit in excess of the  estimated  taxable  profits over the next
         three years.

        Provision for income taxes (benefit):
                                                   1999              1998
                                                   ----              ----

                  Current                            0            $ 58,718
                  Deferred                   ($109,750)          ( 179,218)
                                               --------            --------
                    Total benefit            ($109,750)          ($120,500)
                                              ========            ========


        Areconciliation  of the income tax  provision  at the federal  statutory
         rate to the  income  tax  provision  at the  effective  tax  rate is as
         follows

                                                         1999             1998
                                                         ----             ----
              Income tax computed at the
                 federal statutory rates                   0           $ 44,968
              State tax (net of federal benefit)           0             13,750
              Net operating loss carryforward      ($109,750)         ( 179,218)
                                                    --------           --------

              Provision (credit) for income taxes  ($109,750)         ($120,500)
                                                    ========           ========


        The  components  of deferred tax assets and  liabilities  consist of the
      following:

        Deferred tax asset:

           Net operating loss carryforward         $475,000            $480,000
                                                   --------            --------

              Total deferred tax asset              475,000             480,000

              Valuation allowance                   151,000             265,750
                                                   --------            --------

                                                   $324,000            $214,250
                                                   ========            ========




                                                                          F-13


<PAGE>



                                      SETO HOLDINGS, INC. AND SUBSIDIARIES
                                 (FORMERLY SEMICON TOOLS, INC. AND SUBSIDIARIES)

                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







9.      Income taxes (continued):

        The Company  has a net  operating  loss carry  forward of  approximately
         $1,600,000 for federal and state purposes which will expire in 2008.



10. Employment and consulting agreements:

        Employment agreements:

        On May 1, 1996, the Company entered into employment  agreements with its
         President and Vice President.  The term of the agreements covers a five
         year period  expiring April 30, 2003.  Compensation is set at a base of
         $100,000   and  $75,000   for  the   President   and  Vice   President,
         respectively,  with each  getting a bonus of 5% of the increase in Seto
         Holdings,  Inc./East Coast Sales  consolidated  net income over the net
         income from the previous years.  Each employee also received  1,000,000
         stock  options at $.25,  1,000,000  stock  options at $.10 and  500,000
         stock  options  at  $.50.  The  options  were  not  part  of  the  1997
         Non-statutory  Stock  Option Plan  effectuated  March 25,  1997.  As of
         January 31, 1999, none of these options had been exercised.

        On July 15, 1998, the Company entered into an employment  agreement with
         the acting secretary of the Company. The term of the agreement covers a
         five year period expiring July 15, 2003.  Compensation is set at a base
         of  $55,000  with a  bonus  of 2% of any  increase  in  Seto  Holdings,
         Inc./East Coast Sales  consolidated net income over the net income from
         the previous  years.  The employee also received  500,000 stock options
         exercisable at $.50 per share,  none of which have been exercised as of
         January 31, 1999. These options were not part of the 1997 non-statutory
         stock option Plan effectuated March 25, 1997.

        Consulting agreements:

        On January  1,  1998,  the  Company  granted a  consultant  an option to
         purchase  100,000  shares of common  stock of Seto  Holdings,Inc.  at a
         price of $.05 per share for a period  of three  years  from the date of
         signing.  This option was issued for services the  consultant  provided
         which were related to the Teik Tatt acquisition.  The shares underlying
         these options were issued pursuant to the Company's 1997  Non-Statutory
         Stock Option Plan. The option was exercised February 6, 1998.

        On February 9, 1998, the Company entered into a consulting agreement for
         the period February 9, 1998 to December 31, 1998, subsequently extended
         to December 2000 for strategic planning, corporate planning, merger and
         acquisition and divestiture advice. In consideration for the consulting
         services,  the Company  granted an option to the consultant to purchase
         600,000  shares  of  common  stock at a price of $.50 per  share  for a
         period of two years  commencing  four  months from the date of signing.
         This







                                                                          F-14


<PAGE>



                                      SETO HOLDINGS, INC. AND SUBSIDIARIES
                                 (FORMERLY SEMICON TOOLS, INC. AND SUBSIDIARIES)

                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS








10.  Employment and consulting agreements (continued):

        Consulting agreements (continued):

         option  was  reduced to  300,000  shares at $.25 per share.  The shares
         underlying  these options were issued  pursuant to the  Company's  1997
         non-statutory  Stock Option Plan, 100,000 shares were issued subsequent
         to January 31, 1999.

        Also on  February  9,  1998,  the  Company  entered  into  a  consulting
         agreement  for the period  February  9, 1998 to  December  31, 1998 and
         subsequently   extended  to  December  2000  for  strategic   planning,
         corporate  planning,  merger and acquisition and divestiture advice. In
         consideration  for the  consulting  agreement  the  Company  granted an
         option to purchase  100,000  shares of common  stock at a price of $.50
         per share for a period of two years  commencing  four  months  from the
         date of the  signing  of  this  agreement.  50,000  options  have  been
         exercised. The shares underlying these options will be registered under
         the Securities Act of 1933.

        On July 1, 1998, the Company entered into a consulting agreement for the
         period July 1, 1998 to June 30, 1999 for strategic planning,  corporate
         planning,   mergers  and  acquisitions  and  divestiture   advice.   In
         consideration  for the  consulting  agreement  the  Company  granted an
         option to purchase  1,000,000  shares of its common stock at a price of
         $.50 per share for one year from the date of  signing  this  agreement.
         This option was reduced to 100,000 shares at $.30 per share.




11. Computation of earnings per share:



                                                        1999            1998
                                                        ----            ----
              Weighted average number of
               common shares outstanding             10,300,219       9,276,741

              Assumed conversion of
               stock options                                          1,335,615
                                                     ----------       ---------

              Weighted average number of
               common shares outstanding             10,300,219      10,612,356
                                                     ==========      ==========



        The  conversion  of stock  options  was not  assumed  for the year ended
         January 31, 1999 as the effect would be antidilutive.








                                                                           F-15


<PAGE>



                                      SETO HOLDINGS, INC. AND SUBSIDIARIES
                                 (FORMERLY SEMICON TOOLS, INC. AND SUBSIDIARIES)

                                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







12. Acquisition of subsidiary, Fuji Fabrication, SDN BHD:

        On June 30, 1998, the Company  purchased 100% of the outstanding  common
         shares of Fuji  Fabrication,  SDN BHD in a transaction  to be accounted
         for as a purchase.  The  Company  issued  100,000  shares of its common
         stock valued at $1.00 per share.

        The assets  acquired and  liabilities  assumed as of June 30, 1998, the
         date of the acquisition, are as follows:

                      Current assets                                $ 72,511

                      Non-current assets                              23,795
                                                                      ------
                                                                      96,306

                      Current liabilities                             17,305
                                                                      ------

                      Net assets acquired                             79,001

                      Purchase price                                 100,000
                                                                     -------

                      Excess of purchase price over
                       net assets acquired                          $ 20,999
                                                                    ========



13. Disposition of subsidiary, Teik Tatt Holding Co., SDN BHD:

        In November 1997, the Company issued  10,000,000  shares of unregistered
         common  shares in exchange for 100% of the  outstanding  shares of Teik
         Tatt Holding Co., SDN BHD, a Malaysian corporation,  which manufactures
         rubber bands,  plastic  ropes and recycles  plastic and metal from wire
         cable,  electronic  devices and circuit  boards.  The  acquisition  was
         valued at the book  value of the  acquired  company  of  $6,560,000  or
         approximately  $.66 per share.  The transaction was reversed  effective
         September 15, 1998 when the Company returned all of the acquired shares
         of Teik Tatt Holding Co. in exchange for the  10,000,000  shares of its
         common stock, which were immediately cancelled.


14. Common stock options outstanding:

        On March 25, 1997, the Company  effectuated a Non-statutory Stock Option
         Plan for the purpose of advancing  the interests of the Company and its
         stockholders  by helping the Company  obtain and retain the services of
         key management employees, officers, directors and consultants. The Plan
         is  administered  by the  Non-statutory  Stock Option  Committee of the
         Board of Directors of the Company. The committee has full authority and









                                                                          F-16


<PAGE>



                                       SETO HOLDINGS, INC. AND SUBSIDIARIES
                                 (FORMERLY SEMICON TOOLS, INC. AND SUBSIDIARIES)

                                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







14. Common stock options outstanding (continued):

         discretion  to determine  the eligible  participants  to be granted the
         options, the date of issuance,  exercise price and expiration date. The
         total  number of shares  set  aside  for the Plan is  6,500,000.  As of
         January 31, 1999,  950,000  options had been issued under the Plan,  of
         which 220,000 had been exercised by April 1999.

        The Company  has elected to  continue  use of the methods of  accounting
         described by APB-25 "Accounting for Stock Issued to Employees" which is
         based on the intrinsic value of equity  instruments and has not adopted
         the principles of SFAS-123  "Accounting  for Stock Based  Compensation"
         effective for fiscal year beginning  after December 15, 1995,  which is
         based  on  fair  value.  There  is no  significant  difference  between
         compensation  cost  recognized  by APB-25 and the fair value  method of
         SFAS-123.  The Company has not recognized  compensation on the granting
         of options or  warrants to  employees  and  consultants  since the fair
         value of warrants  or options is the same as or less than the  exercise
         price.

        Summary of options are as follows:

<TABLE>
<CAPTION>
<S>                                               <C>             <C>                <C>              <C>    
                                                                                      Exercise         Expiration
                                                     Date             Amount            Price              Date

        Eugene Pian, Officer                       05/01/96          1,000,000            $.25           05/01/01
        Eugene Pian, Officer                       02/13/97          1,000,000             .10           05/01/01
        Eugene Pian, Officer                       07/15/98            500,000             .50           06/30/03
        Craig Pian, Officer                        05/01/96          1,000,000             .10           05/01/01
        Craig Pian, Officer                        02/13/97          1,000,000             .10           05/01/01
        Craig Pian, Officer                        07/15/98            500,000             .50           06/30/03
        Francine Pian, Officer                     07/15/98            500,000             .50           06/30/03

        Tan Hun Chin, Director                     11/27/97         $  500,000             .10           11/27/00
        Consultant                                 06/19/98            300,000             .25           06/09/00
        Consultant                                 07/01/98            100,000             .30           04/30/99
        Employee                                   11/05/97             25,000             .05           11/05/99
        Employee                                   11/05/97             25,000             .05           11/05/99

</TABLE>


15. Principal products and segmentation of sales:

        The  Company's  principal  products  are  industrial  ceramics,  diamond
         cutting tools and cellular  batteries.  The tools include dicing blades
         which are components of precision  electronic  saws,  scribes which are
         used to cut silicon  wafers,  porcelain  and ceramic molds and dressers
         which are used for the shading  and  forming of grinding  wheels in the
         machine tool industry.









                                                                        F-17


<PAGE>



                                      SETO HOLDINGS, INC. AND SUBSIDIARIES
                                 (FORMERLY SEMICON TOOLS, INC. AND SUBSIDIARIES)

                                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS









15.     Principal products and segmentation of sales (continued):

        Financial  information  relating to the principal  industry segments and
         classes of products:
<TABLE>
<CAPTION>
<S>                                                                                                           <C>
                                                                                                      January 31,
                                                                                  January 31,            1998
                                                                                      1999             Restated
           Sales to customers:
            Industry A:
               Ceramics                                                            $1,461,621         $ 1,225,248
            Industry B:
               Diamond tools                                                          617,140             554,695
            Industry C:
               Cellular batteries                                                     428,850
            Miscellaneous                                                             139,039             151,663
                                                                                   ----------         -----------
                                                                                   $2,646,650         $ 1,931,606
                                                                                   ==========         ===========

         Operating profit or loss:
            Industry A                                                             $  438,477         $   409,901
            Industry B                                                           (   353,558)       (    279,395)
            Industry C                                                                 37,872                    
                                                                                   ----------         -----------

                                                                                   $  122,791         $   130,506
                                                                                   ==========         ===========
         Identifiable assets:
            Industry A                                                             $  441,285          $  397,069
            Industry B                                                              1,303,039             719,554
            Industry C                                                                116,819                    
                                                                                   ----------          ----------

                                                                                   $1,861,143          $1,116,623
                                                                                   ==========          ==========

</TABLE>


        Two  customers  each  accounted  for more  than 10% of total  sales  and
         together  accounted for  approximately  44% of total sales for the year
         ended January 31, 1999.


        Foreign and domestic operations and export sales:
<TABLE>
<CAPTION>
<S>                                                                              <C>                 <C>  


                                                                                  January 31,         January 31,
                                                                                     1999                1998
           Sales to customers:
              United States                                                        $1,604,300          $1,170,868
              Far East                                                                476,970             348,108
              Canada                                                                  565,380             412,630
                                                                                   ----------          ----------
                                                                                   $2,646,650          $1,931,606
                                                                                   ==========          ==========

</TABLE>



                                                                         F-18


<PAGE>



                                      SETO HOLDINGS, INC. AND SUBSIDIARIES
                                 (FORMERLY SEMICON TOOLS, INC. AND SUBSIDIARIES)

                                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







15.     Principal products and segmentation of sales (continued):

<TABLE>
<CAPTION>
<S>                                                                                                           <C>
                                                                                                      January 31,
                                                                                  January 31,            1998
                                                                                     1999              Restated
           Operating profit:
              United States                                                        $   74,431          $   79,108
              Far East                                                                 22,129              23,519
              Canada                                                                   26,231              27,879
                                                                                   ----------          ----------
                                                                                   $  122,791          $  130,506
                                                                                   ==========          ==========

           Identifiable assets:
              United States                                                        $1,128,156          $  676,856
              Far East                                                                335,410             201,234
              Canada                                                                  397,577             238,533
                                                                                   ----------          ----------
                                                                                   $1,861,143          $1,116,623
                                                                                   ==========          ==========
</TABLE>



16. Year 2000 compliance:

        The Company operates date sensitive computer equipment in its operations
         in the United  States and  Malaysia.  The  accounting  and  bookkeeping
         computer  programs  have been  upgraded to be year 2000  compliant at a
         cost of less then $1,000 in the United States.  The Company's  domestic
         manufacturing  equipment is not  date-sensitive.  The Company purchased
         all-new manufacturing and computer equipment in Malaysia, which is year
         2000 compliant, at a cost of approximately $200,000.

        Like many  other  businesses,  the  Company  is at risk  from  year 2000
         failures on the part of its suppliers.



17. Supplemental cash flow information:
<TABLE>
<CAPTION>
<S>                                                                                                       <C> 
                                                                                                          1998
                                                                                       1999             Restated

        Interest paid during the year                                                $ 53,656          $   35,701
                                                                                     ========          ==========
        Income taxes paid during the year                                            $      0          $        0
                                                                                     ========          ==========

        Supplemental schedule of non-cash investing and financing activities:
            Issuance of common shares for purchase
             of subsidiary                                                           $100,000

        Reconciliation of increase in cash:
         Cash at beginning of year, as originally
           reported                                                                                    $1,352,231
         Decrease in cash resulting from disposition
           of foreign subsidiary                                                                        1,235,897
         Cash at beginning of year, as restated                                                        $  116,334


</TABLE>



                                                                          F-19


<PAGE>






GENERAL

During  the fiscal  year ended  January  31,  1999,  Seto  Holdings,  Inc.  (the
"Company")  altered  its  business  plans and  objectives  and  reorganized  its
subsidiaries and their product lines for faster growth into two major groupings:
Technical  Products  to  Industry  with three (3)  operating  subsidiaries;  and
Consumer Products with one (1) operating  subsidiary.  This management  decision
followed and was  conditioned by the  acquisition of Fuji and its cellular phone
battery  line  and  the  disassociation  from  and  the  disposal  of two  other
subsidiaries,  TTH and Southsonic. The Company believes that an understanding of
the two subsidiary reversal transactions leading to this discussion and analysis
being made essentially on the continuing operations only, will be helpful.

    1.   On September 15, 1998, the Company reversed its acquisition of TTH when
         it  returned  all  shares  that  it  owned  as a  result  of  the  1997
         acquisition  in exchange  for the  10,000,000  shares of its own common
         stock,  which shares were immediately  cancelled.  This transaction was
         mutually  deemed  acceptable  and in the best interests of both parties
         following  the  unanticipated  disappearance  and  reduction  of credit
         facilities in Malaysia.

    2.   On January 30, 1999,  the  acquisition  of  Southsonic  was  completely
         voided and cancelled. The action was a result of Southsonic's inability
         to fulfill a major  condition of the acquisition  agreement  concerning
         the  delivery  of assets  free and clear of any claim,  lien,  security
         interest, pledge, restriction, charge or encumbrance.

The discontinuance of both TTH and Southsonic  subsidiaries and their operations
reflect on the  Company's  statement  of income as mostly  non-cash,  accounting
transactions  except for approximately  $60,000.  The latter amount was expended
primarily for purposes of public relations, financing searches and miscellaneous
expenses directly  associated with those  subsidiaries  business and presence as
part of the corporate structure.  These transactions are one time events and for
this reason, management feels it is best to address the portion of the statement
of income  above  the  discontinued  operations  line for the  remainder  of the
discussion.

In spite of the disassociation from TTH and Southsonic, the Company remains with
a presence  in Malaysia  via DTI and Fuji which it is expected  will become more
significant  in time,  especially  Fuji.  Accordingly,  economic  and  political
conditions there, and in Southeast Asia as a whole, will remain of importance to
the Company.  Management  believes that steps taken by the Malaysian  Government
since  the  outset  of the  areas  downturn  in  mid  1997  involving  financial
uncertainties have had a calming and stabilizing effect. In any event,  although
no assurance  can be given,  the Company  believes that there will be no adverse
effect on its operations or financial condition during 1999 because of it.


FINANCIAL CONDITION

The Company's financial condition remains healthy.  Reflecting its highest level
of sales for a fiscal  year from its long  existing  business  and the advent of
revenues beginning to be derived from its cellular phone battery product line, a
comparison  of the  balance  sheet as of January  31,  1999 to October  31, 1998
follows:

    1.   Total assets increased by 7.5% to $2,295,863 and current assets
         increased by 1% to $1,357,524

    2.   Mainly because  property and equipment  increased by 11.6% to match the
         sales growth  necessities,  current  liabilities  increased by 11.3% to
         $830,949

    3. Other balance sheet comparisons which management believes is of note:

           a.  Total shareholders' equity increased by 7.3% and its total assets
               increased by 7.5%

           b.   Notes  payable  to  bank  increased  by  21.8%   reflecting  the
                Company's  drawing on its line of credit to support  the working
                capital needs associated with its revenue

<PAGE>

RESULTS OF OPERATIONS

Discounting the  discontinued  operations of TTH and Southsonic,  for the fiscal
year ended January 31, 1999,  Seto  experienced  its highest annual sales in the
history of the Company,  its second highest income from  operations (at $232,541
it was $18,455 or 7.4% less).  These  results  are  attributable  to most of the
present product lines,  especially  ceramics,  diamond tools inclusive of dicing
blades and scribes and the start of the sales for the cellular phone  batteries.
The income from  continuing  operations  were impacted by a planned  increase in
public  relations  expenses and the move of the Company and associated get ready
expenses  of the new  headquarters  and  manufacturing/warehouse  facilities  in
Briarcliff Manor, New York.

In the fiscal  year ended  January  31,  1999  compared to the fiscal year ended
January 31, 1998,  sales  increased  from  $1,931,606 to $2,646,650 or 37% gross
profit  margins  continued  in the  60%-65%  range and  income  from  continuing
operations was $232,154 compared to 1998's $251,006.

With regard to cost of sales,  as the cellular  phone battery  business grows it
will impact the average gross profit  historical  figure  mentioned  above.  The
material cost of  manufacturing  the batteries  will be the reason whereas labor
costs will remain low. However,  with volume growth, unit cost of materials will
decrease.

Management  continues  to take steps to hold  ongoing  expenses  at its  current
favorable level and to identify new and more economical sources of supply.

Looking  ahead to the next fiscal year  beginning  February 1, 1999,  management
believes  business in certain product lines will contribute to increasing  total
Company revenue by at least 50%.

      1.   Cellular phone batteries:

           a.   An  e-commerce  site will be  opened  in the  spring of 1999 for
                retailing.

           b.   Fuji has recently received Malaysian Government  exemptions from
                a 30% import duty tax and a 20% sales tax on battery cells.

           c.   Fuji was acquired on June 30, 1998 and, thus, did not complete a
                full year with the Company.

           d.   Cellular  phones  are  expected  to grow in the U.S.  from  66.5
                million to 110 million in 2002. Worldwide, 162.9 million sold in
                1998.

      2. Hard disk drive parts:

           a.   Company  has  purchase  orders for these new  products  from two
                companies.

           b. The parts are consumable.



<PAGE>






LIQUIDITY AND CAPITAL RESOURCES

At January 31, 1999,  the Company had current  assets of $1,357,524  and current
liabilities of $830,949 yielding a positive working capital position of $526,575
and a current ratio of 1.6:1.  These routine measures of a company's  ability to
meet current  obligations  reflects  positively on the  Company's  liquidity and
internal  resources  for the current  level of business and will  contribute  to
satisfying   its   suppliers   of   goods   and   services    concerned    about
credit-worthiness.

As for growth  capital,  to some  extent its should be  satisfied  by the recent
increase  received from the  Company's  bank on its  outstanding  line of credit
which rose to  $500,000  from  $350,000.  However,  because  of the  anticipated
increase  in sales,  especially  in its  cellular  phone  battery  product  line
manufactured in Malaysia by its wholly-owned  subsidiary,  Fuji, the Company has
been  seeking  additional  capital  via higher  lines of credit and bank  loans.
However, no new definite funding source has yet been identified and no assurance
can be given that such  financing  will be obtained on  commercially  reasonable
terms, or at all.

During the fiscal year,  certain stock options were exercised in the amount of $
and the Company  initiated its stock buyback program by purchasing 29,400 shares
in October  1998 and 20,000 in  December  1998.  The Company  has  instituted  a
moratorium on its buyback program and will utilize its capital for the growth of
the Company.

During the fiscal  year  ending  January  31,  1998,  the  Company  purchased  a
computerized  precision saw for $33,000 in conjunction  with the increase of its
ceramic  value-added  fabrication  product  line, of which $24,000 was financed.
Also,  a  belt  driven   assembly  line  for  use  by  Fuji  was  purchased  for
approximately  $12,000. As at the end of the fiscal year, there were no material
commitments for like capital expenditures.

EFFECTS OF FOREIGN CURRENCY FLUCTUATIONS

The  Company's  foreign  operations  are  subject  to certain  risks  related to
fluctuation in foreign currency  exchange rates. In fiscal 1998,  ending January
31, 1998, due to a strengthening U.S. dollar and weaker Malaysian  ringgit,  the
Company  recognized  $37,719 in foreign currency exchange losses,  which did not
have a material adverse effect on net income.  In fiscal 1999, that loss dropped
to $900.  While  future  fluctuations  in currency  exchange  rates could impact
results of operations or financial  conditions,  foreign operations are expected
to continue to provide strong financial results and earnings growth.

A number of economists,  including some high in the U.S. Government's  financial
circles,  believe that predictable  policies (e.g. pegging exchange rates, which
Malaysia  did in 1998,  and  sticking  to that  policy)  yields a key element of
financial  stability.  That is a course which Malaysia has chosen to follow.  In
addition,  what also helps is the fact that  Malaysia  has no great  overhang of
foreign debt - any  squandering  and misuse of funds in the recent past was done
with domestic funds. At the moment,  the perception is that the financial crisis
which began in mid-1997  in  Southeast  Asia is easing and may be ending e.g. in
the first  quarter of 1999,  container  traffic from the West Coast to East Asia
ran 10% ahead projections. This appears to bode well for Malaysia.


Disclosure about market risks
The Company is exposed to market risks  primarily from changes in interest rates
and foreign currency  exchange rates. To manage exposure to these  fluctuations,
the Company occasionally enters into various hedging  transactions.  The Company
does not use  derivatives  for trading  purposes,  or to  generate  income or to
engage in speculative activity and the Company never uses leveraged derivatives.
The Company does not use  derivatives to hedge the value of its net  investments
in these foreign operations.



<PAGE>






The  Company  exposure  to  foreign  exchange  rate  fluctuations  results  from
investment in foreign  ventures in Malaysia and from the Company's  share of the
earnings of these operations, which are denominated in the Malaysian ringgit.

Year 2000 costs
The Company currently operates numerous  date-sensitive computer application and
network systems throughout its business. As the century change approaches, it is
essential  for the Company to ensure that these systems  properly  recognize the
year 2000 and continue to process  operations  and  financial  information.  The
Company recently upgraded its computer system and is year 2000 compliant.

Impact of inflation
Although  it is  difficult  to  predict  the  impact of  inflation  on costs and
revenues of the Company in connection with the Company's  products,  the Company
does  not  anticipate  that  inflation  will  materially  impact  its  costs  of
operations or the profitability of its products.

FORWARD-LOOKING STATEMENTS

This "Managements Discussion and Analysis of Plan Operation" contains statements
which  are  not  historical  facts  and  are   forward-looking   statements  and
expressions  such  as  "expect",  "believe",   "anticipate",  "may"  or  similar
variations of such terms which reflect  management's  confidence,  expectations,
estimates and assumptions. Such statements are based on information available at
the time this 10KSB was prepared and involve risks and uncertainties  that could
cause  future  results  to differ  materially  include,  among  others,  partial
dependence on the semiconductor industry, availability of raw materials, intense
competition,  technological  obsolescence,  continued  relationship  with  major
customers  and the risks of doing  business  in  Malaysia  and  Southeast  Asia,
including,  without  limitations,  economic and  political  conditions,  foreign
currency  translation  risks,  tariffs  and other  foreign  trade  policies  and
dependence on inexpensive  labor in such  countries.  Seto assumes no obligation
for updating any such forward-looking statement, if any, at any time.


<PAGE>



Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.

Yes  X     No ____

Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year. $2,646,650

State the  aggregate  market  value of the voting  stock held by non  affiliates
computed by reference  to the price at which the stock was sold,  or the average
bid and asked  prices of such stock,  as of a specified  date within the past 60
days. $3,764,593 as of April 26, 1999.

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest  practicable  date.  11,109,101 shares of Common Stock,
$.001 par value, outstanding as
of April 26, 1999.


                   DOCUMENTS INCORPORATED BY REFERENCE - None




                                                         2

<PAGE>



                                     PART I

Item 1.  Description of Business.

General

                  SETO  Holdings,  Inc.  (formerly  Semicon  Tools,  Inc.)  (the
"Company"),  a Nevada corporation,  principally  manufactures and/or distributes
(1) industrial  ceramic  products,(2)  small  disposable  diamond  cutting tools
(dicing  blades and  scribes,  which are the  cutting  components  of  precision
electronic saws, scribers used by the electronics and semiconductor  industries,
and dressers for the shaping and forming of grinding  wheels in the machine tool
industry),   and  (3)  cellular  telephone  and  other  rechargeable  batteries.
Approximately 26% of the Company's revenues are generated in Malaysia.

Business Development over the Past Three Years

                  For more than the past three  years,  the Company  principally
has (a) distributed and fabricated on a "value-added"  basis industrial  ceramic
products, and (b) sold small,  disposable precision diamond cutting tools, which
include  diamond-coated  nickel dicing blades (which are components of precision
electronic saws) and diamond  scribes,  both of which are used to cut integrated
circuits,  and  diamond  dressers  which  are used to shape  grinding  wheels in
machine  shops.  These  products  are  marketed  to  the   microelectronics  and
semiconductor  industries  primarily  for use in the  manufacture  of electronic
components and devices.  Since June 1996, when it purchased all of the assets of
KBR (Malaysia) Sdn. Bhd. ("KBR"), a Malaysian corporation,  the Company's dicing
blades have been manufactured in Malaysia.  Its other cutting tools and ceramics
have been made and  fabricated,  respectively,  at its facility in New York. The
Company sells its products to hundreds of Fortune 1000 companies, including IBM,
National Semiconductor, Motorola and General Motors.

                  On November 26, 1997,  the Company  acquired all of the issued
and outstanding capital stock of Teik Tatt Holding Co. (1979) Sdn. Bhd. ("TTH"),
a Malaysian corporation which principally  manufactured rubber bands and plastic
rope and recycled scrap nonferrous  metals, in exchange for 10,000,000 shares of
Common Stock, which resulted in a change-in-control of the Company. On September
15,  1998 the  Company  reversed  its  acquisition  of TTH by selling all of the
issued and outstanding capital stock of TTH to Tan Khay


                                                         3

<PAGE>



Swee,  the  former  owner of TTH,  in  exchange  for  10,000,000  shares  of the
Company's Common Stock, the amount of the original purchase price. The following
discussion of the Company's  business does not take into account the  operations
of TTH.

                  On June 30, 1998,  the Company issued 100,000 shares of Common
Stock to Tan Hun Hooi as consideration  for its acquisition of all of the issued
and  outstanding  shares of Fuji  Fabrication  Sdn. Bhd.  ("Fuji"),  a Malaysian
company  which  principally  designs,   manufactures  and  distributes  cellular
telephone and other rechargeable batteries.

Forward-Looking Statements

                  THIS  ANNUAL   REPORT  ON  FORM  10-KSB,   INCLUDING   WITHOUT
LIMITATION  ITEM 6,  MANAGEMENT'S  DISCUSSION AND ANALYSIS OR PLAN OF OPERATION,
CONTAINS  STATEMENTS  WHICH ARE NOT  HISTORICAL  FACTS  AND ARE  FORWARD-LOOKING
STATEMENTS WHICH REFLECT MANAGEMENT'S  EXPECTATIONS,  ESTIMATES AND ASSUMPTIONS.
SUCH STATEMENTS ARE BASED ON INFORMATION  AVAILABLE AT THE TIME THIS FORM 10K-SB
WAS  PREPARED  AND  INVOLVE  RISKS AND  UNCERTAINTIES  THAT COULD  CAUSE  FUTURE
RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO DIFFER SIGNIFICANTLY FROM
PROJECTED  RESULTS.  FACTORS  THAT COULD CAUSE ACTUAL  FUTURE  RESULTS TO DIFFER
MATERIALLY  INCLUDE,  AMONG OTHERS,  THE RISKS OF DOING BUSINESS IN MALAYSIA AND
SOUTHEAST  ASIA,   INCLUDING,   WITHOUT   LIMITATION,   ECONOMIC  AND  POLITICAL
CONDITIONS,  FOREIGN CURRENCY TRANSLATION RISKS, TARIFFS AND OTHER FOREIGN TRADE
POLICIES  AND  DEPENDENCE  ON  INEXPENSIVE  LABOR  IN  SUCH  COUNTRIES,  PARTIAL
DEPENDENCE ON THE  SEMICONDUCTOR  MANUFACTURING  INDUSTRY,  AVAILABILITY  OF RAW
MATERIALS,  COMPETITION AND TECHNOLOGICAL  OBSOLESCENCE.  THE COMPANY ASSUMES NO
OBLIGATION TO UPDATE SUCH FORWARD-LOOKING STATEMENTS, IF ANY, AT ANY TIME.

Principal Products

Overview

                  The percentage contributions to the Company's sales by product
line for the fiscal years ended January 31, 1999, 1998 and 1997 are as follows:



                                                         4

<PAGE>



                                            Contribution to Total Sales
                                                   January 31,
    Product line                              1996     1997     1998 
    ------------                             ------   ------   ------

    Industrial Ceramic Products                 58%     67%     55%
    Diamond Cutting Tools                       33      29       9
    Cellular Telephone Batteries                 -      -       16
    Miscellaneous Products                       9       4      20

Industrial Ceramic Products

                  The Company distributes two principal categories of industrial
ceramic products:  (1) insulators,  tubes, rods and crucibles and other labware,
all of which are standard  catalogue  items,  and (2) machinable  ceramics.  The
products are manufactured by third parties and warehoused and distributed by the
Company  from its  facilities  in  Briarcliff  Manor,  New York,  often  after a
value-added machining process performed either by the Company or subcontractors.
The  products  are  used  principally  by the  aerospace,  electronic  detection
equipment and industrial heating industries.

Diamond Cutting Tools

                  Dicing Blades.  Dicing blades are made of diamonds bonded to a
circular nickel alloy blade. They are used with the precision  electronic dicing
saws which the  microelectronics  and  semiconductor  industries  use to cut and
separate  integrated  circuits and discrete  devices made from silicon and other
wafers. The blade market consists  principally of hubbed blades, made of diamond
nickel alloy (the most common),  diamond/thermoset plastic (called resin blades,
which are the blades most widely used in precision  electronic  saws for cutting
ceramic  substrates,  even though they have a shorter  useful  life) and diamond
nickel  alloy  hubless  blades.  Hubbed  blades are  competitively  manufactured
principally by Disco, Inc., Semitec Corporation and Kulicke & Soffa Corporation.
The  Company,  which  manufactures  hubbed and hubless  blades in its  Malaysian
facility,  has an  insignificant  share of the  world-wide  dicing blade market.
There can be no  assurance  that the Company will be able to increase its market
share.

                  Scribes.  Scribes, which have tips made out of gem
quality diamonds, are used to cut silicon wafers and perform die
and integrated circuit separation.  These products, which are
assembled in the Company's facility in Briarcliff Manor, New York,


                                                         5

<PAGE>



have limited growth  potential in this  application  since the  electronics  and
semiconductor  industries have in large part switched from scribing  machines to
dicing  saws  for the  wafer  cutting  process.  However,  diamond  scribes  are
preferred over sawing for cutting certain wafer  materials  because they provide
cleaner separation.  They also are preferred for certain low volume applications
which do not  justify the  capital  expense of using a dicing  saw.  The Company
occasionally uses subcontractors to set or "lap" the diamonds into the tools.

                  Dressers.  Dressers are diamond-tipped tools generally used to
"dress" or shape  abrasive  grinding  wheels in machine shops.  These  products,
which are  assembled  in the  Company's  facility in  Malaysia,  are sold by the
Company  principally to companies such as Black & Decker and Snap On Tools which
resell them to third  parties.  The  Company  believes  that there are  multiple
foreign suppliers of these dressers.

Cellular Telephone and Other Rechargeable Batteries

                  The  Company   manufactures   battery  packs  principally  for
cellular  telephones,  notebook  computers,  and  camcorders.  All  products are
manufactured  by  the  Company  in  Malaysia,   based  on  battery  designs  and
modifications done by the Company's research and development team. The Company's
products  rely on the  availability  of an adequate  supply of battery cells and
components,  which the Company purchases from multiple international electronics
manufacturers.  The Company has qualified  batteries for such major companies as
Ericsson,  Nokia, Panasonic,  NEC and OKI. In addition, the Company manufactures
many custom batteries for OEM and private label customers. The Company currently
has an  insignificant  share of the battery  market,  which is  dominated by the
cellular telephone manufacturers, such as Motorola, Nokia and Ericsson, and mass
retailers such as Radio Shack and Staples.  The Company competes  principally on
the basis of quality  and price and will begin  promoting  its  products  on the
World  Wide  Web to  customers  who are  seeking  only  limited  quantities  and
therefore are of minimal interest to wholesalers and distributors.

Miscellaneous Products

                  The  Company   distributes   small  precision  tools  such  as
tweezers,  pliers, vacuum pickups and scribes, core drills and sinter blades for
ceramic applications. It also distributes cleaning chemicals,  inspection gloves
and other items used to


                                                         6

<PAGE>



preserve a contamination  free environment,  and they are primarily  marketed to
IBM and Lucent Technologies.

Customers

                  During the fiscal  year ended  January  31,  1999,  two of the
Company's  customers  accounted for  approximately  44% of its  consolidated net
sales.

Raw Materials

                  The Company  purchases  its raw  materials  and supplies  from
multiple sources.  None of the raw materials and supplies it requires  currently
are in short supply  although  factors  outside of the  Company's  control could
adversely impact their future availability.

Backlog

                  As of January 31, 1999, the Company had a backlog of orders of
approximately  $1.1  million,  all of which it expects to ship by May 30,  1999.
While such orders may be cancelled or postponed,  the Company believes that they
are firm and the resulting revenues will be realized.

Competition

                  The   Company's   operating   segments   each  are   intensely
competitive.  Virtually  all  competitors  have greater  financial and personnel
resources and greater market  recognition than the Company.  As a result,  these
competitors  can  obtain  better  payment  terms  and  service  from  suppliers.
Furthermore,  the Company faces the  possibility  of adverse  market  conditions
arising from tariff revisions  resulting from changes in foreign trade policies,
raw material shortages,  technological  change,  shifting product emphasis among
competitors  and the entry of new  competitors  into its  markets.  The  Company
believes the principal  competitive  factors  affecting its products are quality
and price.

Marketing

                  The   Company    markets   its   products    through   account
representatives,  distributors, telephone solicitations,  participation in trade
shows, advertisements in trade journals and the Internet.


                                                         7

<PAGE>



Manufacturing Facilities

                  In Briarcliff,  New York, the Company  operates a machine shop
and a manufacturing facility for resin/diamond dicing blades. The Company owns a
facility in Kepala  Batas,  Penang,  Malaysia,  equipped to  manufacture  dicing
blades and diamond  dressing tools and another  facility  located in Batu Maung,
Penang,  Malaysia,  where it  manufactures  rechargeable  batteries.  See Item 2
below, "Description of Property."

Government Regulation

                  The Company  believes its  operations  and  facilities  are in
compliance with all federal,  state and local  environmental  laws in the United
States and  Malaysia.  The Company has not incurred any special or unusual costs
to comply with environmental laws or other applicable governmental regulations.

Research and Development

                  In the fiscal  years  ended  January  31,  1999 and 1998,  the
Company spent approximately $50,000 and $60,000,  respectively,  on its research
and development activities.

Employees

                  The Company employs  approximately 40 full-time employees,  of
which 20 work in its diamond  tools and ceramics  facilities  and 20 work in its
battery pack  facilities.  It also utilizes  outside  consultants  and part-time
workers when required.


Item 2.  Description of Property.

                  In Malaysia,  the Company  leases  approximately  4,000 square
feet of manufacturing space and 500 square feet of office space in Kepala Batas,
Penang,  pursuant  to a lease  expiring  July 2001  with  minimum  annual  lease
payments  of  $7,200.  It  also  occupies  approximately  3,500  square  feet of
manufacturing  facilities  and 600 square  feet of office  space in Batu  Maung,
pursuant to a lease  expiring July 2001,  with a minimum annual lease payment of
$11,400.

                  In the United States, the Company leases  approximately  2,400
square feet of manufacturing and warehouse space and 1,200


                                                         8

<PAGE>



square feet of office space in Briarcliff  Manor, New York, from Rachrob Realty,
LLC, a company owned by Eugene Pian,  the President and a principal  shareholder
of the Company, pursuant to a fifteen (15) year lease which expires on April 30,
2013, with annual base rents,  excluding utilities,  maintenance and repairs, as
follows:  Years One to Five - $60,000;  Years Six to Ten - $66,000; Years Eleven
to Fifteen - $72,000.


Item 3.  Legal Proceedings.

                  There are no pending legal proceedings to which the Company is
a party or to which any of its property is subject and no such  proceedings  are
known to the Company to be threatened or contemplated by or against it.


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

                  No matters were submitted to a vote of security holders during
the last fiscal quarter covered by this Report.





                                                         9

<PAGE>



                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters.

Market Information

                  The Company's Common Stock,  $.001 par value, is traded in the
over-the-counter  market on the OTC Bulletin Board under the symbol "SETO". Such
Stock is not traded or quoted on any automated quotation system.

                  The  following  table sets forth the range of high and low bid
information for the Company's  Common Stock for each calender quarter within the
last two fiscal years,  and for the first calendar  quarter of 1999, as provided
by the National  Quotation  Bureau,  Inc. Such quotations  reflect  inter-dealer
prices  without  retail  mark-up,  mark-down or commission and may not represent
actual transactions.

                  1999                                Low          High

                  First quarter                       .14        $1.625

                  1998

                  First quarter                       .29            .70
                  Second quarter                      .61             .9
                  Third quarter                       .19            .80
                  Fourth quarter                      .20           .335

                  1997

                  First quarter                       .070          .200
                  Second quarter                      .050          .140
                  Third quarter                       .050          .155
                  Fourth quarter                      .075          .450

Holders

     As of April 26, 1999, there were 320 record holders of the Company's Common
Stock.



                                                        10

<PAGE>



Recent Sales of Unregistered Securities

                  On November 26, 1997, the Company issued  10,000,000 shares of
its Common Stock  pursuant to Section  4(2) of the  Securities  Act of 1933,  as
amended, in exchange for all of the issued and outstanding capital stock of TTH.
The shares were issued to Tan Khay Swee.  (The  Company sold TTH back to Mr. Tan
Khay Swee on September 15, 1998 in return for such 10,000,000 shares.)

                  On July 1, 1998,  the  Company  issued  100,000  shares of its
Common Stock pursuant to Section 4(2) of the Securities Act of 1933, as amended,
in exchange for all of the issued and outstanding stock of Fuji Fabrication Sdn.
Bhd. The shares were issued to Tan Hun Hooi.

Voting and Other Rights

                  Holders  of  Common  Stock are  entitled  to one vote for each
share held.  There are no  preemptive,  subscription,  conversion  or redemption
rights  pertaining to the Common Stock.  Holders of Common Stock are entitled to
receive  such  dividends  as may be  declared by the Board of  Directors  out of
assets  legally  available  therefor  and to share  ratably in the assets of the
Company available upon liquidation.

                  The holders of Common  Stock do not have the right to cumulate
their votes in the election of directors and,  accordingly,  the holders of more
than 50% of all such shares  outstanding  can elect all of the  directors of the
Company.

Dividends

                  The Company has not paid cash dividends to date and intends to
apply its earnings, if any, for use in its activities. Payment of cash dividends
in the future will be wholly  dependent upon the Board of Directors and upon the
Company's earnings,  financial condition, capital requirements and other factors
deemed  relevant by them. It is not likely that cash  dividends  will be paid in
the foreseeable future.

                  In the event of the  acquisition  of or merger with a business
by the Company,  control of the Company and its Board of  Directors  may pass to
others.  In that event,  the payment of dividends would be wholly dependent upon
such persons.


                                                        11

<PAGE>



Item 6.  Management's Discussion and Analysis or Plan of
         Operation.

General

                  In fiscal year 1998 the Company altered its business plans and
objectives  and  reorganized  its product lines for faster growth into two major
groupings:  Technical Products to Industry and Consumer Products.  This decision
followed the  Company's  June 1998  acquisition  of Fuji  Fabrication  Sdn. Bhd.
("Fuji") and its cellular  telephone battery line and its September 1998 sale of
TTH back to its former owner.

                  During the fiscal year ended  January 31, 1999,  excluding the
results of  discontinued  operations the Company  experienced the highest annual
net  sales  in its  history  and  its  second  highest  income  from  continuing
operations.  These results are  attributable  principally to continued growth in
fabricated  industrial ceramics (sales of $1,461,621 compared to $1,225,249) and
diamond cutting tools (sales of $617,140 compared to $554,695) and the launch of
the Company's  cellular  telephone  battery  product line in July 1998 (sales of
$428,850).

                  The Company's financial condition remains healthy.  At
January 31, 1999, the Company had total assets of $2,295,863.
Mainly because of short term borrowings needed to fund the purchase
of raw materials and additional property and equipment, which
increased by 11.6%, to match anticipated sales growth, current
liabilities increased by 6% to $791,654.  Notes payable to bank
increased by 21.8%, reflecting the Company's drawing down on its
line of credit principally to support the working capital needs
associated with the cost of raw materials needed to manufacture
cellular telephone batteries.

                  The Company conducts  substantially  all of its  manufacturing
and  assembly  operations  in  Malaysia.  Accordingly,  economic  and  political
conditions there, and in Southeast Asia as a whole, will remain of importance to
the Company.  Management  believes that steps taken by the Malaysian  Government
since  the  outset  of the  area's  downturn  in  mid-1997  involving  financial
uncertainties have had a calming and stabilizing effect. In any event,  although
no assurance can be given, the Company believes that regional circumstances will
have no material adverse effect on its operations or financial  condition during
the fiscal year beginning February 1, 1999.


                                                        12

<PAGE>



                  In fiscal 1999, Management believes certain product lines will
contribute to an anticipated 50% increase in revenues:

                  1.       Cellular telephone batteries:

                           a.      The Company will have the benefit of a full
                                   year of sales;

                           b.      An e-commerce site will be opened in the
                                   Spring of 1999 for retail sales;

                           c.     The  Company's   Malaysian   subsidiary  has
                                  recently   received    exemptions   from   a
                                  Malaysian  30%  import  duty  tax  and a 20%
                                  sales tax on  battery  cells and a waiver of
                                  its 1999 corporate income tax waiver; and

                           d.     Sales of cellular  telephones  in the United
                                  States  are   expected  to  grow  from  66.5
                                  million to 110 million in 2002.  (Worldwide,
                                  162.9 million were sold in 1998.)

                  2.       Hard Disk Drive parts

                           a.     The Company has received purchase orders for
                                  these new products from two disk drive
                                  manufacturers; and

                           b. The parts are consumable.

Fiscal 1998 Compared to Fiscal 1997

                  Including  discontinued  operations,  in the fiscal year ended
January  31,  1999 the  Company  had a net loss of  $(226,962),  compared to net
income  of  $629,586  in  the  prior  year.  However,   excluding   discontinued
operations,   the  Company's  net  sales   increased  37%,  from  $1,931,606  to
$2,646,650,  and income from continuing  operations  declined $18,465,  or 7.4%,
from  $251,006 to $232,541.  The decrease in income from  continuing  operations
principally  resulted from (1) a $260,498 increase in general and administrative
expenses  from  non-recurring  costs  related to increases  in public  relations
expenses  and  the  Company's  relocation  from  Armonk,  New  York  to its  new
headquarters  and  manufacturing/warehouse  facilities in Briarcliff  Manor, New
York, and (2) a near-doubling in cost of sales (an increase of $481,145,


                                                        13

<PAGE>



or 87%) attributable mainly to the high material cost of manufacturing  cellular
telephone batteries.  The significant increase in cost of sales was attributable
principally to the Company's launch of its cellular telephone  batteries in July
1998,  and these  products  will  continue to cause a decrease in the  Company's
gross margins.  However, with anticipated volume growth, the Company's unit cost
of these products should decline.

Fiscal 1997 Compared with Fiscal 1996

                  For the year ended  January 31, 1998,  the Company's net sales
increased to $7,808,380, a 487% increase over the $1,602,830 in fiscal 1996, and
net income was $629,586 or $.05 per share,  a 250% increase over the $213,652 or
$.02 per share in fiscal 1996. The acquisition of TTH contributed  $5,876,774 to
net sales and $378,580 to net income  during the fourth  quarter of fiscal 1997.
In fiscal  1997  gross  profit  was  $2,586,816,  or 33% of gross  revenues,  as
compared to $1,105,570, or 69% of gross revenues in fiscal 1996. In fiscal 1997,
gross profit  increased due to higher sales, and gross profit as a percentage of
gross  revenues  decreased  principally  due  to low  profit  margins  on  TTH's
operations, especially its recycling business.

                  In fiscal 1997,  net sales of the  Company's  diamond  cutting
tools increased  approximately  4% to $554,695 but generated a loss of $279,395,
approximately  43% higher than the loss in fiscal 1996.  Net sales of industrial
ceramics and clean room supplies  increased by 26.5% to $1,226,136,  and related
net  income  increased  by  $31.6%  to  $409,901.  Net  sales  of  TTH  for  the
approximately  two-month  period  after  its  acquisition  by the  Company  were
$5,876,774 and related net income was $378,580.

Liquidity and Capital Resources

                  At  January  31,  1999,  the  Company  had  current  assets of
$1,357,524,  including $66,052 of unrestricted cash, and current  liabilities of
$830,949, yielding a positive working capital position of $526,575 and a current
ratio of 1.6.:1.  These  standard  measures of a  company's  ability to meet its
current  obligations  reflect positively on the Company's improved liquidity and
its ability to internally  generate or obtain the funds necessary to support its
current  level of business and are expected to enable the Company to obtain more
favorable payment terms from its suppliers.



                                                        14

<PAGE>



                  During the fiscal year, the Company received $120,000 from the
exercise of stock options. The Company also initiated a stock buyback program by
purchasing  29,400  shares in October  1998 and  20,000 in  December  1998.  The
Company has instituted a moratorium on this program and will utilize its capital
to fund its future growth.

                  Although no assurances can be given,  the Company expects that
internally  generated  funds together with its existing  credit  facilities will
enable it to meet it  obligations  as they come due and finance its  operations.
The Company  recently  increased its  available  line of credit to $500,000 from
$350,000.  To improve its  liquidity  and  accelerate  its  anticipated  growth,
especially in sales of its cellular  telephone  batteries,  the Company has been
seeking  additional  capital  via even  higher  lines of credit and bank  loans.
However, no new definite funding source has yet been identified and no assurance
can be given that such  financing  will be obtained on  commercially  reasonable
terms, or at all.

                  During the fiscal year ending  January 31,  1999,  the Company
purchased  a  computerized  precision  saw for $33,000 in  conjunction  with the
increased sales of industrial  ceramic and  fabrication  product lines, of which
$24,000 was financed,  and a belt-driven assembly line for approximately $12,000
for use by Fuji in its battery  business.  As at the end of fiscal  1998,  there
were no material commitments for significant capital expenditures.

                  A  small  percentage  of  the  Company's  profits  may  not be
distributable  to  the  Company's  other  subsidiaries  or as  dividends.  Under
Malaysian law a Malaysia corporation is required to maintain a statutory reserve
of five  percent (5%) of profit after  taxation in  accordance  with the Foreign
Investment  Law until such reserve  equals ten percent  (10%) of legal  capital.
Such reserve is non-distributable.

Effects of Foreign Currency Fluctuations

                  The Company's foreign  operations are subject to certain risks
related to fluctuation in foreign  currency  exchange  rates. In the fiscal year
ended  January  31,  1998,  due to a  strengthening  U.S.  dollar  and a  weaker
Malaysian ringgit the Company's operating results were hurt by a $37,719 loss on
foreign  currency  exchange.  In fiscal 1998,  such loss  amounted to only $900,
although  the Company  suffered a foreign  currency  translation  adjustment  of
($119,374). While future fluctuations in currency exchange rates


                                                        15

<PAGE>



could impact results of operations or financial  conditions,  foreign operations
are  expected to  continue  to provide  strong  financial  results and  earnings
growth.

                  A number of  economists,  including  some  high in the  United
States Government's financial circles,  believe that predictable policies (e.g.,
pegging exchange rates, which Malaysia did in 1998, and sticking to that policy)
yields a key element of financial stability. That is a course which Malaysia has
chosen to follow.  At the moment,  the  perception is that the financial  crises
which began in mid-1997 in Southeast Asia is easing and may be ending,  e.g., in
the first  quarter of 1999,  container  traffic from the West Coast to East Asia
ran 10% ahead of projections. This appears to bode will for Malaysia.

Disclosures about Market Risk

                  The Company is exposed to market risks  primarily from changes
in interest rates and foreign  currency  exchange  rates.  To manage exposure to
these  fluctuations,  the  Company  occasionally  enters  into  various  hedging
transactions.  The Company does not use derivatives for trading purposes,  or to
generate income or to engage in speculative activity, and the Company never uses
leveraged  derivatives.  The Company does not use derivatives to hedge the value
of its net investments in these foreign operations.

                  The Company's  exposure to foreign exchange rate  fluctuations
results  from  wholly-owned  subsidiary  operations  in  Malaysia,  and from the
Company's  share of the earnings of these  operations,  which are denominated in
the Malaysian ringgit.

Year 2000 Costs

                  The  Company  currently   operates   numerous   date-sensitive
computer  applications  and network  systems  throughout  its  business.  As the
century change approaches,  it is essential for the Company to ensure that these
systems properly recognize the year 2000 and continue to process operational and
financial information. The Company recently upgraded its computer systems and is
year 2000 compliant.

New Accounting Pronouncements

                  In June 1997, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standard (FAS 130),


                                                        16

<PAGE>



"Reporting  Comprehensive  Income."  This  statement  establishes  standards for
reporting and display of  comprehensive  income and requires that all components
of  comprehensive  income be reported  in  financial  statement  having the same
prominence as other financial statements. For the Company, FAS 130 was effective
in 1998, and it requires  reclassification of prior period financial  statements
for comparative purposes. Adoption of this standard should have little effect on
the Company's  financial  statements as the new requirements  primarily  involve
modifications to the way that existing information is displayed.

                  Also in June 1997, the FASB issued FAS 131, "Disclosures about
Segments of an Enterprise and Related  Information."  This statement  supersedes
FAS  14,  "Financial  Reporting  of  Segments  of  a  Business  Enterprise,"  by
establishing new standards for the way that a public business enterprise reports
operating segment information in its annual and interim financial statements. In
general,  FAS 131 requires  reporting of financial  information as it is used by
senior  company  management  for  evaluating  performance  and  deciding  how to
allocate resources. The statement is effective for 1998, but need not be applied
to interim  financial  statements  in that  year.  Comparative  information  for
earlier years must be restated.

Impact of Inflation

                  Although it is difficult to predict the impact of inflation on
costs and revenues of the Company in connection with the Company's products, the
Company does not anticipate that inflation will  materially  impact its costs of
operation or the profitability of its products.

Forward-Looking Statements

                  THIS   "MANAGEMENT'S   DISCUSSION  AND  ANALYSIS  OR  PLAN  OF
OPERATION",   CONTAINS  STATEMENTS  WHICH  ARE  NOT  HISTORICAL  FACTS  AND  ARE
FORWARD-LOOKING  STATEMENTS WHICH REFLECT MANAGEMENT'S  EXPECTATIONS,  ESTIMATES
AND ASSUMPTIONS.  SUCH STATEMENTS ARE BASED ON INFORMATION AVAILABLE AT THE TIME
THIS FORM 10K-SB WAS PREPARED  AND INVOLVE  RISKS AND  UNCERTAINTIES  THAT COULD
CAUSE  FUTURE  RESULTS,  PERFORMANCE  OR  ACHIEVEMENTS  OF THE COMPANY TO DIFFER
SIGNIFICANTLY  FROM  PROJECTED  RESULTS.  FACTORS THAT COULD CAUSE ACTUAL FUTURE
RESULTS TO DIFFER MATERIALLY INCLUDE,  AMONG OTHERS, THE RISKS OF DOING BUSINESS
IN MALAYSIA AND SOUTHEAST  ASIA,  INCLUDING,  WITHOUT  LIMITATION,  ECONOMIC AND
POLITICAL CONDITIONS,


                                                        17

<PAGE>



FOREIGN CURRENCY TRANSLATION RISKS, TARIFFS AND OTHER FOREIGN TRADE POLICIES AND
DEPENDENCE ON INEXPENSIVE  LABOR IN SUCH  COUNTRIES,  PARTIAL  DEPENDENCE ON THE
SEMICONDUCTOR  MANUFACTURING  INDUSTRY,  AVAILABILITY OF RAW MATERIALS,  INTENSE
COMPETITION AND TECHNOLOGICAL OBSOLESCENCE. THE COMPANY ASSUMES NO OBLIGATION TO
UPDATE SUCH FORWARD-LOOKING STATEMENTS, IF ANY, AT ANY TIME.


Item 7.  Financial Statements.

                  The following are filed as part of this Report:

         Consolidated Financial Statements:

         Independent Accountants' Report

         Consolidated Balance Sheet as at January 31, 1999

         Consolidated Statement of Income (Loss) for the Years ended
         January 31, 1999 and 1998

         Consolidated Statement of Comprehensive Income for the Years
         ended January 31, 1999 and 1998

         Consolidated Statement of Cash Flows for the Years ended
         January 31, 1999 and 1998

         Consolidated Statement of Changes in Stockholders' Equity for
         the Years ended January 31, 1999 and 1998

         Notes to Consolidated Financial Statements


Item 8.  Changes in and Disagreements with Accountants on
         Accounting and Financial Disclosure.

                  None.





                                                        18

<PAGE>



                                    PART III

Item 9.  Directors, Executive Officers, Promoters and Control
         Persons; Compliance with Section 16(a) of the Exchange
         Act.

                  The following table sets forth certain information  concerning
the current directors and executive officers of the Company,  who will serve for
one year or until their respective successors are elected and have qualified:

NAME                                AGE                      POSITION

Eugene J. Pian                       59                   President, Chief
                                                           Executive Officer
                                                              & Director

Craig Pian                           37                    Executive Vice
                                                           President, Treasurer
                                                           & Director

Francine Pian                        39                    Secretary

Tan Hun Chin                         37                    Director

             Craig and Francine Pian are the children of Eugene Pian.



     Eugene J. Pian.  Mr. Pian has been  President  of the  Company  since April
1987.  He was President of East Coast Sales from its inception in 1975 until its
acquisition  by the Company in January 1990.  From 1969 to 1975, he was Division
Manager  of  Consolidated  Refining  Company,   where  he  was  responsible  for
organizing a division  manufacturing the materials  necessary to plate and stamp
semiconductor  materials and supervising all sales and manufacturing.  From 1960
to 1969, he was Vice President of Semi Alloys,  Inc.,  where he was  responsible
for the manufacture and sale of fabricated  metal products to the  semiconductor
industry.


     Craig Pian. Mr. Pian has been Executive Vice President and Treasurer of the
Company since  February 1, 1995. He has been employed by the Company since April
1987.  Mr.  Pian has been  involved  with all aspects of the  Company's  diamond
cutting  tool and ceramic  operations  as well as the  Company's  United  States
manufacturing, sales and administrative operations. Mr. Pian

                                                        19

<PAGE>



graduated Manhattan College with a Bachelor of Science Degree in
Business.



     Francine  Pian.  Ms. Pian has been a director  of the  Company  since March
1996. She has been employed by the Company since 1987,  serving as its Secretary
since March 1996.




     Tan Hun Chin.  Mr. Tan,  domiciled in Malaysia,  has been a director of the
Company  since  November  1998.  Since 1991 he has been a Managing  Director  of
Gentlecare Learning Center (M) Sdn. Bhd., a childcare center in Malaysia.  Since
1996 he has been an  Executive  Director of Intellect  Technology  Aura (M) Sdn.
Bhd., an electronic  sub-contract  manufacturing  company.  He has been Managing
Director of Fuji Fabrication Sdn. Bhd. since it became a wholly-owned subsidiary
of the Company in June 1998. Mr. Tan has  Management  and Business  degrees from
the United Kingdom and Canadian Universities.



Compliance with Section 16(a) of the Securities Exchange Act of
1934



     The Company does not have any securities registered under Section 12 of the
Securities Exchange Act of 1934 and, accordingly,  compliance with Section 16(a)
thereof is not required or applicable.


Item 10.  Executive Compensation.

Employment Agreements.

     Mr.  Eugene Pian,  the  Company's  President,  serves under a five (5) year
employment agreement dated May 1, 1996 providing for (a) a base annual salary of
$100,000 plus annual  increases as determined by the Board of Directors,  but in
no event less than the increase in the Consumer  Price Index over the  preceding
calendar  year,  (b) a bonus equal to five  percent  (5%) of any increase in the
Company's  consolidated  net income and (c) an automobile  allowance of $500 per
month or use of a Company car.  Under the  Agreement,  Mr. Pian was granted five
(5) year options to purchase  1,000,000  shares of the Company's Common stock at
$.25  per  share  and  1,000,000  shares  at  $.10  per  share.  He  may  demand
registration  by the Company under the  Securities Act of all or any part of the
option  shares as to which stock  options have been  exercised and may piggyback
any other shares which he owns.


                                                        20

<PAGE>


     Mr. Craig Pian,  the Company's  Executive  Vice  President  and  Treasurer,
serves under a five (5) year  employment  agreement  dated May 1, 1996 providing
for (a) a base annual  salary of $75,000 plus annual  increases as determined by
the Board of  Directors,  but in no event less than the increase in the Consumer
Price Index over the preceding  calendar year, (b) a bonus equal to five percent
(5%) of any increase in the Company's consolidated net income, (c) an automobile
allowance  of $500 per month or use of a Company car and (d) a one-time  signing
bonus of  $25,000.  Under the  Agreement,  Mr.  Pian was  granted  five (5) year
options to purchase  1,000,000  shares of the Company's Common stock at $.25 per
share and 1,000,000 shares at $.10 per share. He may demand  registration by the
Company under the  Securities  Act of all or any part of the option shares as to
which stock options have been exercised and may piggyback any other shares which
he owns.


Director Compensation

     Directors do not receive compensation for their services as directors,  but
may be reimbursed for expenses  incurred for attendance at meetings of the Board
of Directors.

Summary Compensation

     The following Summary  Compensation Table reflects certain  information for
the Company's Chief Executive Officer and the Company's  executive  officers who
had  total  annual  salary  and  bonus for any of the last  three  fiscal  years
exceeding $100,000.




                                                        21

<PAGE>



                           Summary Compensation Table


                                                                   Long Term
                               Annual Compensation               Compensation

                                                        Other       Securities
     Name and                                           Annual      Underlying
     Principal                      Salary      Bonus   Comp. (1)   Options/
     Position            Year        ($)        ($)      ($)         SARs (#)
     ---------           ----       ------      -----   ---------  --------

Eugene Pian, Chief       1998       107,499       -        -        500,000
Executive                1997       101,662     1,868      -      1,000,000
Officer                  1996        92,784       -        -      1,000,000

Craig Pian,              1998        83,769       -     53,665      500,000
Executive Vice           1997        73,648    26,868   28,317    1,000,000
President and            1996        70,615       -     21,829    1,000,000
Treasurer


--------------------

(1)      Excludes perquisites and other benefits, unless the aggregate amount of
         such  compensation  is at least the lesser of either  $50,000 or 10% of
         the total  annual  salary and bonus  reported  for the named  executive
         officer.

                  Options/SAR Grant Table:  The following information is
provided for the Company's executive officers:


              OPTION/SAR GRANTS IN LAST FISCAL YEAR

  Individual Grants
                 Number of          % of Total           
                 Securities          Options/SARs     Exercise
                 Underlying          Granted to       or Base
                 Options/SARs        Employees in     Price       Expiration
 Name            Granted (#)         Fiscal Year      ($/Sh)         Date

Eugene Pian,     500,000               33%             $.50      March 2003
Chief
Executive
Officer

Craig Pian       500,000               33%              $.50     March 2003






                                                        22

<PAGE>



Item 11.          Security Ownership of Certain Beneficial Owners and
                  Management.

     The  following  table sets forth  certain  information  as to the number of
shares of the  Company's  Common Stock deemed to be owned  beneficially  by each
person known by the Registrant to be the beneficial owner of more than 5% of the
outstanding Common Stock, each of its executive officers and directors,  and all
of its executive officers and directors as a group, at April 15, 1999. Except as
indicated in the  footnotes to this table,  the Company  believes that the named
persons have sole voting power with respect to the shares indicated:



Name and Address of          Position         Number          Percentage
Beneficial Owner             with Company     of Shares       of Class 

Eugene J. Pian               President and   5,574,000(1)        41%
c/o Semicon Tools, Inc.      Director
554 North State Road
Briarcliff Manor, NY 10510

Craig Pian                   Executive Vice  3,010,000(2)         22
c/o Semicon Tools, Inc.      President,
554 North State Road         Treasurer and
Briarcliff Manor, NY 10510   Director

Francine Pian                Secretary       785,500(3)            7
c/o Semicon Tools, Inc.      and Director
554 North State Road
Briarcliff Manor, NY 10510

Tan Hun Chin                 Director        500,000(4)            4
#35,Lintang Delima 3, Greenlane
11700 Penang, Malaysia

All Directors and Executive                9,869,500(5)           58
Officers as a Group
(4 Persons)



     (1) Includes currently  exercisable options to purchase 2,500,000 shares of
Common  Stock,  and 1,552,613  shares of Common Stock held under voting  trusts.
Each Voting Trust terminates when the shareholder sells his stock.


     (2) Includes currently  exercisable options to purchase 2,500,000 shares of
Common Stock.

                                             
     (3) Includes  currently  exercisable  options to purchase 500,000 shares of
Common Stock.


     (4) Includes  currently  exercisable  options to purchase 500,000 shares of
Common Stock.


     (5) Includes currently  exercisable options to purchase 6,000,000 shares of
Common Stock.


Item 12.  Certain Relationships and Related Transactions.

                                       N/A




                                                                         23
                                               

<PAGE>



Item 13.          Exhibits and Reports on Form 8-K.

                  (a)      Index of Exhibits.

                                      Exhibit                           Page

                           3(a)       Articles of Incorporation1
                           3(b)       By-Laws1
                           3(c)       Amendment to Articles of
                                      Incorporation2
                           10(a)      Agreement of Merger with
                                      Semicon Tools, Inc., a
                                      New York Corporation2
                           10(b)       Articles of Merger2
                           10(c)      Certificate of Merger2
                           10(d)      Patent License1
                           10(e)      Patent No. 4,219.0041
                           10(f)      License Agreement with Bookuk
                                      Industry Company, Ltd.1
                           10(i)      Thermode/Synthrode Supplier
                                      Agreement1
                           10(j)      East Coast Sales Acquisition
                                      Agreement3
                           10(k)      $300,000 Promissory Note3
                           10(l)      Amendment to East Coast Sales
                                      Acquisition Agreement4
                           10(m)      Teik Tatt Holding Co. (1979)
                                      Sdn. Bhd. Acquisition Agreement5
                           10(n)      Teik Tatt Holding Co.
                                      Disposition Agreement6
                           16         The required letter from the
                                      former accountants7
                           21         List of Subsidiaries
                           27         Financial Data Schedule



                           1.   Incorporated  by  Reference  from  Registrant's
                                Registration  Statement  on Form S-18  declared
                                effective on June 8, 1988.



                           2.   Incorporated  by  Reference  from  Registrant's
                                Form 8-K Report dated May 19, 1987.



                           3.   Incorporated  by  Reference  from  Registrant's
                                Form 8-K Report dated February 19, 1990.

  
                           4.    Incorporated  by  Reference  from  Registrant's
                                 Form 10-K Report for the year ended January 31,
                                 1991.

                           5.    Incorporated  by  Reference  from  Registrant's
                                 Form 8-K Report dated December 9, 1997.

                           6.    Incorporated  by  Reference  from  Registrant's
                                 Form 8-K Report dated September 19, 1998.

                           7.    Incorporated  by  Reference  from  Registrant's
                                 Form 8-K Report dated January 29, 1993.




                                                                          24


<PAGE>



                  Supplemental Information to be Furnished With
                     Reports Filed Pursuant to Section 15(d)
                  of the Exchange Act By Non-reporting Issuers


     (1) No annual report to security  holders  covering the  registrant's  last
fiscal year was sent to security holders; and

     (2) No proxy statement,  form of proxy or other proxy  soliciting  material
has been sent to more than ten of the registrant's security holders with respect
to any annual or other meeting of security holders.


                                                  
                                                                        25
<PAGE>



                                   SIGNATURES

In  accordance  with  Section 13 or 15(d) of the Exchange  Act,  the  Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                                 SETO HOLDINGS, INC.        
                                                    (Registrant)

                                                 By /s/ Eugene J. Pian 
                                                     Eugene J. Pian, President

                                                     Date:  April 29 1999


In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on behalf of the  Registrant and in the capacities and on the
dates indicated.


                                                      /s/ Eugene J. Pian
                                 Eugene J. Pian
                                    Director

                                                     Date:  April 29, 1999

                                                      /s/ Craig A. Pian
                                  Craig A. Pian
                                    Director

                                                     Date:  April 29, 1999

                                                      /s/ Francine Pian
                                  Francine Pian
                                    Director

                                                     Date:  April 29, 1999


                                                    /s/ Tan Hun Chin
                                  Tan Hun Chin
                                    Director

                                                     Date:  April 29, 1999



                                                                       26

<PAGE>


                                   EXHIBIT 21


                                 Subsidiaries of
                               SETO Holdings, Inc.



  Name of                                        State/Jurisdiction
Subsidiary                                       of Incorporation  

Semicon Tools, Inc.                                New York


East Coast Sales Company, Inc.                     Connecticut


DTI Technology, Sdn. Bhd.                          Malaysia


Fuji Fabrication, Sdn. Bhd.                        Malaysia


                                                                           27