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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-KSB/A

(Amendment No. 1)


(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, 2001                                          

|  |  |                                                                                         
|- |  | ----------------------------------------------------------------------------------------
|o |  | 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 0-28698

SETO HOLDINGS, INC.

(Exact name of small business issuer as specified in its charter)


|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Nevada                                                         |  | 77-0082545                             
|                                                               |  |                                        
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S.) Employer
Identification Number

554 North State Road, Briarcliff Manor, New York, 10510




(Address of principal executive offices)


Registrants telephone number, including area code (914) 923-5000

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

|    |  |   |  |    |  | 
|--- |  | - |  | -- |  | 
|Yes |  | X |  | No |  | 
|    |  |   |  |    |  | 



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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is not contained herein,
and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated
by reference in Part III of the Form 10-KSB or any amendment to this form 10-KSB. o

State issuers revenues for its most recent fiscal year. $5,653,289

State 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.
$3,025,286 as of September 18, 2003.

State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date.
13,751,300 shares of common stock, $0.001 par value, outstanding on September 18, 2003.

DOCUMENTS INCORPORATED BY REFERENCE

None





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EXPLANATORY NOTE

This Amendment No. 1 to SETO Holdings, Inc.s Annual Report on Form 10-KSB
for the year ended January 31, 2001 includes restated consolidated financial
statements as of January 31, 2001 and 2000.

In the Companys original Form 10-KSB dated April 25, 2001, the Companys
discontinued subsidiary, Fimas, Sdn. Bhd. financial statements were not audited
and the Companys accountants did not express an opinion on them. The
financial statements for Fimas, Sdn. Bhd. have since been audited and
subsequently the Companys Auditors have expressed an opinion on the
consolidated financials statements as of January 31, 2001.

In fiscal 2001, the Company issued 180,000 shares of its common stock as
compensation to a consulting firm for a consulting contract with a 15 month
term. The Company originally valued the consulting agreement at $255,600 and
was amortizing it over its term. In the fourth quarter of fiscal 2001, due to
changing market conditions and the lack of performance by the consulting
company, management revalued the consulting contract down to $50,400. The
staff of the Securities and Exchange Commission (SEC) has advised the Company
that in regard to Stock Based Compensation to Non-Employees, the fair value of
publicly traded shares is generally more readily determinable than the fair
value of services rendered and that under FAS No. 123 (Accounting for Stock
Based Compensation) revaluation is not permitted. Following a series of
discussions with the SEC Staff, the Company agreed to restate its consolidated
financial statements for all years presented using FAS No. 123. Accordingly,
the accompanying consolidated financial statements have been restated from
those originally reported to reflect the resolution of these discussions
between the Company and the SEC Staff regarding the valuation of stock based
compensation to non-employees. This correction resulted in the Company
recognizing in Fiscal 2001, $196,377 in additional Selling, General and
Administrative expenses.

In fiscal 2001, the Company reported weighted average common shares
outstanding, assuming dilution of 13,788,985 shares which was incorrect. The
correct amount should have been 14,557,463, because the weighted average common
shares outstanding, assuming dilution, should not include the incremental
shares that would be issued upon the exercise of stock options
because their
effect was antidilutive and should have been excluded from the calculation.

Following its determination to restate its earnings for the matters
described above, the Company also determined that it would correct certain of
its historical accounting policies to conform the accounting to U.S. generally
accepted accounting principles (GAAP) and certain known errors in the
application of GAAP that were previously not recorded because in each such case
the Company believed the amount of any such error was not material to the
Companys consolidated financial statements.

As a result of the foregoing, the Company has restated its financial
statements for the two years ended January 31, 2001 and 2000. The restatement
of previously issued financial statements reduced the Companys net earnings
and diluted earnings per share in the years ended December 31, 2001 by
approximately $331,543 or $.01 per share.

Note 2, Restatement of Previously Issued Financial Statements, to the
restated consolidated financial statements disclose the nature of the
restatement adjustments and shows the impact of each adjustment on operating
income, income (loss) from continuing operations, net loss and related per
share amounts and the cumulative impact of the adjustments on the statement of
operations and balance sheet for January 31, 2001.

The Company revised Note 3 to the restated consolidated financial
statements to present the revised accounting policies for certain matters
included in the restatement. Other notes to the consolidated financial
statements affected by the restatement have also been revised.

This
Form 10-KSB/A amends and restates Items 1 of Part I, Items 6 and 7 of
Part II, and Item 11 of Part III of the original Form 10-KSB, and no other
information included in the original Form 10-KSB is amended hereby. The
explanatory caption at the beginning of each item of this Form 10-KSB set forth
the nature of revisions to that item.

For a discussion of events and developments subsequent to January 31,
2001, see the Companys Quarterly report of Form 10-QSB for the quarterly
period ended July 31, 2003.





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PART I

ITEM 1. DESCRIPTION OF BUSINESS

Industry

We principally distribute and fabricate on a value-added basis,
industrial ceramic products for the airline security, aircraft, aerospace,
defense and microwave industries. We also manufacture and distribute small
disposable precision diamond cutting tools which are used in the fabrication of
semiconductor chips and integrated circuit boards for the semiconductor and
electronic industries, and we also manufacture both rechargeable cellular phone
batteries along with rechargeable industrial batteries. In addition to
fabricating and manufacturing, we also provide contract manufacturing for
personal safety devices and to produce medical, automotive and mining safety
devices. In fiscal 2001 we exited the business of manufacturing consumer
electronic products in Fimas, SDN. BHD. division, as discussed below and in
Business Developments over the Last Three Years and in Item 6 Managements
Discussion and Analysis of Financial Condition and Results of Operations 
Discontinued Operations.

We are incorporated in Nevada in 1986. Our Internet address is
www.setoholdings.com. On our web site we post the following filings as soon as
reasonable practicable after they are electronically filed with or furnished to
the Securities and Exchange Commission: our annual report on Form 10-KSB, our
quarterly reports on Form 10-QSB, our current reports on Form 8-K and any
amendments to those reports filed or furnished pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934. All such filings on our web site
are available free of charge.

Business Developments Over The Past Three Years

Since June 1998, we have made acquisitions and formed joint ventures
designed to enable us to sell rechargeable batteries for telephones, power
tools, and other consumer products. A summary of these transactions is set
forth below:

On June 30, 1998, we issued 100,000 shares of common stock to acquire all
of the issued and outstanding shares of Fuji Fabrication Sdn. Bhd.
(Fuji), a
Malaysian company which principally designed, manufactured and distributed
cellular telephone and other rechargeable batteries.

On November 19, 1999, we acquired all the issued and outstanding common
stock of Hong Kong Batteries Industries, Ltd. (HKBI), a Hong Kong manufacturer
and distributor of electronic components and industrial batteries, with joint
venture partners in mainland China, in exchange for 1,500,000 shares of our
common stock. In January 2001, we mutually agreed to reduce the purchase price
by 100,000 shares, which were returned to us and cancelled. In March 2001, we
issued to the former shareholders of HKBI an additional 500,000 shares due to
HKBI generating a certain amount of post acquisition net income. The
acquisition of HKBI marked the beginning of our emphasis on the design,
manufacturing, marketing and distribution of products for the
telecommunications industry.

On November 27, 1999, we issued 5,000,000 shares of our common stock to
acquire all the issued and outstanding capital stock of Fimas Sdn. Bhd.
(Fimas), a Malaysian holding corporation with facilities in Malaysia and
Suzhou, China, to manufacture electronic consumer products such as DVD players,
CD ROM drives, home theater systems, CD players and a wireless computer mouse.
In January 2001, the Company decided to dispose of Fimas due to low gross
profit margins, increasing losses and high working capital requirements.

On December 6, 1999, the Company entered into a joint venture with
International Bearing Networks, LLC (IBN) a privately owned company in
California, to manufacture and supply a new diamond dicing blade developed by
IBN, which is manufactured using a proprietary process called Diamond
LifeTM.
This venture ended in June 2000.

On January 31, 2001, we sold Fimas back to their former owners in exchange
for the 5,000,000 shares of common stock we originally issued to acquire Fimas.
We decided to dispose of Fimas due to its low gross profit margins, increasing
losses and high working capital requirements. In February 2001, we decided to
discontinue Fujis operations because we could not compete with Chinese
companies. China was producing batteries for a third of what it cost us to
manufacture. On October 1, 2001, we sold certain equipment and inventory used
to manufacture





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and assemble cellular telephone packs to G Com Net, Inc. (G Com), a New York
corporation for $290,547. We accepted a promissory note for the full amount,
interest was stated at 10% and the note was originally due on October 1, 2002,
such note was then amended on October 1, 2002 to increase the principal to
$396,693 to reflect the sale of additional supplies and unpaid interest, to
extend the maturity date to September 30, 2003, and to provide for the payment
of interest on a monthly basis instead of quarterly. Interest payments on this
note are current, although, no assurance can be given that they will remain
current or that the note will be paid on maturity. In April 2001, we
discontinued our SETO Ventures U.S. distribution company and its Circle 1.com
marketing company, both of which were formed in 2000. On October 31, 2002,
following a significant reduction in revenues and profits which we could not
overcome, we closed HKBI, and thereafter we dissolved our Lexal Battery Co.,
Ltd. and Vision Shenzen Center Power Tech Co., Ltd. joint ventures, effectively
terminating our foray into the business of manufacturing and selling consumer
electronic products and rechargeable and other batteries for consumer products.

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 10-KSB was prepared and
involves 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 translations 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.

Products

Our major products include industrial ceramics, diamond cutting tools,
rechargeable cellular phone batteries, rechargeable industrial batteries, and
personal safety devices, such as our CPR trainer.

Our major customers are:



| |  |  | Original equipment manufactures who make airport security,
bomb detection devices, jet engine and missiles;
| | - |  | -----------------------------------------------------------------------------------------------------------
|
| |  |  | Original equipment manufacturers who make semiconductors and light emitting diodes (LEDs); and            
|
| |  |  | Safety and rescue industries.                                                                              
|
| |  |  | Major cellular telephone manufacturers.                                                                    
|
| |  |  | Major industrial rechargeable battery distributors.                                                        

Focusing on our core competencies in the fabrication of industrial
ceramics as well as our diamond tools and personal safety devices, we believe
we are well positioned to provide our customers with the quality products they
demand.

Each of our operating segments uses its core competencies, and we use our
relatively small size to provide niche services for larger companies in order
to compete vigorously in each relevant market segment. Our East Coast Sales
Company segment focuses on industrial ceramics for the security, detection and
jet engine industries. Our Semicon Tools DTI Technology segment focuses on
diamond cutting tools for the semiconductor and electronic industries. Our
Fuji Fabrication and Hong Kong Batteries segments focus on the rechargeable
battery market. Finally, our SETO Technology segment focuses on contract
manufacturing for the safety and rescue industries.





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Industrial Ceramic Products  East Coast Sales Company

East Coast Sales Company (ECS) operating segment distributes two principal
categories of industrial ceramic products: (1) insulators, tubes, rods,
crucibles and other lab-ware, all of which are standard catalogue items, and
(2) custom cut ceramics for the airline security and detection industries and
jet engine manufacturers. The products are manufactured by third parties and
fabricated by us and warehoused and then distributed by us from our New York
facilities.

Our three major customers are developing new products all which will
require our ceramic products. In addition to airport security devices our
ceramic products are used in military defense equipment such as missiles and by
manufacturers of jet engines for both commercial and military use.

Net revenue for the Industrial Ceramic Products operating segment made up
approximately 27% of our consolidated net revenue in fiscal 2001.

Industrial Diamond Cutting Tools  Semicon Tools/DTI Technology

Semicon Tools/DTI Technology manufactures and distributes diamond dicing
blades. Dicing blades are made of industrial diamonds bonded with 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 materials.
The blade market consists principally of hubbed blades, which are the most
commonly used, diamond/thermoset plastic known as resin blades, which are
used in precision electronic saws for cutting ceramic substrates and have a
shorter useful life, and diamond nickel allow hubbless blades. Hubbed blades
are competitively manufactured principally by Disco, Inc. and Kulicke & Soffa
Corporation. We manufacture hubbed and hubbless blades at our Malaysian
facility and we currently have an insignificant share of the world-wide dicing
blade market. There can be no assurance that we will be able to increase our
market share.

We also manufacture and distribute Scribes and Dressers. A Scribe, which
resembles a small pencil, has a tip that contains a gem quality diamond which
is used to cut silicon wafers and perform die and integrated circuit
separation. These products, which we assemble in our New York facility, have
limited growth potential in this application since the semiconductor and
electronic industries have 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 are also preferred for certain low volume applications which do not
justify the capital expense of using a dicing saw. We occasionally use
subcontractors to set or lap the diamonds into the tools. Dressers are
diamond tipped tools generally used to dress or shape abrasive grinding
wheels in machine shops. These products, which are assembled in our Malaysian
facility, are sold to companies such as Black & Decker and Snap-On Tools, who
then resells them to third parties. We believe that there are multiple foreign
suppliers of these dressers.

Net revenue for the Industrial Diamond Cutting Tool operating segment made
up approximately 13% of our consolidated net revenue in fiscal 2001.

Cellular Telephone and Other Rechargeable Batteries

The Companys subsidiaries, Fuji Fabrication, SDN, BHD (Fuji) and Hong
Kong Batteries Industries Ltd. (HKBI) manufacture rechargeable batteries for
consumer and industrial use. These products rely on the availability of an
adequate supply of battery cells and components which the Company purchases
from international electronics manufacturers. The Company has joint venture
agreements with two third-party suppliers in China to Supply batteries to the
Company when the Company receives orders beyond its manufacturing capacity or
is for a product which the Company does not currently manufacture. These two
segments compete principally on the basis of quality, price and availability.
Net revenue for the cellular and industrial battery operating segments made up
approximately 59% of our consolidated net revenue in fiscal 2001.





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Contract Manufacturing  SETO Technology

SETO Technology provides contract-manufacturing services for personal
electronic safety devices and to produce medical, automotive and mining safety
devices. This segment is currently developing and selling medical training
products, auto safety devices and safety helmets. Currently this segments
main product is a CPR training device used by the medical industry. We have
five different models under contract on an exclusive and nondisclosure basis.
SETO Technology has also contracted with a third party to develop and
manufacture a safety helmet that we expect to bring to market in fiscal 2004.

Net revenue for the Contract Manufacturing operating segment made up
approximately 1% of our consolidated net revenue in fiscal 2001.

Miscellaneous Products

In addition to the products mentioned above, we distribute small precision
tools such as tweezers, pliers, vacuum pickups and scribes, core drills and
sinter blades for ceramic applications. We also distribute cleaning chemicals,
inspection gloves and other items used to preserve a contamination-free
environment, which we market primarily to semiconductor manufacturers.

Raw Materials

We purchase our raw materials and supplies from multiple sources. None of
the raw materials and supplies we require is currently in short supply,
although factors outside of our control could adversely impact their future
availability.

Backlog

Our sales are made primarily pursuant to standard purchase orders for
delivery of standard products. We believe that only a small portion of our
order backlog is noncancellable and that the dollar amount associated with the
noncancellable portion is not material. Therefore, we do not believe that our
backlog as of any particular date is indicative of future results.

Competition

Our operating segments each are intensely competitive. Virtually all
competitors have greater financial and personnel resources and greater market
recognition than our company has. As a result, these competitors can obtain
better payment terms and service from suppliers. Furthermore, we face 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. We believe the principal competitive
factors affecting its products are quality, price and availability.

Marketing

We market our products though joint ventures, account representatives,
telephone solicitations, participation in trade shows, the Internet and
advertisements in trade journals.

Manufacturing Facilities

In Briarcliff Manor, New York, we operate a machine shop and a
manufacturing facility for resin/diamond dicing blades. We lease a facility in
Kepala Batas, Penang, Malaysia which is equipped to manufacture dicing blades
and diamond dressing tools. In addition, the Company also manufactures
rechargeable industrial batteries at a facility in Shenzhen, China

Government Regulation

We believe our operations and facilities are in compliance with all
federal, state and local environmental laws in the United States, Malaysia and
China. We have not incurred any special or unusual costs to comply with
environmental laws or other applicable governmental regulations.





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Research and Development

In fiscal years ended January 31, 2001 and 2000, we did not incur any
research and development expenses.

Employees

We employ approximately 50 full-time employees, of which 6 employees work
in the United States and the remaining 14 are employed in Malaysia and 30 are
employed in China. We also utilize outside consultants and part-time workers
when required.

ITEM 2. DESCRIPTION OF PROPERTY

In Malaysia, we lease approximately 4,600 square feet of manufacturing and
warehouse space and 500 square fee of office space in Kepala Batas, Penang,
pursuant to a lease expiring in July 2004, with a minimum annual lease payment
of $7,200. We also occupy approximately 1,500 square feet of office space in
Penang, pursuant to a lease expiring in September 2004, with a minimum annual
lease payment of $12,000.

In the United States, we lease approximately 2,400 square feet of
manufacturing and warehouse space and 1,200 square feet of office space in
Briarcliff Manor, New York, from Rachrob Realty, LLC, a company owned by Eugene
Pian, the President and principal shareholder, pursuant to a 15 year lease
which expires on April 30, 2013, with an annual base rent, excluding utilities,
maintenance and repairs, as follows: years 1 to 5 $60,000; years 6 to 10,
$66,000 and years 11 to 15, $72,000.

ITEM 3. LEGAL PROCEEDINGS

There are no pending material legal proceedings to which we are a party to
or which any of our property is subject, and we know on no such threatened or
contemplated proceedings against us.

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.

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

Our common stock, $.001 par value, is traded on NASDAQs over-the-counter
Bulletin Board under the symbol SETO

The following table sets forth the range of high and low bid information
for our common stock for each calendar quarter within the last two fiscal
years, and for the first calendar quarter of 2001, as provided by Pink Sheets,
LLC. Such quotations reflect inter-dealer prices without retail mark-up,
mark-down or commission, and may not represent actual transactions.

|               |  |     |      |      |  |   |      | 
|-------------- |  | --- | ---- | ---- |  | - | ---- | 
|               |  | Low |      | High
|               |  |     |      |     
|2001           |  |     |      |      |  |   |      | 
|First quarter  |  | $   | 0.74 |      |  | $ | 0.21 | 
|2000           |  |     |      |      |  |   |      | 
|First quarter  |  | $   | 0.38 |      |  | $ | 2.75 | 
|Second quarter |  | $   | 1.21 |      |  | $ | 2.00 | 
|Third quarter  |  | $   | 1.03 |      |  | $ | 1.81 | 
|Fourth quarter |  | $   | 0.31 |      |  | $ | 1.10 | 





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|               |  |     |      |      |  |   |      | 
|-------------- |  | --- | ---- | ---- |  | - | ---- | 
|               |  | Low |      | High
|               |  |     |      |     
|1999           |  |     |      |      |  |   |      | 
|First quarter  |  | $   | 0.14 |      |  | $ | 1.63 | 
|Second quarter |  | $   | 0.30 |      |  | $ | 0.67 | 
|Third quarter  |  | $   | 0.30 |      |  | $ | 0.55 | 
|Fourth quarter |  | $   | 0.40 |      |  | $ | 0.76 | 

Holders

As of April 24, 2001, there were 328 record holders of our common stock.

Recent Sales of Unregistered Securities

On December 10, 1999, the Company issued 1,500,000 of its common stock
pursuant to section 4(2) of the Securities Act in exchange for all of the
issued and outstanding stock of Hong Kong Batteries. In January 2001, 100,000
shares were returned to the Company.

On December 12, 1999, the Company issued 5,000,000 of its common stock
pursuant to section 4(2) of the Securities Act in exchange for all of the
issued and outstanding stock of Fimas SDN. BHD.

On January 28, 2000, we issued 250,000 shares of our common stock to an
individual who rendered consulting services to us valued at $68,000 in
connection with our 1999 acquisition of Fimas Sdn. Bhd. The shares were issued
pursuant to Section 4(2) of the Securities Act. In March 2001, the consultant
returned 200,000 of these shares to us for cancellation.

In February 2000, we issued 100,000 shares of our common stock to SCAL
Distributors in connection with a distribution agreement, pursuant to Section
4(2) of the Securities Act.

In March 2000, we issued an aggregate of 875,000 shares of our common
stock, sold at a price of $.40 per share, to three investors, pursuant to
Section 4(2) of the Securities Act.

In March 2000, we issued 180,000 shares to GoPublicNow.Com (GPN), an
investor relations company, for services to be rendered, pursuant to Section
4(2) of the Securities Act. GPN subsequently returned 77,600 of those shares
to us for cancellation. See Note 22 in the financial statements.

In April 2000, we issued an aggregate of 317,500 shares of common stock,
sold at a price of $1.25 per share to 15 investors, pursuant to Section 4(2) of
the Securities Act.

In March 2001, we issued 500,000 shares pursuant to Section 4(2) of the
Securities Act to the former owners of Hong Kong Batteries Industries, Ltd.
(HKBI), our former wholly owned subsidiary which we acquired in December
1999, and discontinued in fiscal 2003. Such shares were issued as an
additional purchase price based on HKBIs generation of a certain amount of
post acquisition net income,

In April 2001, we issued an aggregate of 500,000 shares our officers,
Eugene Pian (250,000 shares), Craig Pian (150,000 shares) and Francine Pian
(100,000 shares), to agreeing to extend the terms of their respective
employment agreements for an additional five years, pursuant to Section 4(2) of
the Securities Act. Such shares were cancelled on December 6, 2001 and
replaced with options to purchase a like number of shares at $.15 per share
with an expiration date of April 30, 2006.

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, 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 Company.





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Dividends

We have not paid cash dividends to date and we intend to apply our
earnings, if any, for use in our activities. Payments of cash dividends in
future will be wholly dependent upon the Board of Directors and upon our
earnings, financial condition, capital requirements and other factors we deem
relevant. 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 us,
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.

ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The Managements Discussion and Analysis or Plan of Operation set forth in
this Item 6 has been revised to reflect the restatement, and certain events
occurring subsequent to the filing of the original Form 10-KSB, as well as to
incorporate certain conforming changes. In addition, the Company updated it
disclosure with respect to recently issued accounting standards, and critical
accounting policies

The following section should be read in conjunction with Item 1: Business
and Item 7: Financial Statements.

The Strategy, Critical Accounting Estimates and Outlook sections all
contain a number of forward-looking statements, all of which are based on our
current expectations. Our actual results may differ materially.

Recent Developments

As
discussed in more detail below under Results of Operations, in 2001 we
issued shares of our common stock as compensation to a consulting firm. We
originally valued the consulting agreement at $255,600 and were amortizing it
over its term. In the fourth quarter of fiscal 2001, due to changing market
conditions and the lack of performance by the consulting company, we revalued
the consulting agreement down to $50,400. After being advised by the staff of
the Securities and Exchange Commission (SEC), we have decided to use the fair
value of our common stock to determine the fair value of services rendered at
the time the contract was signed in accordance with FAS No. 123 (Accounting for
Stock Based Compensation), and decreased fiscal 2002s net income by $8,823,
from $521,688 to $512,865.

Throughout the following Managements Discussion and Analysis of Financial
Condition and Results of Operations, all amounts referencing prior periods and
prior period comparisons reflect the balances and amounts on a restated basis.

Strategy

Our goal is to be a niche company, with the ability to provide products
and services to a variety of larger corporations who need contract
manufacturing and/or made-to-order products. Our primary areas of focus are
the fabrication of ceramic parts for the airline security business and jet
engine manufacturing along with cutting blades for silicon wafers.

All of our businesses operate in competitive environments characterized by
the introduction of new products with lower prices. As part of our overall
strategy, we use our relatively small size and ability to provide niche
services for larger companies in order to compete vigorously in each relevant
market segment. Our competition comes from established businesses as well as
new entrants to the marketplace. The trend in the United States (U.S.) toward
HomeLand Security will offer us new opportunities, but will result in more
competition. Competition tends to increase pricing pressure on our products,
which may mean that we must offer our products at lower prices than we had
anticipated, resulting in lower profits. Because some of our customers already
have established products, it is inherently difficult for us to compete against
them. In addition, certain market segments in which we compete, such as dicing
blade products, have experienced an overall economic decline, increasing the
degree of competition within this market segment. When we believe it is
appropriate, we will take various steps,





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including discontinuing older products and reducing prices, in order to
increase acceptance of our products and to be competitive within each relevant
market segment.

We plan to continue to cultivate new businesses and work with the security
and chip making industries to expand our product lines.

East Coast Sales Company East Coast Sales Company (ECS) operating
segment specializes in the distribution and value-added fabrication of
technical ceramic products for the airline security industry and jet engine
manufacturers, and distributes clean room supplies and tools. Our strategy for
ceramic fabrication is to increase our production efficiency by utilizing our
foreign subsidiarys labor force and updating our machinery. Our three major
customers are developing new products which will require our ceramic products.
In addition to airport security devices, our ceramic products are used in
military defense equipment such as missiles, and by manufacturers of jet
engines for both commercial and military use. To increase the acceptance and
deployment of our ceramic products, we are focused on providing our customers
with the highest quality products and services.

Semicon Tools and DTI Technology Semicon Tools and DTI Technology
operating segments strategy is to produce quality diamond cutting tools for
the semiconductor industry. We plan to improve the quality and capability of
our diamond cutting products that we currently have on the market. We are
currently consulting with an outside source in Taiwan to improve our
manufacturing process and diamond tool technology. The diamond tool segment is
very dependent on the semiconductor industry which over last three years has
experienced economic decline and is still not showing signs of growth. The
diamond blades manufactured by DTI Technology are a vital part of East Coast
Sales ceramic fabrication process.

Fuji Fabrication Sdn. Bhd (Fuji) Fujis strategy is to gain market
share in the highly competitive cellular telephone replacement battery market.
Our strategy is to gain acceptance from the major consumer product companies by
providing quality products for less.

Hong Kong Batteries Industries (HKBI) HKBIs strategy is to gain
market share in the highly competitive industrial rechargeable battery market.
Our strategy is to gain acceptance from the major consumer product companies by
providing quality products for less.

SETO Technology SETO Technologys strategy is to provide
contract-manufacturing services for personal electronic safety devices and to
produce medical, automotive and mining safety devices. This segment is
currently developing and selling medical training products, auto safety devices
and safety helmets. Currently this segments main product is a CPR training
device used by the medical industry. We have five different models under
contract on an exclusive and nondisclosure basis. SETO Technology has also
contracted with a third party to develop and manufacture a safety helmet that
we expect to bring to market in fiscal 2004. As of January 31, 2001, we have
not incurred any expenses regarding the development of the safety helmet.

Critical Accounting Estimates

The methods, estimates and judgments we use in applying our accounting
policies have a significant impact on the results reported in our financial
statements. Some of these accounting policies require us to make difficult and
subjective judgments, often as a result of the need to make estimates of
matters that are inherently uncertain. Our most critical accounting estimates
include the assessment of recoverability of goodwill, which impacts write-offs
of goodwill; valuation of inventory, which impacts gross margin; assessment of
recoverability of long-lived assets, which primarily impacts gross margin when
we impair assets or accelerate their depreciation; and recognition and
measurement of current and deferred income tax assets and liabilities, which
impacts our tax provision. Below we discuss these policies further, as well as
the estimates and judgments involved. We also have other policies that we
consider to be key accounting policies, such as our policy for revenue
recognition; however, this policy does not meet the definition of critical
accounting estimates because they generally require us to make estimates or
judgments that are difficult or subjective.

Inventory Our policy for valuation of inventory, including the
determination of obsolete or excess inventory requires us to estimate the
future demand for our products within specific time horizons, generally one
year or less. If our demand forecast for specific products is greater than
actual demand and we fail to reduce manufacturing output accordingly, we could
be required to record additional inventory reserves, which would have a
negative impact on our gross margin.





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Goodwill In conjunction with the implementation of the new accounting
rules for goodwill as of the beginning of Fiscal 2003 (February 1, 2002), we
will complete a goodwill impairment review of East Coast Sales Company which is
the reporting unit that has substantially all of our recognized goodwill.
According to our accounting policy, we will also perform an annual review
during the fourth quarter of fiscal 2003. We will perform a similar review in
the fourth quarter of each year, or more frequently if indicators of potential
impairment exist. Our impairment review process is based on a discounted
future cash flow approach that uses our estimates of revenue for the reporting
unit, driven by assumed market growth rates and assumed segment share, and
estimated costs as well as appropriate discount rates. In the future, we may
incur charges for impairment of goodwill if the ceramic fabrication business
experiences an economic downturn, new technology becomes available, we lose
market acceptance, we fail to deliver new products, or if we fail to achieve
our assumed revenue growth rates or assumed gross margin

Long-Lived Assets We assess the impairment of long-lived assets when
events or changes in circumstances indicate that the carrying value of the
assets or the asset grouping is not recoverable. Factors that we consider in
deciding when to perform impairment review include significant
under-performance of a business or product line in relation to expectations,
significant negative industry or economic trends, and significant changes in
our use of the assets. Recoverability of assets that will continue to be used
in our operations is measured by comparing the carrying amount of the assets
grouping to the related total future net cash flows. If an assets grouping
carrying value is not recoverable through those cash flows, the asset grouping
is considered to be impaired. The impairment is measured by the difference
between the assets carrying amount and their fair value, based on the best
information available, including market prices or discounted cash flow
analysis.

Income Taxes In determining income for financial statement purposes, we
must make certain estimates and judgments. These estimates and judgments occur
in the calculation of certain tax liabilities and in the determination of the
recoverability of certain tax assets, which arise from temporary differences
between the tax and financial statement recognition of revenue and expense. As
of January 31, 2001, taxes were not provided on approximately $300,062 of
undistributed earnings of foreign subsidiaries, as we invest or expect to
invest the undistributed earnings indefinitely. If in the future these
earnings are repatriated to the United States, or if we determine such earnings
will be remitted in the foreseeable future, additional tax provisions would be
required.

We must assess the likelihood that we will be able to recover our deferred
tax assets. If recovery is not likely, we must increase our provision for
taxes by recording a reserve, in the form of a valuation allowance, for the
deferred tax assets that we estimate will not ultimately be recoverable. As of
January 31, 2001, we believe that our recorded deferred tax assets will
ultimately be recovered. However, should there be a change in our ability to
recover our deferred tax assets; our tax provision would increase in the period
in which we determine that the recovery is not probable.

In addition, the calculation of our tax liabilities involves dealing with
uncertainties in the application of complex tax regulations. We recognize
potential liabilities for anticipated tax audit issues in the U.S. and other
tax jurisdictions based on our estimate of whether, and the extent to which,
additional taxes will be due. If payment of these amounts ultimately proves to
be unnecessary, the reversal of the liabilities would result in tax benefits
being recognized in the period when we determine the liabilities are no longer
necessary. If our estimate of tax liabilities proves to be less than the
ultimate assessment, a further charge to expense would result.

Results of Operations

The financial statements for fiscal 2001 and 2000 have been restated. In
fiscal 2001, we issued 180,000 shares of our common stock as compensation to a
consulting firm for a fifteen month contract. We originally valued the
consulting agreement at $255,600 and were amortizing it over its term. In the
fourth quarter of fiscal 2001, due to changing market conditions and the lack
of performance by the consulting company, we revalued the consulting contract
down to $50,400. After being advised by the staff of the Securities and
Exchange Commission (SEC), we used the fair value of our common stock to
determine the fair value of services rendered at the time the contract was
signed in accordance with FAS No. 123 (Accounting for Stock Based
Compensation). This correction resulted in us recognizing in Fiscal 2001, and
additional $196,377 in Selling, General and Administrative expenses which had a
negative effect on our net income for fiscal 2001. In addition, the
implementation of FAS No. 123 had no impact on our liquidity or cash flows for
fiscal 2002.

In addition, we have corrected a typographical error in our computation of
earnings per share in fiscal 2001. The diluted number of common shares
outstanding was originally stated as 19,365,825. Using the treasury





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stock method, the correct amount of diluted common shares outstanding at
January 31, 2001 should have been 23,561,771.

The following table sets forth certain consolidated statements of income
data as a percentage of net revenue for the periods indicated:

|                 |                                              |  |          |       |          |  |        |       |  
|---------------- | -------------------------------------------- |  | -------- | ----- | -------- |  | ------ | ----- | -
|                 |                                              |  | 2001     |       | 2000    
|                 |                                              |  | Restated |       | Restated
|                 |                                              |  |          |       |         
|Net revenues     |                                              |  | 100.00   | %     |          |  | 100.00 | %    
|Cost of sales    |                                              |  | 61.68    | %     |          |  | 53.03  | %    
|                 |                                              |  |          |       |          |  |        |       |  
|Gross margin     |                                              |  | 38.32    | %     |          |  | 46.97  | %    
|                 | Selling, general and administrative expenses |  |          | 37.03 | %        |  |        | 43.40 | %
|                 | Amortization of goodwill                     |  |          | 0.49  | %        |  |        | 0.25  | %
|                 |                                              |  |          |       |          |  |        |      
|Operating income |                                              |  | 0.80     | %     |          |  | 3.82   | %    

For fiscal 2001, our net revenue of $5,653,289 was up approximately 59%
compared to fiscal 2000, primarily due to the increase in demand for our
industrial rechargeable battery products. Our increase in net revenues came
primarily from our Hong Kong Battery and Fuji Fabrication operating segments in
the form of significantly higher unit volumes and higher average selling prices
of rechargeable batteries.

Our gross margin percentage in fiscal 2001 of 38% was lower compared to
47% in fiscal 2000, primarily due to lower average selling prices and higher
raw material costs for the components used in our industrial rechargeable
batteries. See Outlook for a discussion of gross margin expectations.

For fiscal 2001, the majority of our consolidated net revenue and gross
margin came from sales of our industrial rechargeable battery and our custom
ceramic products.

Ceramics  East Coast Sales Company

The revenue and operating income for the East Coast Sales Company
operating segment for the two years ended January 31, 2001 and 2000 were as
follows:

|                 |  |          |           |          |  |   |           | 
|---------------- |  | -------- | --------- | -------- |  | - | --------- | 
|                 |  | 2001     |           | 2000    
|                 |  | Restated |           | Restated
|                 |  |          |           |         
|Revenue          |  | $        | 1,535,171 |          |  | $ | 1,399,482 | 
|Operating income |  | $        | 265,824   |          |  | $ | 333,978   | 

The East Coast Sales Company operating segment is our ceramics division.
Net revenues for this segment increased $135,689 or 10% in fiscal 2001 compared
to fiscal 2000. The increase in revenue was due to higher sales of custom cut
ceramics that are used in airport security devices and in the manufacturing
process of jet engines and missiles for the military.

Net operating income for the East Coast Sales Company operating segment
decreased by $68,154 or 20% compared to fiscal 2000 primarily due to the
increase in general and administrative cost some of which were reallocated from
our parent company, SETO Holdings, Inc.





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##### 



Diamond Tools  Semicon Tools/DTI Technology

The revenue and operating loss for the diamond tool operating segment for
the two years ended January 31, 2001 and 2000 were as follows:

|               |  |          |           |          |  |   |           |  
|-------------- |  | -------- | --------- | -------- |  | - | --------- | -
|               |  | 2001     |           | 2000    
|               |  | Restated |           | Restated
|               |  |          |           |         
|Revenue        |  | $        | 758,100   |          |  | $ | 680,343   |  
|Operating loss |  |          | ($415,315 | )        |  |   | ($254,195 | )

Net revenue in fiscal 2001 was up $77,757 or 11%, compared to fiscal 2000.
The net operating loss for fiscal 2001 increased $161,120 or 63%, compared to
fiscal 2000. The increase in the net operating loss from fiscal 2000 to fiscal
2001 was primarily due to lower average selling prices of diamond cutting tools
and the higher general and administrative costs. The lower selling prices
reflected the impact of competitive pricing pressures and a very soft
semiconductor industry. In addition, the following expenses; Consulting, and
labor, all increased substantially in fiscal 2001 compared to fiscal 2000.

Cellular Batteries  Fuji Fabrication

Our Fuji Fabrication operating segment consists of the manufacturing and
distribution of replacement cellular telephone batteries. The revenue and
operating income (loss) for the cellular batteries operating segment for the
two years ended January 31, 2001 and 2000 were as follows:

|                        |  |          |          |          |  |   |           | 
|----------------------- |  | -------- | -------- | -------- |  | - | --------- | 
|                        |  | 2001     |          | 2000    
|                        |  | Restated |          | Restated
|                        |  |          |          |         
|Revenue                 |  | $        | 731,635  |          |  | $ | 1,102,258 | 
|Operating income (loss) |  |          | ($54,844 | )        |  | $ | 20,046    | 

Net revenue in fiscal 2001 was down $370,623 or 34%, compared to fiscal
2000. The net operating income for fiscal 2001 decreased $74,890 or 374%,
compared to fiscal 2000. The decrease in the net operating income from fiscal
2000 to fiscal 2001 was primarily due to significantly lower average selling
price of our rechargeable cellular telephone batteries. The lower selling
prices reflect the impact of competitive pricing pressures.

On February 1, 2001, we adopted a formal plan to sell the assets of Fuji
Fabrication to G Com Net, Inc. of New York for $290,547.

Industrial Batteries  Hong Kong Batteries Industries

Hong Kong Batteries Industries is our industrial rechargeable battery
segment. The revenue and operating loss for the industrial rechargeable
batteries operating segment for the two years ended January 31, 2001 and 2000
were as follows:

|                 |  |          |           |          |  |   |         | 
|---------------- |  | -------- | --------- | -------- |  | - | ------- | 
|                 |  | 2001     |           | 2000    
|                 |  | Restated |           | Restated
|                 |  |          |           |         
|Revenue          |  | $        | 2,576,985 |          |  | $ | 376,486 | 
|Operating income |  | $        | 276,927   |          |  | $ | 18,801  | 

Net revenue in fiscal 2001 was up $1,896,642 or 279%, compared to fiscal
2000. The net operating income for fiscal 2001 increased $258,126 or 1,373%,
compared to fiscal 2000. The increase in the net operating income from fiscal
2000 to fiscal 2001 was primarily due to the fact that we acquired Hong Kong
Batteries in the forth quarter of fiscal 2000 and the operating income and net
revenues were only representative of three months of operation.





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Contract Manufacturing  SETO Technology

The revenue and operating income for the contract manufacturing operating
segment for the two years ended January 31, 2001 and 2000 were as follows:

|               |  |          |          |          |  |  |  | 
|-------------- |  | -------- | -------- | -------- |  |  |  | 
|               |  | 2001     |          | 2000    
|               |  | Restated |          | Restated
|               |  |          |          |         
|Revenue        |  | $        | 51,398   |         
|Operating loss |  |          | ($26,960 | )       

Our SETO Technology operating segment is a contract manufacturer of
personal electronic safety devices. This operating segment began operations
during fiscal 2001 with net revenues of $51,398 and net operating loss of
$26,960 which consisted of rent, insurance, utilities, depreciation and other
administrative expenses.

Operating Expenses

Operating expenses for the two years ended January 31, 2001 and 2000 were
as follows:

|                                             |  |          |           |          |  |   |           | 
|-------------------------------------------- |  | -------- | --------- | -------- |  | - | --------- | 
|                                             |  | 2001     |           | 2000    
|                                             |  | Restated |           | Restated
|                                             |  |          |           |         
|Selling, general and administrative expenses |  | $        | 2,093,292 |          |  | $ | 1,544,108 | 
|Amortization of goodwill                     |  | $        | 27,459    |          |  | $ | 8,811     | 

Selling, general and administrative expenses increased $549,184, or 36%
compared to fiscal 2000. This increase was primarily due to the addition of
Hong Kong Batteries and the recognition of additional consulting fees of
$196,377 for stock issued to a consultant.

Amortization of goodwill increased $18,648 in fiscal 2001 compared to
fiscal 2000, which was due to the acquisition of Hong Kong Batteries in the
forth quarter of fiscal 2000. Through fiscal 2001, in accordance with our
accounting policy, we reviewed acquisition-related goodwill and have not
identified any of our intangibles for impairment based on undiscounted cash
flows, and these analyses incorporated our estimates of future cash flows
related to the acquired businesses. If the new goodwill and intangibles asset
accounting standards issued by the Financial Accounting Standards Board (FASB)
in July 2001 had been applied in fiscal 2001, we estimate that amortization
expense would have been approximately 100% lower than the $27,459 reported.

Interest and Other, Net

Interest and other, net and taxes for the two years ended January 31, 2001
and 2000 were as follows:

|                                     |  |          |           |          |  |   |           |  
|------------------------------------ |  | -------- | --------- | -------- |  | - | --------- | -
|                                     |  | 2001     |           | 2000    
|                                     |  | Restated |           | Restated
|                                     |  |          |           |         
|Interest income                      |  | $        | 13,419    |          |  | $ | 3,264     |  
|Gain (loss) on sale of assets        |  |          | ($12,250  | )        |  |   |           |  
|Interest expense                     |  |          | ($154,925 | )        |  |   | ($114,933 | )
|Foreign currency exchange loss       |  | $        | 881       |          |  |   | ($529     | )
|Provision for income taxes (benefit) |  | $        | 44,511    |          |  | $ | 10,487    |  

Interest expense increased $39,992, or 35% in fiscal 2001 compared to
fiscal 2000, primarily due to the Company borrowing more money on a
line-of-credit in fiscal 2001. For 2000 compared to 1999 interest expense
increased $61,286, primarily due to the Company borrowing more money at a
higher interest rate.

Our effective tax benefit was 42% in fiscal 2001 and our effective income
tax rate was 163% in fiscal 2000. The lower adjusted rate in 2001 compared to
fiscal 2000 was due to a shift in the mix of income in various tax
jurisdictions.





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Foreign currency exchange income (loss) increased $1,410, or 266%, in
fiscal 2001 to $881 compared to a loss of $529 in fiscal 2000. We experience
currency translation gains or losses when we purchase items from foreign
countries (other than Malaysia) whose currencies are not pegged to the U.S.
Dollar. Historically, these gains and losses have been insignificant and
therefore we do not expect any significant losses in the future.

Discontinued Operations

In January 2001 we disposed of our subsidiary, Fimas Sdn. Bhd. (Fimas) and
reacquired the common stock previously issued in the acquisition and as a
result of the sale, activities of Fimas have been accounted for as discontinued
operations. At January 31, 2001 we accrued $83,849 in expenses related to the
discontinued segment that were paid in fiscal 2002. They are as follows:

|                                          |  |   |        | 
|----------------------------------------- |  | - | ------ | 
|Consulting                                |  | $ | 6,579  | 
|Other general and administrative expenses |  |   | 4,443  | 
|Printing                                  |  |   | 11,421 | 
|Professional fees                         |  |   | 4,210  | 
|Rent                                      |  |   | 25,872 | 
|Salaries                                  |  |   | 29,140 | 
|Utilities                                 |  |   | 2,184  | 
|                                          |  |   |        | 
|Total accrued expenses                    |  | $ | 83,849 | 
|                                          |  |   |        | 

The components of income (loss) from discontinued operations of Fimas are
as follows:

|                                             |  |          |            |          |  |   |           | 
|-------------------------------------------- |  | -------- | ---------- | -------- |  | - | --------- | 
|                                             |  | 2001     |            | 2000    
|                                             |  | Restated |            | Restated
|                                             |  |          |            |         
|Net sales                                    |  | $        | 24,091,242 |          |  | $ | 3,084,519 | 
|Cost of sales                                |  |          | 22,889,911 |          |  |   | 2,811,100 | 
|                                             |  |          |            |          |  |   |           | 
|Gross profit                                 |  |          | 1,201,331  |          |  |   | 273,419   | 
|                                             |  |          |            |          |  |   |           | 
|Selling, general and administrative expenses |  |          | 1,206,932  |          |  |   | 107,079   | 
|Interest and other, net                      |  |          | 148,917    |          |  |   | 60,065    | 
|                                             |  |          |            |          |  |   |           | 
|                                             |  |          | 1,355,849  |          |  |   | 167,144   | 
|                                             |  |          |            |          |  |   |           | 
|Loss before income taxes                     |  |          | (154,518   | )        |  |   | 106,275   | 
|Income taxes                                 |  |          | 0          |          |  |   | 15,979    | 
|                                             |  |          |            |          |  |   |           | 
|Net income (loss)                            |  |          | ($154,518  | )        |  | $ | 90,296    | 
|                                             |  |          |            |          |  |   |           | 

Financial Condition

Our financial condition remains strong. At January 31, 2001, cash totaled
$743,116, up from $349,547 at January 31, 2000. At January 31, 2001, total
short-term and long-term debt was $1,230,622, an increase of $502,665 compared
to January 31, 2000, which was primarily due to an increase in our short-term
line of credit. At January 31, 2001, total debt was $2,312,275 which
represented 99% of stockholders equity.

For fiscal 2001, cash used in operating activities was $492,701, compared
to cash provided by operating activities of $296,135 in fiscal 2000. Cash was
used by the net loss and was used to pay down accounts payable and accrued
expenses and adjusted for non-cash related items. Increases in accounts
receivable, inventory and prepaid expenses were offset by depreciation,
compensatory stock issued and decreases in other assets. For fiscal 2001, net
cash used in discontinued operations was $282,840, compared to cash used in
discontinued operations of $44,004 in fiscal 2000. This increase was primarily
due to Fimas, Sdn. Bhd.s fiscal 2001 net loss, along with a decrease in





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accounts payable and accrued expenses. For fiscal 2001, our three largest
customers accounted for approximately 44% of net revenue.

We used $182,270 in net cash for investing activities during fiscal 2001,
compared to cash provided of $143,809 during fiscal 2000. The increase in cash
used for investing activities as compared to fiscal 2000 was primarily due to
the cash acquired from the acquisition of Hong Kong Batteries in fiscal 2000 of
$305,603 and purchases of property and equipment. Capital expenditures in
fiscal 2001 remained relatively flat compared to fiscal 2000. We anticipate
capital expenditures of $150,000 for fiscal 2002.

We received $1,061,930 in net cash for financing activities in fiscal
2001, which increased from cash used in financing activities of ($70,238) in
fiscal 2000. The major financing uses of cash for both years were the
repayment of debt. During fiscal 2001, financing sources of cash of $758,927
came from proceeds from the sale of our common stock in addition to the
$919,899 we drew down on our revolving line of credit from a U.S. financial
institution. In addition, we paid back a total of $616,896 in short-term and
long-term debt during fiscal 2001. We have another potential source of
liquidity from authorized borrowings in the form of a line-of-credit with a
U.S. financial institution for $1.0 million. At January 31, 2001, we had
$18,847 available for use from this line of credit. In addition, our
subsidiary, DTI Technology has a banking arrangement through a Malaysian
banking facility for a total of $280,000 (U.S. dollars) in available credit
including $18,000 in overdraft protection and $262,000 in a line of credit.

We believe that we have the financial resources needed to meet our
anticipated business requirements for the next 12 months, including capital
expenditures for the expansion or upgrading of our manufacturing capacity and
working capital requirements.

Outlook

In general, as we look ahead to the rest of fiscal 2002, the outlook
continues to be uncertain, and we anticipate a year that will be largely driven
by the airline security, military, jet engine and semiconductor industries as
well as the global economy. Although it is difficult to predict product demand
for the rest of fiscal 2004, we expect a 10% to 20% increase in revenue from
our ceramic segment, East Coast Sales Company. During the second quarter of
fiscal 2002 we may be able to better forecast ceramic sales more accurately.
The outlook for the diamond tools industry continues to be weak. We are trying
to cut costs in order to compete with other manufacturers and we are planning
to improve the quality and capability of our diamond cutting products. The
diamond tool industry is very dependent on the semiconductor industry, which
over last three years has experienced economic decline and is still not showing
signs of growth. The outlook for the rechargeable battery segments also looks
weak due to increased competition from Chinese companies who can produce the
same battery products for half our cost. The outlook for the contract
manufacturing segment remains strong, however, we are still trying to cut costs
and improve profitability. Currently, we have a contract with a third party to
develop and manufacture a safety helmet that we expect to bring to market in
fiscal 2004. In this environment, revenue growth for our new safety helmet is
largely dependent on the commercial acceptance of our current designs and
successfully marketing the designs to the safety and rescue industries, which
we can not assure.

Our financial results are substantially dependent on sales of ceramics and
related products by the East Coast Sales Company operating segment. Revenue is
partly a function of the mix of products we offer, all of which are difficult
to forecast. Because of the changing conditions throughout the world our
revenue is subject to the impact of economic conditions in various geographic
regions.

Our gross margin expectation for fiscal 2002 is approximately 42% plus or
minus a few points, which is a slight increase from the fiscal 2001 gross
margin of 38%. Our gross margin varies depending on unit sales volumes and
product mixes. Our policy for valuation of inventory, including the
determination of obsolete inventory, requires us to estimate the future demand
for our products within six months or less. The estimates of future demand
that we use in the valuation of inventory are also used for near-term factory
planning. If our demand forecast is greater than actual demand and we fail to
reduce manufacturing output accordingly, we would likely be required to record
additional inventory reserves, which would have a negative impact on our gross
margin. Various other factors including unit sales volumes and new
technologies will also continue to affect cost of sales and the variability of
gross margin percentages.

In fiscals 2002 and 2003 we are planning to improve our cutting blade
facility and updated our ceramics fabrication facility. We expect that capital
spending will increase to $200,000 for fiscal 2002 from $ 182,270 in fiscal





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2001. If market demand does not grow or our new products are not accepted,
revenues and gross margins may also be adversely affected.

Depreciation for fiscal 2002 is expected to be approximately $150,000,
compared to $111,075 in fiscal 2001. Most of this increase would be included
in cost of sales.

We are completing the adoption of FASB Statements of Financial Accounting
Standards No.s 141 and 142 on accounting for business combinations and
goodwill at the end of fiscal 2002. Accordingly we will no longer amortize
goodwill from acquisitions, but will continue to amortize other
acquisition-related intangibles and cost. The estimates we used are consistent
with the plans and estimates that we are using to manage the underlying
business. If we fail to deliver products for this group, if our new products
fail to gain market acceptance, or if market conditions in the ceramic business
decline, our revenue and cost forecasts may not be achieved and we may incur
charges for impairment of goodwill.

Due to our net operating loss carryforwards from prior years we expect our
tax rate to be minimal for fiscal 2002. The expected rate is based on current
tax law and is subject to change.

Our future results of operations and the other forward-looking statements
contained in this Outlook section and in our Strategy and Critical
Accounting Estimates sections involve a number of risks and uncertainties, in
particular the statements regarding our strategies, our expectations regarding
new products, future economic conditions, revenues, gross margin and costs,
capital spending and depreciation and amortization. In addition to the factors
discussed above, among the other factors that could cause actual results to
differ materially are the following: business and economic conditions and
trends in the airline security business, jet engine manufacturers, microchip
industry, and safety industries in various geographic regions; possible
disruption in commercial activities related to terrorist activity and armed
conflict, such as change in logistics and security arrangements, and reduced
end-user purchases relative to expectations; the impact of events outside the
United States, such as the business impact of fluctuating currency rates,
unrest or political instability in a locale; changes in customer order
patterns; competitive factors and acceptance of new products in specific market
segments; pricing pressures; excess or obsolete inventory and variations in
inventory valuation.

We believe that we have the products, facilities, personnel and financial
resources for continued business success, but future revenues, costs, margins
and profits are all influenced by a number of factors, including those
discussed above, all of which are inherently difficult to forecast.

Forward-Looking Statements

Our 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 10-KSB was prepared
and involve risk 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, the lack of acceptance of
our new products, ability to retain credit facilities we need, partial
dependence on the semiconductor manufacturing industries, availability of raw
materials, competition and technological obsolescence. We assume no obligation
to update such forward-looking statements, if any, at any time.





---



##### 



INSERT A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to financial market risks, including changes in currency
exchange rates and interest rates. We do not try to mitigate these risks by
utilizing derivative financial instruments or other risky strategies.

A substantial majority of our revenue, expense, and capital purchasing
activities are transacted in U. S. dollars. However, we do enter into these
transactions in other currencies, primarily the Malaysian Ringgit. The
Malaysian Ringgit is pegged to the U.S. Dollar and is translated to U.S.
dollars for consolidated purposes. In fiscal 2001 we reported a foreign
currency exchange gain of $881, compared to a loss of $529 in fiscal 2000,
neither of which materially impacted the financial statements.

Inflation has not had a material effect on our revenues and income from
continuing operations in the past four years. Inflation is not expected to
have a material future effect.

INDEX

ITEM 7. FINANCIAL STATEMENTS



| |                                                                                                                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The restated consolidated financial statements and supplementary data, including the notes to the restated
consolidated financial statements, set for in Item 7 have been revised to reflect the restatement that became
effective in the last quarter of fiscal 2000 and certain events occurring subsequent to the filing of the
original Form 10-KSB.

|                                   |                                                                                                         |     |            |  | 
|---------------------------------- | ------------------------------------------------------------------------------------------------------- | --- | ---------- |  | 
|Independent Auditors Report        |                                                                                                         | F-1
|Consolidated Financial Statements: |                                                                                                         |     |            | 
|                                   | Consolidated Balance Sheet as of January 31, 2001, restated                                             |     | F-2       
|                                   | Consolidated Statements of Income for the years ended January 31, 2001
and 2000, restated               |     | F-3       
|                                   | Consolidated Statements of Stockholders Equity for the years ended
January 31, 2001 and 2000, restated |     | F-4       
|                                   | Consolidated Statements of Cash Flows for the years ended January 31,
2001 and 2000, restated           |     | F-5       
|                                   | Notes to Financial Statements, restated                                                                 |     | F-6 - F-21





---



##### 



INDEPENDENT AUDITORS REPORT

Board of Directors
SETO Holdings, Inc. and Subsidiaries
Briarcliff Manor, New York

We have audited the restated consolidated balance sheet of SETO Holdings,
Inc. and Subsidiaries as of January 31, 2001 and the related consolidated
statements of income (loss), cash flows and changes in stockholders equity for
the restated two years ended January 31, 2001 and 2000. These restated
financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these restated financial statements
based on our audits. We did not audit the financial statements of DTI
Technology, Sdn. Bhd., Fuji Fabrication Sdn. Bhd., Hong Kong Batteries
Industries, Ltd. and SETO Technology Sdn. Bhd., wholly owned subsidiaries,
which statements reflect total assets of $2,167,141 at January 31, 2001 and
total sales from continuing operations for the years ended January 31, 2001 and
2000 of $3,762,354 and 1,919,491, respectively. We did not audit the financial
statements of Fimas Sdn. Bhd., a subsidiary which was disposed of in January
2001 and which statements reflect a loss from discontinued operations of
$154,518 for the year ended January 31, 2001 and income from discontinued
operations of $90,926 for the year ended January 31, 2000. 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., Fuji Fabrication Sdn. Bhd., Hong Kong Batteries Industries, Ltd., and
SETO Technology Sdn. Bhd. And Fimas, Sdn. Bhd., is based solely on the report
of other auditors.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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 reports of other auditors, the
restated consolidated financial statements referred to above present fairly, in
all material respects, the financial position of SETO Holdings, Inc. and
Subsidiaries as of January 31, 2001 and the results of operations, cash flows
and changes on stockholders equity as restated for the two years ended January
31, 2001 and 2000, in accordance with accounting principles generally accepted
in the United States of America.

As discussed in Note 2 to the financial statements, certain errors in the
results of operations of the foreign subsidiaries were discovered by
management. Accordingly, the 2001 financial statements have been restated to
correct these errors.

|                                              |  |                             
|--------------------------------------------- |  | ----------------------------
|April 25, 2001, except for Note 21,           |  |                             
|as to which date is November 5, 2001 and      |  | /s/ Zeller Weiss & Kahn, LLP
|Note 2 as to which date is September 18, 2003 |  |                             
|Mountainside, New Jersey                      |  |                             

F-1



---



##### 



SETO HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET  JANUARY 31, 2001

|                                                   |                                                                                       |                            |                                            |            |           |           |  | 
|-------------------------------------------------- | ------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------ | ---------- | --------- | --------- |  | 
|                                                   |                                                                                       |                            |                                            |            |           | Restated 
|                                                   |                                                                                       |                            |                                            |            |           |          
|ASSETS                                            
|CURRENT ASSETS                                     |                                                                                       |                            |                                            |           
|                                                   | Cash and cash equivalents                                                             |                            | $                                          | 743,116    |          
|                                                   | Accounts receivable                                                                   |                            |                                            | 867,737    |          
|                                                   | Inventory                                                                             |                            |                                            | 940,017    |          
|                                                   | Prepaid expenses and other current assets                                             |                            |                                            | 154,855    |          
|                                                   | Deferred tax asset, current portion                                                   |                            |                                            | 114,209    |          
|                                                   |                                                                                       |                            |                                            |           
|                                                   |                                                                                       | TOTAL CURRENT ASSETS       |                                            |            | 2,819,934 |          
|                                                   |                                                                                       |                            |                                            |           
|PROPERTY, PLANT AND EQUIPMENT, NET OF DEPRECIATION |                                                                                       |                            | 744,947                                    |           
|                                                   |                                                                                       |                            |                                            |           
|OTHER ASSETS                                       |                                                                                       |                            |                                            |           
|                                                   | Goodwill                                                                              |                            |                                            | 834,001    |          
|                                                   | Security deposits and other assets                                                    |                            |                                            | 6,947      |          
|                                                   | Deferred tax asset, net of current portion                                            |                            |                                            | 220,917    |          
|                                                   |                                                                                       |                            |                                            |           
|                                                   |                                                                                       | TOTAL OTHER ASSETS         |                                            |            | 1,061,865 |          
|                                                   |                                                                                       |                            |                                            |           
|                                                   |                                                                                       |                            | TOTAL ASSETS                               |            | $         | 4,626,746 | 
|                                                   |                                                                                       |                            |                                            |           
|LIABILITIES AND STOCKHOLDERS EQUITY              
|CURRENT LIABILITIES                                |                                                                                       |                            |                                            |           
|                                                   | Current portion of long-term debt                                                     |                            | $                                          | 127,395    |          
|                                                   | Note payable, line of credit                                                          |                            |                                            | 981,153    |          
|                                                   | Accounts payable                                                                      |                            |                                            | 678,620    |          
|                                                   | Accrued expenses                                                                      |                            |                                            | 386,533    |          
|                                                   |                                                                                       |                            |                                            |           
|                                                   |                                                                                       | TOTAL CURRENT LIABILITIES  |                                            |            | 2,173,701 |          
|                                                   |                                                                                       |                            |                                            |           
|OTHER LIABILITIES                                  |                                                                                       |                            |                                            |           
|                                                   | Deferred lease liability                                                              |                            |                                            | 16,500     |          
|                                                   | Long-term debt, net of current portion                                                |                            |                                            | 122,074    |          
|                                                   |                                                                                       |                            |                                            |           
|                                                   |                                                                                       | TOTAL OTHER LIABILITIES    |                                            |            | 138,574   |          
|                                                   |                                                                                       |                            |                                            |           
|STOCKHOLDERS EQUITY                               |                                                                                       |                            |                                            |           
|                                                   | Common stock par value $.001; 100,000,000 shares authorized; 14,361,000 shares issued |                            |                                            | 14,361     |          
|                                                   | Additional paid in capital                                                            |                            |                                            | 4,708,178  |          
|                                                   | Accumulated other comprehensive income                                                |                            |                                            | (150,576   | )        
|                                                   | Retained earnings (deficit)                                                           |                            |                                            | (2,248,466 | )        
|                                                   |                                                                                       |                            |                                            |           
|                                                   |                                                                                       |                            | 2,323,497                                  |           
|                                                   | Less common shares held in treasury, 29,400 shares at cost                            |                            |                                            | (9,026     | )        
|                                                   |                                                                                       |                            |                                            |           
|                                                   |                                                                                       | TOTAL STOCKHOLDERS EQUITY |                                            |            | 2,314,471 |          
|                                                   |                                                                                       |                            |                                            |           
|                                                   |                                                                                       |                            | TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |            | $         | 4,626,746 | 
|                                                   |                                                                                       |                            |                                            |           

See Notes to Consolidated Financial Statements.

F-2



---



##### 



SETO HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (LOSS)
YEARS ENDED JANUARY 31, 2001 AND 2000

|                                                              |                                               |   |             |           |          |   |            |           |  
|------------------------------------------------------------- | --------------------------------------------- | - | ----------- | --------- | -------- | - | ---------- | --------- | -
|                                                              |                                               |   | January 31,
|                                                              |                                               |   |            
|                                                              |                                               |   | 2001        |           | 2000    
|                                                              |                                               |   | Restated    |           | Restated
|                                                              |                                               |   |             |           |         
|Net revenues                                                  |                                               | $ | 5,653,289   |           |          | $ | 3,558,569  |          
|Cost of sales                                                 |                                               |   | 3,486,906   |           |          |   | 1,887,020  |          
|                                                              |                                               |   |             |           |          |   |            |          
|Gross margin                                                  |                                               |   | 2,166,383   |           |          |   | 1,671,549  |          
|                                                              |                                               |   |             |           |          |   |            |          
|                                                              | Selling, general and administrative expenses  |   |             | 2,093,292 |          |   |            | 1,544,108 |  
|                                                              | Amortization of goodwill                      |   |             | 27,459    |          |   |            | 8,811     |  
|                                                              |                                               |   |             |           |          |   |            |          
|Operating expenses                                            |                                               |   | 2,120,751   |           |          |   | 1,552,919  |          
|                                                              |                                               |   |             |           |          |   |            |          
|Operating income                                              |                                               |   | 45,632      |           |          |   | 118,630    |          
|                                                              |                                               |   |             |           |          |   |            |          
|Interest and other, net                                       |                                               |   | (152,875    | )         |          |   | (112,198   | )        
|                                                              |                                               |   |             |           |          |   |            |          
|Income (loss) before income taxes                             |                                               |   | (107,243    | )         |          |   | 6,432      |          
|Income taxes                                                  |                                               |   | 44,511      |           |          |   | 10,487     |          
|                                                              |                                               |   |             |           |          |   |            |          
|Loss from continuing operations                               |                                               |   | (151,754    | )         |          |   | (4,055     | )        
|                                                              |                                               |   |             |           |          |   |            |          
|Discontinued operations:                                      |                                               |   |             |           |          |   |            |          
|                                                              | Income (loss) from operations of subsidiaries |   |             | (154,518  | )        |   |            | 90,296    |  
|                                                              | Gain (loss) on disposal of subsidiaries       |   |             | (685,262  | )        |   |            |           |  
|                                                              |                                               |   |             |           |          |   |            |          
|                                                              |                                               |   | (839,780    | )         |          |   | 90,296     |          
|                                                              |                                               |   |             |           |          |   |            |          
|Net income (loss)                                             |                                               |   | ($991,534   | )         |          | $ | 86,241     |          
|                                                              |                                               |   |             |           |          |   |            |          
|Earning per share information:                                |                                               |   |             |           |          |   |            |          
|                                                              | Income from continuing operations             |   |             |           |          |   |            |           |  
|                                                              | Basic                                         |   |             | ($0.01    | )        |   |            | ($0.00    | )
|                                                              |                                               |   |             |           |          |   |            |          
|                                                              | Diluted                                       |   |             | ($0.01    | )        |   |            | ($0.00    | )
|                                                              |                                               |   |             |           |          |   |            |          
|                                                              | Discontinued operations:                      |   |             |           |          |   |            |           |  
|                                                              | Basic                                         |   |             | ($0.04    | )        |   | $          | 0.01      |  
|                                                              |                                               |   |             |           |          |   |            |          
|                                                              | Diluted                                       |   |             | ($0.04    | )        |   | $          | 0.01      |  
|                                                              |                                               |   |             |           |          |   |            |          
|Weighted average common shares outstanding                    |                                               |   | 19,365,825  |           |          |   | 11,995,985 |          
|                                                              |                                               |   |             |           |          |   |            |          
|Weighted average common shares outstanding, assuming dilution |                                               |   | 23,561,771  |           |          |   | 14,662,652 |          
|                                                              |                                               |   |             |           |          |   |            |          

See Notes to Consolidated Financial Statements.

F-3



---



##### 



SETO HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
YEARS ENDED JANUARY 31, 2001 AND 2000

|                                                                                |                                                   |                            |            |        |   |       |        |         |   |                    |            |                      |   |                   |          |             |   |                     |           |         |   |  |             |          |   |   |            |          |          |  
|------------------------------------------------------------------------------- | ------------------------------------------------- | -------------------------- | ---------- | ------ | - | ----- | ------ | ------- | - | ------------------ | ---------- | -------------------- | - | ----------------- | -------- | ----------- | - | ------------------- | --------- | ------- | - |  | ----------- | -------- | - | - | ---------- | -------- | -------- | -
|                                                                                |                                                   |                            |            |        |   |       |        | Common  |   | Additional Paid in |            | Treasury             |   | Accumulated Other |          | Accumulated |   | Total Stockholders'
|                                                                                |                                                   |                            |            | Shares |   | Stock |        | Capital |   | Stock              |            | Comprehensive Income |   | Deficit           |          | Equity     
|                                                                                |                                                   |                            |            |        |   |       |        |         |   |                    |            |                      |   |                   |          |            
|Balance at January 31, 1999                                                     |                                                   |                            | 10,548,500 |        |   | $     | 10,549 |         |   | $                  | 2,779,625  |                      |   |                   | ($15,166 | )           |   |                     | ($119,374 | )       |   |  | ($1,343,173 | )        |   | $ | 1,312,461  |         
|                                                                                | Net income                                        |                            |            | 0      |   |       |        | 0       |   |                    |            | 0                    |   |                   |          | 0           |   |                     |           | 0       |   |  |             | 86,241   |   |   |            | 86,241   |         
|                                                                                | Change in foreign currency
translation adjustment |                            |            | 0      |   |       |        | 0       |   |                    |            | 0                    |   |                   |          | 0           |   |                     |           | (79,601 | ) |  |             | 0        |   |   |            | (79,601  | )       
|                                                                                |                                                   |                            |            |        |   |       |        |         |   |                    |            |                      |   |                   |          |             |   |                     |           |         |   |  |             |          |   |   |            |         
|                                                                                |                                                   | Total comprehensive income |            |        | 0 |       |        |         | 0 |                    |            |                      | 0 |                   |          |             | 0 |                     |           |         | 0 |  |             |          | 0 |   |            |          | 6,640    |  
|                                                                                |                                                   |                            |            |        |   |       |        |         |   |                    |            |                      |   |                   |          |             |   |                     |           |         |   |  |             |          |   |   |            |         
|Issuance of shares regarding
acquisition of Hong Kong Batteries
Industries, Ltd |                                                   |                            | 1,500,000  |        |   |       | 1,500  |         |   |                    | 725,500    |                      |   |                   |         |             |   |                     |          |         |   |  |            |          |   |   | 727,000    |         
|Issuance of shares regarding
acquisition of Fimas, SDN. BHD.                    |                                                   |                            | 5,250,000  |        |   |       | 5,250  |         |   |                    | 4,513,112  |                      |   |                   |         |             |   |                     |          |         |   |  |            |          |   |   | 4,518,362  |         
|Shares issued for cash                                                          |                                                   |                            | 330,000    |        |   |       | 330    |         |   |                    | 87,170     |                      |   |                   |         |             |   |                     |          |         |   |  |            |          |   |   | 87,500     |         
|Shares issued for services                                                      |                                                   |                            | 510,000    |        |   |       | 510    |         |   |                    | 129,290    |                      |   |                   |         |             |   |                     |          |         |   |  |            |          |   |   | 129,800    |         
|Shares cancelled                                                                |                                                   |                            | (20,000    | )      |   |       | (20    | )       |   |                    | (82,622    | )                    |   |                   | 6,140    |             |   |                     |          |         |   |  |            |          |   |   | (76,502    | )       
|                                                                                |                                                   |                            |            |        |   |       |        |         |   |                    |            |                      |   |                   |          |             |   |                     |           |         |   |  |             |          |   |   |            |         
|Balance at January 31, 2000                                                     |                                                   |                            | 18,118,500 |        |   | $     | 18,119 |         |   | $                  | 8,152,075  |                      |   |                   | ($9,026  | )           |   |                     | ($198,975 | )       |   |  | ($1,256,932 | )        |   | $ | 6,705,261  |         
|                                                                                | Net loss                                          |                            |            | 0      |   |       |        | 0       |   |                    |            | 0                    |   |                   |          | 0           |   |                     |           | 0       |   |  |             | (991,534 | ) |   |            | (991,534 | )       
|                                                                                | Change in foreign currency
translation adjustment |                            |            | 0      |   |       |        | 0       |   |                    |            | 0                    |   |                   |          | 0           |   |                     |           | 48,399  |   |  |             | 0        |   |   |            | 48,399   |         
|                                                                                |                                                   |                            |            |        |   |       |        |         |   |                    |            |                      |   |                   |          |             |   |                     |           |         |   |  |             |          |   |   |            |         
|                                                                                |                                                   | Total comprehensive income |            |        | 0 |       |        |         | 0 |                    |            |                      | 0 |                   |          |             | 0 |                     |           |         | 0 |  |             |          | 0 |   |            |          | (943,135 | )
|                                                                                |                                                   |                            |            |        |   |       |        |         |   |                    |            |                      |   |                   |          |             |   |                     |           |         |   |  |             |          |   |   |            |         
|Shares issued for cash                                                          |                                                   |                            | 1,262,500  |        |   |       | 1,262  |         |   |                    | 757,665    |                      |   |                   |         |             |   |                     |          |         |   |  |            |          |   |   | 758,927    |         
|Shares issued for services                                                      |                                                   |                            | 180,000    |        |   |       | 180    |         |   |                    | 255,420    |                      |   |                   |         |             |   |                     |          |         |   |  |            |          |   |   | 255,600    |         
|Shares cancelled                                                                |                                                   |                            | (200,000   | )      |   |       | (200   | )       |   |                    | (6,982     | )                    |   |                   |         |             |   |                     |          |         |   |  |            |          |   |   | (7,182     | )       
|Cancellation of shares regarding
acquisition of Fimas, SDN. BHD.                |                                                   |                            | (5,000,000 | )      |   |       | (5,000 | )       |   |                    | (4,450,000 | )                    |   |                   |         |             |   |                     |          |         |   |  |            |          |   |   | (4,455,000 | )       
|                                                                                |                                                   |                            |            |        |   |       |        |         |   |                    |            |                      |   |                   |          |             |   |                     |           |         |   |  |             |          |   |   | 0          |         
|                                                                                |                                                   |                            |            |        |   |       |        |         |   |                    |            |                      |   |                   |          |             |   |                     |           |         |   |  |             |          |   |   |            |         
|Balance at January 31, 2001, restated                                           |                                                   |                            | 14,361,000 |        |   | $     | 14,361 |         |   | $                  | 4,708,178  |                      |   |                   | ($9,026  | )           |   |                     | ($150,576 | )       |   |  | ($2,248,466 | )        |   | $ | 2,314,471  |         
|                                                                                |                                                   |                            |            |        |   |       |        |         |   |                    |            |                      |   |                   |          |             |   |                     |           |         |   |  |             |          |   |   |            |         

See Notes to Consolidated Financial Statements.

F-4



---



##### 



SETO HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED JANUARY 31, 2001 AND 2000

|                                |                                                                                   |                                     |                                           |                                                      |         |          |           |          |         |          |         |  
|------------------------------- | --------------------------------------------------------------------------------- | ----------------------------------- | ----------------------------------------- | ---------------------------------------------------- | ------- | -------- | --------- | -------- | ------- | -------- | ------- | -
|                                |                                                                                   |                                     |                                           |                                                      |         | 2001     |           | 2000    
|                                |                                                                                   |                                     |                                           |                                                      |         | Restated |           | Restated
|                                |                                                                                   |                                     |                                           |                                                      |         |          |           |         
|OPERATING ACTIVITIES            |                                                                                   |                                     |                                           |                                                      |         |          |           |         
|                                | Loss from continuing operations                                                   |                                     |                                           | ($151,754                                            | )       |          |           | ($4,055  | )      
|                                | Adjustments to reconcile net income to net cash provided
by operating activities: |                                     |                                           |                                                      |         |          |           |          |        
|                                |                                                                                   | Depreciation and amortization       |                                           |                                                      | 138,534 |          |           |          | 76,371  |         
|                                |                                                                                   | Loss on sale of equipment           |                                           |                                                      | 12,250  |          |           |          | 2,064   |         
|                                |                                                                                   | Provision for deferred income taxes |                                           |                                                      | 0       |          |           |          | (11,126 | )       
|                                |                                                                                   | Compensatory stock issued           |                                           |                                                      | 255,600 |          |           |          | 129,800 |         
|                                | Changes in assets and liabilities:                                                |                                     |                                           |                                                      |         |          |           |          |        
|                                |                                                                                   |                                     | Accounts receivable                       |                                                      |         | (69,507  | )         |          |         | (409,766 | )      
|                                |                                                                                   |                                     | Inventories                               |                                                      |         | (555     | )         |          |         | (178,764 | )      
|                                |                                                                                   |                                     | Prepaid expenses and other current assets |                                                      |         | (34,511  | )         |          |         | (86,034  | )      
|                                |                                                                                   |                                     | Other assets                              |                                                      |         | 7,210    |           |          |         | 1,393    |        
|                                |                                                                                   |                                     | Accounts payable, and accrued expenses    |                                                      |         | (373,128 | )         |          |         | 815,756  |        
|                                |                                                                                   |                                     | Deferred lease liability                  |                                                      |         | 6,000    |           |          |         | 4,500    |        
|                                |                                                                                   |                                     |                                           |                                                      |         |          |           |         
|                                |                                                                                   |                                     |                                           | NET CASH PROVIDED BY (USED IN) CONTINUING OPERATIONS |         |          | (209,861  | )        |         |          | 340,139 |  
|                                |                                                                                   |                                     |                                           | NET CASH USED IN DISCONTINUED OPERATIONS             |         |          | (282,840  | )        |         |          | (44,004 | )
|                                |                                                                                   |                                     |                                           |                                                      |         |          |           |         
|                                |                                                                                   |                                     |                                           | NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES  |         |          | (492,701  | )        |         |          | 296,135 |  
|                                |                                                                                   |                                     |                                           |                                                      |         |          |           |         
|INVESTING ACTIVITIES            |                                                                                   |                                     |                                           |                                                      |         |          |           |         
|                                | Cash acquired on acquisition of subsidiary                                        |                                     |                                           |                                                      |         |          |           | 305,603  |        
|                                | Proceeds from sale of equipment                                                   |                                     |                                           |                                                      |         |          |           | 2,659    |        
|                                | Purchase of property and equipment                                                |                                     |                                           | (182,270                                             | )       |          |           | (164,453 | )      
|                                |                                                                                   |                                     |                                           |                                                      |         |          |           |         
|                                |                                                                                   |                                     |                                           | NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES  |         |          | (182,270  | )        |         |          | 143,809 |  
|                                |                                                                                   |                                     |                                           |                                                      |         |          |           |         
|FINANCING ACTIVITIES            |                                                                                   |                                     |                                           |                                                      |         |          |           |         
|                                | Proceeds from issuance of common stock                                            |                                     |                                           | 758,927                                              |         |          |           | 90,000   |        
|                                | Proceeds from financing                                                           |                                     |                                           | 919,899                                              |         |          |           | 290,000  |        
|                                | Repayments of and retirement of long-term debt                                    |                                     |                                           | (616,896                                             | )       |          |           | (450,238 | )      
|                                |                                                                                   |                                     |                                           |                                                      |         |          |           |         
|                                |                                                                                   |                                     |                                           | NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES  |         |          | 1,061,930 |          |         |          | (70,238 | )
|                                |                                                                                   |                                     |                                           |                                                      |         |          |           |         
|EFFECT OF EXCHANGE RATE ON CASH |                                                                                   |                                     |                                           |                                                      |         |          | (79,601   | )       
|                                |                                                                                   |                                     |                                           |                                                      |         |          |           |         
|NET INCREASE IN CASH            |                                                                                   |                                     | 386,959                                   |                                                      |         |          | 290,105   |         
|CASH, BEGINNING OF YEAR         |                                                                                   |                                     | 356,157                                   |                                                      |         |          | 66,052    |         
|                                |                                                                                   |                                     |                                           |                                                      |         |          |           |         
|CASH, END OF YEAR               |                                                                                   | $                                   | 743,116                                   |                                                      |         | $        | 356,157   |         
|                                |                                                                                   |                                     |                                           |                                                      |         |          |           |         

See Notes to Consolidated Financial Statements.

F-5



---



##### 



SETO HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS

Throughout these notes to the restated consolidated financial statements, all
referenced amounts reflect the balances and amounts on a restated basis.

Note 1: Nature of Operations

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, the Company has five wholly owned subsidiaries with their own
product lines. They are as follows:

East Coast Sales Company, Inc.(ECS) is a Connecticut corporation, which
distributes and fabricates industrial ceramic products for the aircraft,
aerospace, defense, and detection industries in addition to distributing clean
room supplies and tools for use by semiconductor and electronic manufacturing
companies.

DTI Technology, Sdn. Bhd.(DTI), is a Malaysian company, which
manufactures a product line similar to that of SETO Holdings, Inc.

Fuji Fabrication, Sdn., Bhd. (Fuji),is a Malaysian Company which
manufactures cellular phone replacement batteries.

Hong Kong Batteries Industries Ltd. (HKBI), based in Hong Kong, China
with manufacturing facilities in mainland China, manufactures batteries for
consumer products.

SETO Technology, Sdn. Bhd.is a Malaysian corporation, which offers sales
and services to United States corporations for contract manufacturing in
Malaysia.

Note 2: Restatement of Previously Issued Financial Statements

In the Companys original Form 10-KSB dated April 25, 2001, the Companys
discontinued subsidiary, Fimas, Sdn. Bhd. financial statements were not audited
and the Companys accountants did not express an opinion on them. The
financial statements for Fimas, Sdn. Bhd., have since been audited and
subsequently the Companys Auditors have expressed an opinion on the
consolidated financials statements as of January 31, 2001.

In fiscal 2001, the Company issued 180,000 shares of its common stock as
compensation to a consulting firm for a consulting contract with a 15 month
term. The Company originally valued the consulting agreement at $255,600 and
was amortizing it over its term. In the fourth quarter of fiscal 2001, due to
changing market conditions and the lack of performance by the consulting
company, management revalued the consulting contract down to $50,400. The
staff of the Securities and Exchange Commission (SEC) has advised the Company
that in regard to Stock Based Compensation to Non-Employees, the fair value of
publicly traded shares is generally more readily determinable than the fair
value of services rendered and that under FAS No. 123 (Accounting for Stock
Based Compensation) revaluation is not permitted. Following a series of
discussions with the SEC Staff, the Company agreed to restate its consolidated
financial statements for all years presented using FAS No. 123. Accordingly,
the accompanying consolidated financial statements have been restated from
those originally reported to reflect the resolution of these discussions
between the Company and the SEC Staff regarding the valuation of stock based
compensation to non-employees. This correction resulted in the Company
recognizing in Fiscal 2001, $196,377 in additional Selling, General and
Administrative expenses. The correct implementation of FAS No. 123 had no
impact on the Companys liquidity or cash flows for fiscal 2001.

Following its determination to restate its earnings for the matters
described above, the Company also determined that it would correct certain of
its historical accounting policies to conform the accounting to U.S. generally
accepted accounting principles (GAAP) and certain known errors in the
application of GAAP that were previously not recorded because in each such case
the Company believed the amount of any such error was not material to the
Companys consolidated financial statements.



F-6



---



##### 



In fiscal 2001, the Company reported weighted average common shares
outstanding, assuming dilution of 13,788,985 shares which was incorrect. The
correct amount should have been 14,557,463, because the weighted average common
shares outstanding, assuming dilution, should not include the incremental
shares that would be issued upon the exercise of stock options because there
effect was antidilutive and should have been excluded from the calculation.

The following illustrates the effect of the above mentioned restatements:

|                                            |                                                            |                                            |           |                  |           |             |           |            |           | 
|------------------------------------------- | ---------------------------------------------------------- | ------------------------------------------ | --------- | ---------------- | --------- | ----------- | --------- | ---------- | --------- | 
|                                            |                                                            |                                            |           | January 31, 2001
|                                            |                                                            |                                            |           |                 
|                                            |                                                            |                                            |           | As Originally    |           |             |           |           
|                                            |                                                            |                                            |           | Reported         |           | As Restated
|                                            |                                                            |                                            |           |                  |           |            
|                                            |                                                            | ASSETS                                     |           |                  |           |             |           |            |           | 
|CURRENT ASSETS                              |                                                            |                                            |           |                  |           |             |           |           
|                                            | Cash and cash equivalents                                  |                                            | $         | 743,116          |           |             | $         | 743,116    |          
|                                            | Accounts receivable                                        |                                            |           | 857,737          |           |             |           | 867,737    |          
|                                            | Inventory                                                  |                                            |           | 949,360          |           |             |           | 940,017    |          
|                                            | Prepaid expenses and other current assets                  |                                            |           | 156,032          |           |             |           | 154,855    |          
|                                            | Deferred tax asset, current portion                        |                                            |           | 114,209          |           |             |           | 114,209    |          
|                                            |                                                            |                                            |           |                  |           |             |           |           
|                                            |                                                            | TOTAL CURRENT ASSETS                       |           |                  | 2,820,454 |             |           |            | 2,819,934 | 
|                                            |                                                            |                                            |           |                  |           |             |           |           
|PROPERTY AND EQUIPMENT, NET OF DEPRECIATION |                                                            |                                            | 751,864   |                  |           |             | 744,947   |           
|                                            |                                                            |                                            |           |                  |           |             |           |           
|OTHER ASSETS                                |                                                            |                                            |           |                  |           |             |           |           
|                                            | Goodwill                                                   |                                            |           | 834,001          |           |             |           | 834,001    |          
|                                            | Security deposits and other assets                         |                                            |           | 6,947            |           |             |           | 6,947      |          
|                                            | Deferred tax asset, net of current portion                 |                                            |           | 220,917          |           |             |           | 220,917    |          
|                                            |                                                            |                                            |           |                  |           |             |           |           
|                                            |                                                            | TOTAL OTHER ASSETS                         |           |                  | 1,061,865 |             |           |            | 1,061,865 | 
|                                            |                                                            |                                            |           |                  |           |             |           |           
|                                            |                                                            | TOTAL ASSETS                               |           | $                | 4,634,183 |             |           | $          | 4,626,746 | 
|                                            |                                                            |                                            |           |                  |           |             |           |           
|                                            | LIABILITIES AND STOCKHOLDERS EQUITY                       |                                            |           |                  |           |             |           |            |          
|CURRENT LIABILITIES                         |                                                            |                                            |           |                  |           |             |           |           
|                                            | Current portion of long-term debt                          |                                            | $         | 127,395          |           |             | $         | 127,395    |          
|                                            | Note payable, line of credit                               |                                            |           | 981,153          |           |             |           | 981,153    |          
|                                            | Accounts payable                                           |                                            |           | 792,452          |           |             |           | 678,620    |          
|                                            | Accrued expenses                                           |                                            |           | 371,769          |           |             |           | 386,533    |          
|                                            |                                                            |                                            |           |                  |           |             |           |           
|                                            |                                                            | TOTAL CURRENT LIABILITIES                  |           |                  | 2,272,769 |             |           |            | 2,173,701 | 
|                                            |                                                            |                                            |           |                  |           |             |           |           
|OTHER LIABILITIES                           |                                                            |                                            |           |                  |           |             |           |           
|                                            | Deferred lease liability                                   |                                            |           | 16,500           |           |             |           | 16,500     |          
|                                            | Long-term debt, net of current portion                     |                                            |           | 122,074          |           |             |           | 122,074    |          
|                                            |                                                            |                                            |           |                  |           |             |           |           
|                                            |                                                            | TOTAL OTHER LIABILITIES                    |           |                  | 138,574   |             |           |            | 138,574   | 
|                                            |                                                            |                                            |           |                  |           |             |           |           
|STOCKHOLDERS EQUITY                        |                                                            |                                            |           |                  |           |             |           |           
|                                            | Common stock                                               |                                            |           | 14,361           |           |             |           | 14,361     |          
|                                            | Additional paid in capital                                 |                                            |           | 4,389,146        |           |             |           | 4,708,178  |          
|                                            | Accumulated other comprehensive income                     |                                            |           | (219,119         | )         |             |           | (150,576   | )        
|                                            | Retained earnings (deficit)                                |                                            |           | (1,952,522       | )         |             |           | (2,248,466 | )        
|                                            |                                                            |                                            |           |                  |           |             |           |           
|                                            |                                                            |                                            | 2,231,866 |                  |           |             | 2,323,497 |           
|                                            | Less common shares held in treasury, 49,400 shares at cost |                                            |           | (9,026           | )         |             |           | (9,026     | )        
|                                            |                                                            |                                            |           |                  |           |             |           |           
|                                            |                                                            | TOTAL STOCKHOLDERS EQUITY                 |           |                  | 2,222,840 |             |           |            | 2,314,471 | 
|                                            |                                                            |                                            |           |                  |           |             |           |           
|                                            |                                                            | TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |           | $                | 4,634,183 |             |           | $          | 4,626,746 | 
|                                            |                                                            |                                            |           |                  |           |             |           |           



F-7



---



##### 



|                                                              |                                               |                    |            |                  |           |             |            |           |           |  
|------------------------------------------------------------- | --------------------------------------------- | ------------------ | ---------- | ---------------- | --------- | ----------- | ---------- | --------- | --------- | -
|                                                              |                                               |                    |            | January 31, 2001
|                                                              |                                               |                    |            |                 
|                                                              |                                               |                    |            | As Originally    |           |             |            |          
|                                                              |                                               |                    |            | Reported         |           | As Restated
|                                                              |                                               |                    |            |                  |           |            
|Net revenues                                                  |                                               | $                  | 5,653,289  |                  |           | $           | 5,653,289  |          
|Cost of sales                                                 |                                               |                    | 3,478,452  |                  |           |             | 3,486,906  |          
|                                                              |                                               |                    |            |                  |           |             |            |          
|                                                              | Gross margin                                  |                    |            | 2,174,837        |           |             |            | 2,166,383 |          
|                                                              |                                               |                    |            |                  |           |             |            |          
|                                                              | Selling, general and administrative expenses  |                    |            | 1,889,946        |           |             |            | 2,093,292 |          
|                                                              | Amortization of goodwill                      |                    |            | 27,459           |           |             |            | 27,459    |          
|                                                              |                                               |                    |            |                  |           |             |            |          
|                                                              |                                               | Operating expenses |            |                  | 1,917,405 |             |            |           | 2,120,751 |  
|                                                              |                                               |                    |            |                  |           |             |            |          
|Operating income                                              |                                               |                    | 257,432    |                  |           |             | 45,632     |          
|Interest and other, net                                       |                                               |                    | (150,692   | )                |           |             | (152,875   | )        
|                                                              |                                               |                    |            |                  |           |             |            |          
|Income before income taxes (benefit)                          |                                               |                    | 106,740    |                  |           |             | (107,243   | )        
|Income taxes (benefit)                                        |                                               |                    | 31,092     |                  |           |             | 44,511     |          
|                                                              |                                               |                    |            |                  |           |             |            |          
|Income from continuing operations                             |                                               |                    | 75,648     |                  |           |             | (151,754   | )        
|Discontinued operations:                                      |                                               |                    |            |                  |           |             |            |          
|                                                              | Income (loss) from operations of subsidiaries |                    |            | (154,518         | )         |             |            | (154,518  | )        
|                                                              | Gain (loss) on disposal of subsidiaries       |                    |            | (581,121         | )         |             |            | (685,262  | )        
|                                                              |                                               |                    |            |                  |           |             |            |          
|                                                              |                                               |                    | (735,639   | )                |           |             | (839,780   | )        
|                                                              |                                               |                    |            |                  |           |             |            |          
|Net income (loss)                                             |                                               |                    | ($659,991  | )                |           |             | ($991,534  | )        
|                                                              |                                               |                    |            |                  |           |             |            |          
|Earning per share information:                                |                                               |                    |            |                  |           |             |            |          
|                                                              | Income from continuing operations             |                    |            |                  |           |             |            |           |          
|                                                              |                                               | Basic              |            | $                | 0.00      |             |            |           | ($0.01    | )
|                                                              |                                               |                    |            |                  |           |             |            |          
|                                                              |                                               | Diluted            |            | $                | 0.00      |             |            |           | ($0.01    | )
|                                                              |                                               |                    |            |                  |           |             |            |          
|Discontinued operations:                                      |                                               |                    |            |                  |           |             |            |          
|                                                              |                                               | Basic              |            |                  | ($0.04    | )           |            |           | ($0.04    | )
|                                                              |                                               |                    |            |                  |           |             |            |          
|                                                              |                                               | Diluted            |            |                  | ($0.04    | )           |            |           | ($0.04    | )
|                                                              |                                               |                    |            |                  |           |             |            |          
|Weighted average common shares outstanding                    |                                               |                    | 19,365,825 |                  |           |             | 19,365,825 |          
|                                                              |                                               |                    |            |                  |           |             |            |          
|Weighted average common shares outstanding, assuming dilution |                                               |                    | 19,365,825 |                  |           |             | 23,561,771 |          
|                                                              |                                               |                    |            |                  |           |             |            |          



F-8



---



##### 



|                                                                                  |                                                |                                           |         |                  |           |             |           |          |           |  
|--------------------------------------------------------------------------------- | ---------------------------------------------- | ----------------------------------------- | ------- | ---------------- | --------- | ----------- | --------- | -------- | --------- | -
|                                                                                  |                                                |                                           |         | January 31, 2001
|                                                                                  |                                                |                                           |         |                 
|                                                                                  |                                                |                                           |         | As Originally    |           |             |           |         
|                                                                                  |                                                |                                           |         | Reported         |           | As Restated
|                                                                                  |                                                |                                           |         |                  |           |            
|OPERATING ACTIVITIES                                                              |                                                |                                           |         |                  |           |             |           |         
|Income from continuing operations                                                 |                                                | $                                         | 75,648  |                  |           |             | ($151,754 | )       
|Adjustments to reconcile net income to net cash provided
by operating activities: |                                                |                                           |         |                  |           |             |           |         
|                                                                                  | Depreciation and amortization                  |                                           |         | 138,534          |           |             |           | 138,534  |          
|                                                                                  | Loss on sale of equipment                      |                                           |         | 12,250           |           |             |           | 12,250   |          
|                                                                                  | Compensatory stock issued                      |                                           |         | 33,556           |           |             |           | 255,600  |          
|Changes in assets and liabilities:                                                |                                                |                                           |         |                  |           |             |           |         
|                                                                                  |                                                | Accounts receivable                       |         |                  | (59,507   | )           |           |          | (69,507   | )
|                                                                                  |                                                | Inventories                               |         |                  | (9,898    | )           |           |          | (555      | )
|                                                                                  |                                                | Prepaid expenses and other current assets |         |                  | (35,688   | )           |           |          | (34,511   | )
|                                                                                  |                                                | Other assets                              |         |                  | 7,210     |             |           |          | 7,210     |  
|                                                                                  |                                                | Accounts payable, and accrued expenses    |         |                  | (318,188  | )           |           |          | (373,128  | )
|                                                                                  |                                                | Deferred lease liability                  |         |                  | 6,000     |             |           |          | 6,000     |  
|                                                                                  |                                                |                                           |         |                  |           |             |           |         
|                                                                                  |                                                | NET CASH USED IN CONTINUING OPERATIONS    |         |                  | (150,083  | )           |           |          | (209,861  | )
|                                                                                  |                                                | NET CASH USED IN DISCONTINUED OPERATIONS  |         |                  | (287,473  | )           |           |          | (282,840  | )
|                                                                                  |                                                |                                           |         |                  |           |             |           |         
|                                                                                  |                                                | NET CASH USED IN OPERATING ACTIVITIES     |         |                  | (437,556  | )           |           |          | (492,701  | )
|                                                                                  |                                                |                                           |         |                  |           |             |           |         
|INVESTING ACTIVITIES                                                              |                                                |                                           |         |                  |           |             |           |         
|                                                                                  | Purchase of property and equipment             |                                           |         | (182,270         | )         |             |           | (182,270 | )        
|                                                                                  |                                                |                                           |         |                  |           |             |           |         
|                                                                                  |                                                | NET CASH USED IN INVESTING ACTIVITIES     |         |                  | (182,270  | )           |           |          | (182,270  | )
|                                                                                  |                                                |                                           |         |                  |           |             |           |         
|FINANCING ACTIVITIES                                                              |                                                |                                           |         |                  |           |             |           |         
|                                                                                  | Proceeds from issuance of common stock         |                                           |         | 723,927          |           |             |           | 758,927  |          
|                                                                                  | Repayments of and retirement of long-term debt |                                           |         | 303,002          |           |             |           | 303,003  |          
|                                                                                  |                                                |                                           |         |                  |           |             |           |         
|                                                                                  |                                                | NET CASH PROVIDED BY FINANCING ACTIVITIES |         |                  | 1,026,929 |             |           |          | 1,061,930 |  
|                                                                                  |                                                |                                           |         |                  |           |             |           |         
|Effect of exchange rate changes on cash                                           |                                                |                                           | (20,144 | )                |           |             |           |         
|                                                                                  |                                                |                                           |         |                  |           |             |           |         
|NET INCREASE IN CASH                                                              |                                                |                                           | 386,959 |                  |           |             | 386,959   |         
|CASH, BEGINNING OF YEAR                                                           |                                                |                                           | 356,157 |                  |           |             | 356,157   |         
|                                                                                  |                                                |                                           |         |                  |           |             |           |         
|CASH, END OF YEAR                                                                 |                                                | $                                         | 743,116 |                  |           | $           | 743,116   |         
|                                                                                  |                                                |                                           |         |                  |           |             |           |         

Note 3: Accounting Policies:

Use of Estimates

The preparation of financial statements in conformity with accounting
principles accepted in the U.S. requires management to make estimates and
judgments that affect the amounts reported in the financial statements and
accompanying notes. The accounting estimates that require managements most
difficult and subjective judgments include the assessment of recoverability of
property, equipment, and goodwill, inventory, and the recognition and
measurement of income tax assets and liabilities. The actual results
experienced by the Company may differ materially from managements estimates.



F-9



---



##### 



Accounting Change

Effective January 31, 2002, the Company completed the adoption of
Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combination, and SFAS No. 142, Goodwill and Other Intangible Assets. As
required by SFAS No. 142, the Company discontinued amortizing the remaining
balances of goodwill as of the beginning of fiscal 2003. Through January 31,
2002, goodwill had been amortized over an estimated life of 40 years. All
remaining and future acquired goodwill will be subject to an impairment test in
the fourth quarter of each year, or earlier if indicators of potential
impairment exists, using a fair-value-based approach. According to SFAS No.
141 goodwill should not be amortized, rather it should be tested for impairment
at a level of reporting referred to as a reporting unit. A reporting unit is
an operating segment or one level below an operating segment. The balance of
goodwill on the balance sheet is related to the Companys East Coast Sales
Company segment.

The Company completed the initial goodwill impairment review as of the
beginning of fiscal 2003, and completed the annual impairment review during the
fourth quarter of fiscal 2003, and found no impairment. All identifiable
intangible assets will continue to be amortized over their estimated useful
lives and assessed for impairment under SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. There were no goodwill
impairments in fiscal 2003 and 2002.

Principles of Consolidation

The consolidated financial statements include the Companys accounts and
those of its wholly owned subsidiaries. Upon consolidation, all significant
intercompany accounts and transactions are eliminated. Certain Prior period
amounts have been reclassified to conform to the current period presentation.
Accounts denominated in non-U.S. currencies have been remeasured using the U.S.
Dollar as the functional currency.

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid, temporary cash
investments having original maturity dates of three months or less. Short-term
investments include certificates of deposit, commercial paper and other
investments not qualifying as cash equivalents. For reporting purposes, such
cash equivalents and short-term investments are stated at cost plus accrued
interest, which approximates fair value.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash equivalents
and accounts receivable. The Company places its cash and cash equivalents with
high quality financial institutions.

Currency Risk. The Company transacts business in currencies other than
the U.S. dollar, primarily the Malaysian Ringgit. The Malaysian Ringgit is
pegged to the U.S. dollar therefore the Company has not established any
transaction or balance sheet risk management programs. 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. Acquisition related 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.

Foreign Operations

Substantially all or the Companys products are manufactured in Malaysia.
The foreign operations represent captive manufacturing facilities of the
Company. The Companys operations are subject to various political, economic,
and other risks and uncertainties inherent in countries in which the Company
operates. Among other risks, the Companys operations are subject to the risks
of restrictions on transfer of funds; export duties, quotas, and embargoes;
domestic and international customs and tariffs; changing taxation policies;
foreign exchange restrictions; and political conditions and government
regulations.



F-10



---



##### 



Inventories

Inventories are stated at the lower of cost or market. Cost is determined
on a first-in, first-out basis and market is considered at net realizable
value.

Goodwill

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 142, Goodwill and Other Intangible Assets, effective for fiscal years
beginning after December 15, 2001. SFAS No. 142 addresses the initial
recognition and measurement of intangible assets acquired outside a business
combination and the recognition and measurement of goodwill and other
intangible assets subsequent to their acquisition. Under the new rules,
goodwill will no longer be amortized but will be subject to annual impairment
tests. The Company adopted SFAS No. 142 effective January 31, 2002.

Deferred Tax Assets

Included in the accompanying Balance Sheet at January 31, 2001 is a
deferred tax asset of $335,126 that represents the Companys tax benefit of its
federal net operating loss carryover. Realization of this asset is dependent
on the Companys ability to generate future taxable income. Management
believes that it is more likely than not that forecasted taxable income will be
sufficient to utilize the tax carryforwards before their expiration in 2009.
However, there can be no assurance that the Company will meet its expectations
of future income. As a result, the amount of the deferred tax asset considered
realizable could be reduced in the near term if estimates of future taxable
income are reduced. Such an occurrence could materially adversely affect the
Companys results of operations and financial condition.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed for
financial reporting purposes principally using the straight-line method over
the following estimated useful lives:

|                        |  |              |       | 
|----------------------- |  | ------------ | ----- | 
|                        |  | Useful Lives
|                        |  |             
|Leasehold improvements  |  |              | 1050 | 
|Manufacturing equipment |  |              | 520  | 
|Office equipment        |  |              | 514  | 

Reviews are regularly performed to determine whether facts and
circumstances exist which indicate that the carrying amount of assets may not
be recoverable or the useful life is shorter than originally estimated. The
Company assesses the recoverability of its assets by comparing the projected
undiscounted net cash flows associated with the related asset or group of
assets over their remaining lives against their respective carrying amounts.
Impairment, if any, is based on the excess of the carrying amount over the fair
value of those assets. If assets are determined to be recoverable, but the
useful lives are shorter than originally estimated, the net book value of the
assets is depreciated over the newly determined remaining useful lives.

Revenue Recognition

The Company recognizes net revenue when the earnings process is complete,
as evidenced by an agreement with the customer, transfer of title and
acceptance, if applicable, as well as fixed pricing and probable
collectibility. When the Company sells its products to distributors, the
distributors have substantial independent operations under sales arrangements
whose terms do not allow for rights of return or price protection on unsold
products held by them. In these instances, the Company recognizes revenue when
it ships the product directly to the distributors. Shipping and handling costs
billed to customers are included in net revenue and the related shipping costs
are included in cost of sales.



F-11



---



##### 



Stock-Based Compensation

The Company accounts for non-cash stock-based compensation in accordance
with the provisions of Accounting Principles Board Opinion No. 25 (Accounting
for Stock Issued to Employees), and its related interpretations, which state
that no compensation expense is recognized for stock options or other stock
based awards to employees that are granted with an exercise price equal to or
above the estimated fair value per share of the Companys common stock on the
grant date. In the event that stock options are granted with an exercise price
below the estimated fair market value of the Companys common stock at the
grant date, the difference between the fair market value of the Companys
common stock and the exercise price of the stock option is recorded as deferred
compensation. Deferred compensation is amortized to compensation expense over
the vesting period of the related stock option.

Reclassifications

Certain amounts reported in the previous year have been reclassified to
conform to the 2001 presentation.

Treasury Stock

The Company accounts for treasury stock using the cost method.

Note 4: Accounts Receivable

The following is a summary of accounts receivable at January 31, 2001:

|                                     |  |   |         |  
|------------------------------------ |  | - | ------- | -
|Trade accounts                       |  | $ | 868,087 |  
|Due from employees                   |  | $ | 10,000  |  
|                                     |  |   |         |  
|                                     |  | $ | 878,087 |  
|Less allowance for doubtful accounts |  |   | (10,350 | )
|                                     |  |   |         |  
|                                     |  | $ | 867,737 |  
|                                     |  |   |         |  

At January 31, 2001 accounts receivable in the amount of $867,737 were
pledged as collateral in connection with bank loans.

Note 5: Inventory

Inventory at January 31, 2001 consist of:

|                |  |   |         | 
|--------------- |  | - | ------- | 
|Finished goods  |  | $ | 512,711 | 
|Work in Process |  |   | 69,491  | 
|Raw Materials   |  |   | 330,306 | 
|Supplies        |  |   | 27,509  | 
|                |  |   |         | 
|                |  | $ | 940,017 | 
|                |  |   |         | 



F-12



---



##### 



Note 6: Property and Equipment

The following is a summary of property and equipment at cost less
depreciation at January 31, 2001:

|                              |  |   |           |  
|----------------------------- |  | - | --------- | -
|Leasehold improvements        |  | $ | 83,934    |  
|Manufacturing equipment       |  |   | 1,084,220 |  
|Office equipment              |  |   | 70,383    |  
|                              |  |   |           |  
|                              |  |   | 1,238,537 |  
|Less accumulated depreciation |  |   | (493,590  | )
|                              |  |   |           |  
|Total                         |  | $ | 744,947   |  
|                              |  |   |           |  

Depreciation expense charged to operations was $111,075 and $67,560 in
fiscal 2001 and 2000, respectively. At January 31, 2001, property and
equipment with a cost of $1,238,537 was pledged as collateral for the Companys
bank and equipment loans.

Note 7: Goodwill

In January, 1990, the Company acquired East Coast Sales Company for
$309,000. The purchase price exceeded the fair value of the assets by $134,281
which was assigned to goodwill, and is being amortized on a straight-line basis
over forty years. As of January 31, 2001, accumulated amortization of goodwill
amounted to $45,471.

In June, 1998, the Company acquired Fuji Fabrication, SDN. BHD. for
$100,000. The purchase price exceeded fair value of the assets by $20,999,
which was assigned to goodwill and is being amortized on the straight-line
basis over forty years. As of January 31, 2001, accumulated amortization of
goodwill amounted to $1,356.

In November, 1999, the Company acquired Hong Kong Batteries Industries,
Ltd. for $727,000. The purchase price exceeded the fair value of the assets by
$747,300, which was assigned to goodwill and is being amortized on a
straight-line basis over forty years. As of January 31, 2001, accumulated
amortization of goodwill amounted to $21,752.

Note 8: Earnings Per Share

The number of shares used in the computation of the Companys basic and
diluted earnings per common share is as follows:

|                                                             |  |          |            |          |  |  |            | 
|------------------------------------------------------------ |  | -------- | ---------- | -------- |  |  | ---------- | 
|                                                             |  | 2001     |            | 2000    
|                                                             |  | Restated |            | Restated
|                                                             |  |          |            |         
|Weighted average common shares outstanding                   |  |          | 19,365,825 |          |  |  | 11,995,985 | 
|Effect of using diluted securities:                          |  |          |            |          |  |  |            | 
|Weighted average common equivalent shares
from stock options |  |          | 4,195,946  |          |  |  | 2,666,667  | 
|                                                             |  |          |            |          |  |  |            | 
|Diluted number of common shares outstanding                  |  |          | 23,561,771 |          |  |  | 14,662,652 | 
|                                                             |  |          |            |          |  |  |            | 

Weighted average common shares outstanding, assuming dilution, includes
the incremental shares that would be issued upon the exercise of stock options.
At January 31, 2001 there were approximately 5.6 million shares of common
stock potentially issuable with respect to stock options, which could dilute
basic earnings per share in the future.



F-13



---



##### 



Note 9: Borrowings

Short-Term Debt

Short-term debt at January 31, 2001 was as follows:

|                                  |  |   |           |  |  |  |  | 
|--------------------------------- |  | - | --------- |  |  |  |  | 
|Current portion of long-term debt |  | $ | 127,395   | 
|Line of credit                    |  |   | 981,153   | 
|                                  |  |   |           | 
|Total                             |  | $ | 1,108,548 | 
|                                  |  |   |           | 

Short-term debt at January 31, 2001 consisted of an outstanding line of
credit with a U.S. financial institution in the amount of $1,000,000. The line
of credit expires on October 31, 2002 and carries interest at an annual rate of
2.90% plus the 30 day dealer commercial paper rate. As of January 31, 2001,
the Company had utilized $981,153 of the line of credit. The loan is secured
by the personal guarantee of the Companys president and the Companys assets.

Long-Term Debt

Long-term debt at January 31, 2001 was as follows:

|                                                             |  |   |          |   |  |  |  | 
|------------------------------------------------------------ |  | - | -------- | - |  |  |  | 
|Payable in U.S. dollars:                                     |  |   |          |  
|Equipment loan, due fiscal 2005 at 15%                       |  | $ | 50,109   |  
|Equipment loan, due fiscal 2004 at 10%                       |  |   | 19,137   |  
|Shareholder loan, due fiscal 2003 at 15%                     |  |   | 101,046  |  
|Shareholder loan, due fiscal 2003 at 10%                     |  |   | 41,323   |  
|Payable in other currencies:                                 |  |   |          |  
|Malaysian Ringgit, Equipment loan, due fiscal 2004 at 14.16% |  |   | 37,854   |  
|                                                             |  |   |          |  
|                                                             |  |   | 249,469  |  
|Less current portion of long-term debt                       |  |   | (127,395 | )
|                                                             |  |   |          |  
|Total                                                        |  | $ | 122,074  |  
|                                                             |  |   |          |  

The aggregate debt maturities were as follows:

|                 |  |   |         |  |  |  |  | 
|---------------- |  | - | ------- |  |  |  |  | 
|January 31, 2002 |  | $ | 127,395 | 
|January 31, 2003 |  |   | 84,404  | 
|January 31, 2004 |  |   | 31,441  | 
|January 31, 2005 |  |   | 6,229   | 
|                 |  |   |         | 
|                 |  | $ | 249,469 | 
|                 |  |   |         | 

The Malaysian borrowings were made in connection with the financing of
manufacturing equipment for the Companys Malaysian subsidiary.



F-14



---



##### 



Note 10: Concentrations of Credit Risk

Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and cash equivalents
and accounts receivable. The Federal Deposit Insurance Corporation (FDIC)
insures the cash balances up to $100,000. At January 31, 2001 the Company had
uninsured cash balances of $640,527.

A majority of the Companys trade receivables are derived from sales to
original equipment manufacturers of security detection and protection devices.
The Companys three largest customers accounted for approximately 44% of net
revenue for fiscal 2001. At January 31, 2001, the three largest customers
accounted for approximately 55% of net accounts receivable.

The Company attempts to keep pace with the changing security and cutting
blade industries, and has adopted credit policies and standards intended to
accommodate industry growth and inherent risk. Management believes that credit
risks are moderated by the diversity of the Companys customers and geographic
sales areas. SETO performs ongoing credit evaluations of its customers.

Note 11: Interest and Other, Net

|                               |  |          |           |          |  |   |           |  
|------------------------------ |  | -------- | --------- | -------- |  | - | --------- | -
|                               |  | 2001     |           | 2000    
|                               |  | Restated |           | Restated
|                               |  |          |           |         
|Interest income                |  | $        | 13,419    |          |  | $ | 3,264     |  
|Loss on sale of assets         |  |          | (12,250   | )        |  |   |           |  
|Interest expense               |  |          | (154,925  | )        |  |   | (114,933  | )
|Foreign currency exchange loss |  |          | 881       |          |  |   | (529      | )
|                               |  |          |           |          |  |   |           |  
|Total                          |  |          | ($152,875 | )        |  |   | ($112,198 | )
|                               |  |          |           |          |  |   |           |  

Note 12: Comprehensive Income

The components of other comprehensive income were $48,399 for fiscal 2001
and $79,601 for fiscal 2000. Both amounts represented changes in the Companys
foreign currency translation amounts that were recorded when the Company
acquired discontinued foreign subsidiaries, Teik Tatt Holdings and Fimas, Sdn
Bhd in prior years. The $48,399 charged to comprehensive income in 2001 was a
result of the discontinuance of Fimas, Sdn. Bhd. The remaining amount of
($150,576) on the Companys balance sheet under accumulated other
comprehensive income is related to the acquisition of the Companys foreign
subsidiaries, DTI Technology, Sdn. Bhd. and Fuji Fabrication, SDN. BHD.



F-15



---



##### 



Note 13: Provision for Taxes

Income before income taxes and the provision for income taxes consisted of
the following:

|         |                                                       |  |           |           |          |  |          |       | 
|-------- | ----------------------------------------------------- |  | --------- | --------- | -------- |  | -------- | ----- | 
|         |                                                       |  | 2001      |           | 2000    
|         |                                                       |  | Restated  |           | Restated
|         |                                                       |  |           |           |         
|Domestic |                                                       |  | ($407,305 | )         |          |  | ($99,523 | )    
|Foreign  |                                                       |  | 300,062   |           |          |  | 105,955  |      
|         |                                                       |  |           |           |          |  |          |      
|         | Income from continuing operations before
income taxes |  |           | ($107,243 | )        |  | $        | 6,432 | 
|         |                                                       |  |           |           |          |  |          |      

|          |               |                 |   |          |        |          |   |         |         |  
|--------- | ------------- | --------------- | - | -------- | ------ | -------- | - | ------- | ------- | -
|          |               |                 |   | 2001     |        | 2000    
|          |               |                 |   | Restated |        | Restated
|          |               |                 |   |          |        |         
|Current:  |               |                 |   |          |        |          |   |        
|          | Federal
State |                 | $ | 6,895    |        |          |   |         |        
|          | Foreign       |                 |   | 37,616   |        |          | $ | 21,613  |        
|          |               |                 |   |          |        |          |   |        
|          |               | Total current   |   |          | 44,511 |          |   |         | 21,613  |  
|          |               |                 |   |          |        |          |   |        
|Deferred: |               |                 |   |          |        |          |   |        
|          | Federal       |                 |   |          |        |          |   | (11,126 | )      
|          | Foreign       |                 |   |          |        |          |   | 0       |        
|          |               |                 |   |          |        |          |   |        
|          |               | Total deferred  |   |          | 0      |          |   |         | (11,126 | )
|          |               |                 |   |          |        |          |   |        
|          |               | Total provision |   | $        | 44,511 |          |   | $       | 10,487  |  
|          |               |                 |   |          |        |          |   |        

The provision for taxes reconciles to the amount computed by applying the
statutory federal rate of 35% to income before taxes as follows:

|                                                                           |  |          |          |          |  |   |         |  
|-------------------------------------------------------------------------- |  | -------- | -------- | -------- |  | - | ------- | -
|                                                                           |  | 2001     |          | 2000    
|                                                                           |  | Restated |          | Restated
|                                                                           |  |          |          |         
|Computed expected tax                                                      |  | $        | 0        |          |  | $ | 2,251   |  
|State tax, net of federal benefit
Non U.S. income taxed at different rates |  |          | (102,021 | )        |  |   | (36,025 | )
|Increase (decrease) in valuation allowance                                 |  |          | 146,532  |          |  |   | 44,261  |  
|                                                                           |  |          |          |          |  |   |         |  
|Provision (benefit) for income tax                                         |  | $        | 44,511   |          |  | $ | 10,487  |  
|                                                                           |  |          |          |          |  |   |         |  
|Effective income (benefit) tax rate                                        |  |          | -42      | %        |  |   | 163     | %
|                                                                           |  |          |          |          |  |   |         |  



F-16



---



##### 



Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Companys deferred assets and liabilities at fiscal year-ends were as
follows:

|                                                   |                                              |   |         |         |          |   |          |         |  |  | 
|-------------------------------------------------- | -------------------------------------------- | - | ------- | ------- | -------- | - | -------- | ------- |  |  | 
|                                                   |                                              |   |         |         | 2001     |   | 2000    
|                                                   |                                              |   |         |         | Restated |   | Restated
|                                                   |                                              |   |         |         |          |   |         
|Deferred tax assets:                               |                                              |   |         |         |          |   |          |        
|                                                   | Loss carryforwards                           |   | $       | 759,742 |          |   | $        | 471,951 | 
|                                                   | Allowance for doubtful accounts              |   |         | 3,519   |          |   |          | 3,519   | 
|                                                   |                                              |   |         |         |          |   |          |        
|                                                   | Total deferred tax assets                    |   |         | 763,261 |          |   |          | 475,470 | 
|                                                   |                                              |   |         |         |          |   |          |        
|Deferred tax liabilities:                          |                                              |   |         |         |          |   |          |        
|                                                   | Difference between book and tax depreciation |   |         | 4,516   |          |   |          | 470     | 
|                                                   |                                              |   |         |         |          |   |          |        
|                                                   | Total deferred tax liabilities               |   |         | 4,516   |          |   |          | 470     | 
|                                                   |                                              |   |         |         |          |   |          |        
|Net deferred tax assets before valuation allowance |                                              |   | 758,745 |         |          |   | 475,000  |        
|Valuation allowance                                |                                              |   | 423,619 |         |          |   | 139,874  |        
|                                                   |                                              |   |         |         |          |   |          |        
|Net deferred tax asset                             |                                              | $ | 335,126 |         |          | $ | 335,126  |        
|                                                   |                                              |   |         |         |          |   |          |        

The Company does not provide for U.S. income taxes or foreign withholding
taxes on the undistributed earnings of its foreign subsidiaries, as such
cumulative earnings are intended to be permanently reinvested in those
operations. It is not practicable to estimate the amount of unrecognized
deferred tax liabilities for these undistributed foreign earnings.

Note 14: Common Stock Options

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 Non-statutory
Stock Option Committee of the Board of Directors of the Company administers the
Plan. The Committee has full authority and 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. Under the Plan, the option exercise price is equal to the fair
market value of the Companys common stock at the date of the grant. Options
currently expire no later than 10 years from the grant date. Proceeds received
by the Company from exercises of stock options are credited to common stock and
additional paid-in capital.



F-17



---



##### 



Additional information with respect to stock option activity other than
the Companys Non-statutory Stock Option Plan is as follows:

|                                        |           |  |                  |          |                |   |                  |      | 
|--------------------------------------- | --------- |  | ---------------- | -------- | -------------- | - | ---------------- | ---- | 
|                                        |           |  |                  |          |                |   | Weighted Average
|                                        |           |  | Number of Shares |          | Exercise Price
|                                        |           |  |                  |          |               
|Outstanding at January 31, 1999         |           |  | 6,000,000        |          |                | $ | 0.23             |     
|                                        | Granted   |  |                  | 0        |                |   |                  |      | 
|                                        | Cancelled |  |                  | 0        |                |   |                  |      | 
|                                        |           |  |                  |          |                |   |                  |     
|Outstanding at January 31, 2000         |           |  | 6,000,000        |          |                | $ | 0.23             |     
|                                        | Granted   |  |                  | 250,000  |                |   | $                | 1.10 | 
|                                        | Cancelled |  |                  | (500,000 | )              |   | $                | 0.10 | 
|                                        |           |  |                  |          |                |   |                  |     
|                                        |           |  | 5,750,000        |          |                | $ | 0.29             |     
|                                        |           |  |                  |          |                |   |                  |     
|Options exercisable at January 31, 2000 |           |  | 6,000,000        |          |                | $ | 0.23             |     
|                                        |           |  |                  |          |                |   |                  |     
|Options exercisable at January 31, 2001 |           |  | 5,600,000        |          |                | $ | 0.24             |     
|                                        |           |  |                  |          |                |   |                  |     

|                          |  |                  |           |                     |  |                  |      |  |  |   |      | 
|------------------------- |  | ---------------- | --------- | ------------------- |  | ---------------- | ---- |  |  | - | ---- | 
|Stock Options Outstanding
|                         
|                          |  |                  |           |                     |  | Weighted Average |      |  |  |  
|                          |  |                  |           |                     |  | Remaining        |      |  |  |  
|                          |  | Number of Shares |           | Contractual Life in |  | Weighted Average
|Ranges of Exercise Prices |  | Outstanding      |           | Years               |  | Exercise Price  
|                          |  |                  |           |                     |  |                 
|$0.10 - $0.25             |  |                  | 4,000,000 |                     |  |                  | 5.25 |  |  | $ | 0.14 | 
|$0.26 - $0.50             |  |                  | 1,600,000 |                     |  |                  | 3.55 |  |  | $ | 0.50 | 
|$0.51 - $1.50             |  |                  | 150,000   |                     |  |                  | 0.56 |  |  | $ | 1.50 | 
|                          |  |                  |           |                     |  |                  |      |  |  |   |      | 
|                          |  |                  | 5,750,000 |                     |  |                  | 3.37 |  |  | $ | 0.29 | 
|                          |  |                  |           |                     |  |                  |      |  |  |   |      | 

|                          |  |                  |           |                     |  |                  |      |  |  |   |      | 
|------------------------- |  | ---------------- | --------- | ------------------- |  | ---------------- | ---- |  |  | - | ---- | 
|Stock Options Exercisable
|                         
|                          |  |                  |           |                     |  | Weighted Average |      |  |  |  
|                          |  |                  |           |                     |  | Remaining        |      |  |  |  
|                          |  | Number of Shares |           | Contractual Life in |  | Weighted Average
|Ranges of Exercise Prices |  | Outstanding      |           | Years               |  | Exercise Price  
|                          |  |                  |           |                     |  |                 
|$0.10 - $0.25             |  |                  | 4,000,000 |                     |  |                  | 5.25 |  |  | $ | 0.14 | 
|$0.26 - $0.50             |  |                  | 1,600,000 |                     |  |                  | 3.55 |  |  | $ | 0.50 | 
|$0.51 - $1.50             |  |                  |           |                     |  |                  |      |  |  |   |      | 
|                          |  |                  |           |                     |  |                  |      |  |  |   |      | 
|                          |  |                  | 5,600,000 |                     |  |                  | 3.32 |  |  | $ | 0.29 | 
|                          |  |                  |           |                     |  |                  |      |  |  |   |      | 

Note 15: Stock Based Compensation to Non-Employees

In Fiscal 2001, the Company recognized compensation to non-employees for
stock issued as compensation at the discounted fair market value of the stock
as of the date of issue. Discounted fair market value is determined by the
average closing price of the stock each day for the prior twelve month period
following the date of issue. At January 31, 2001 the Company issued a total of
180,000 shares of common stock to consultants and recognized consulting expense
of $246,777.



F-18



---



##### 



Note 16: Commitments

The Company is 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 any increases in real estate taxes
over the base year as stipulated by the lease. The lease requires the
following future minimum payments:

|                 |  |   |         | 
|---------------- |  | - | ------- | 
|January 31, 2002 |  | $ | 60,000  | 
|January 31, 2003 |  |   | 60,000  | 
|January 31, 2004 |  |   | 64,500  | 
|January 31, 2005 |  |   | 66,000  | 
|January 31, 2006 |  |   | 66,000  | 
|Thereafter       |  |   | 508,500 | 
|                 |  |   |         | 
|                 |  | $ | 825,000 | 
|                 |  |   |         | 

Rent expense charged to operations was $73,478 and $66,000 in fiscal 2001
and 2000, respectively.

In addition, the Company leases several vehicles under operating lease
terms expiring through fiscal 2004. Total lease expense was $49,283 and
$34,452 for the years ended January 31, 2001 and 2000, respectively.

Note 17: Employment Agreements

On May 1, 1996, the Company entered into employment agreements with its
President and Vice President. The Term of the agreements has been extended to
April 30, 2006. Compensation is set at a base of $125,000 and $110,000 for the
President and Vice President, respectively, with each getting a bonus of 5% of
the increase in SETO Holdings, Inc./East Coast Sales Companys consolidated net
income over the net income from the previous years. Each employee also
received 1,000,000 stock options at $0.25, 1,000,000 stock options at $0.10 and
500,000 stock options at $0.50. The Vice President also received 50,000 stock
options at $0.50 in February 2000. On December 6, 2001 the President received
250,000 stock options and the Vice President received 150,000 stock options
with both having an exercise price of $.15 per share in exchange for 400,000
shares of common stock they both received in April 2001. These shares were
duly cancelled by the Company on December 6, 2001. These options were not part
of the 1997 Non-statutory Stock Option Plan effectuated March 25, 1997. As of
January 31, 2001, 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 has been
extended to April 30, 2006. Compensation is set at a base of $60,000 with a
bonus of 2% of any increase in SETO Holdings, Inc./East Coast Sales Companys
consolidated net income over the net income from the previous years. The
employee also received 500,000 stock options exercisable at $0.50 per share.
On December 6, 2001 the employee received 100,000 options exercisable at $.15
per share in exchange for the 100,000 shares of common received in April 2001.
These shares were duly cancelled by the Company on December 6, 2001. These
options were not part of the 1997 Non-statutory Stock Option Plan effectuated
March 25, 1997. As of January 31, 2001, none of these options had been
exercised.

As of January 31, 2001 and 2000, no accrual has been made for officers
bonuses.

Note 18: Discontinued Operations

On January 1, 2001, the Company adopted a formal plan to dispose of Fimas,
SDN. BHD. (Fimas) and reacquired the common stock previously issued in the
acquisition at $.89 per share. As a result, the activities for Fimas have been
accounted for as discontinued operations. These results are presented as net
amounts in the consolidated statements of income, with prior periods restated
to conform to the current presentation.



F-19



---



##### 



Net sales of Fimas for the years ended January 31, 2001 and 2001 were
$24,091,242 and $3,084,519, respectively. These amounts are not included in
net sales in the accompanying consolidated statements of income, but rather are
presented as net amounts in the consolidated statements of income, with prior
periods restated to conform to the current presentation. The condensed results
of the discontinued operations were as follows:

|                                             |  |          |            |          |  |   |           | 
|-------------------------------------------- |  | -------- | ---------- | -------- |  | - | --------- | 
|                                             |  | 2001     |            | 2000    
|                                             |  | Restated |            | Restated
|                                             |  |          |            |         
|Net sales                                    |  | $        | 24,091,242 |          |  | $ | 3,084,519 | 
|Cost of sales                                |  |          | 22,889,911 |          |  |   | 2,811,100 | 
|                                             |  |          |            |          |  |   |           | 
|Gross profit                                 |  |          | 1,201,331  |          |  |   | 273,419   | 
|                                             |  |          |            |          |  |   |           | 
|Selling, general and administrative expenses |  |          | 1,206,932  |          |  |   | 107,079   | 
|Interest and other, net                      |  |          | 148,917    |          |  |   | 60,065    | 
|                                             |  |          | 1,355,849  |          |  |   | 167,144   | 
|                                             |  |          |            |          |  |   |           | 
|Loss before income taxes                     |  |          | (154,518   | )        |  |   | 106,275   | 
|Income taxes                                 |  |          | 0          |          |  |   | 15,979    | 
|                                             |  |          |            |          |  |   |           | 
|Net income (loss)                            |  |          | ($154,518  | )        |  | $ | 90,296    | 
|                                             |  |          |            |          |  |   |           | 

In conjunction with the discontinuance of operations, at January 31, 2001,
the Company has recorded a provision of $83,849 for estimated disposition
costs.

Note 19: Principal Products and Segmentation of Sales

The Company has adopted FASB Statement No. 131, Disclosures about
Segments of a Business Enterprise and Related Information. The Company is
managed in three principal operating segments, which are (1) custom cut and
fabricated ceramic parts for the aircraft, aerospace, defense,
detection/protection industries, (2) the manufacturing of disposable precision
diamond cutting tools for the semiconductor and electronics industries, (3)
cellular telephone batteries, (4) industrial rechargeable batteries, and (5)
contract manufacturing of personal safety devices. These operating segments
were determined based on the nature of the products and services offered.
Operating segments are defined as components of an enterprise about which
separate financial information is available and is evaluated regularly by the
chief operating decision-maker (CEO) to decide how to allocate resources and to
assess performance.



F-20



---



##### 



Operating segments do not record inter-segment revenue, and, accordingly,
there is none to be recorded. The accounting policies for segment reporting
are the same as for the Company as a whole. Financial information relating to
the principal industry segments and classes of products are as follows:

|                          |                        |                        |   |           |           |          |   |           |           | 
|------------------------- | ---------------------- | ---------------------- | - | --------- | --------- | -------- | - | --------- | --------- | 
|                          |                        |                        |   | 2001      |           | 2000    
|                          |                        |                        |   | Restated  |           | Restated
|                          |                        |                        |   |           |           |         
|Sales to customers:       |                        |                        |   |           |           |          |   |          
|                          | Ceramics               |                        | $ | 1,535,171 |           |          | $ | 1,399,482 |          
|                          | Diamond tools          |                        |   | 758,100   |           |          |   | 680,343   |          
|                          | Cellular batteries     |                        |   | 731,635   |           |          |   | 1,102,258 |          
|                          | Industrial batteries   |                        |   | 2,576,985 |           |          |   | 376,486   |          
|                          | Contract manufacturing |                        |   | 51,398    |           |          |   |           |          
|                          |                        |                        |   |           |           |          |   |          
|                          |                        | Total sales            |   | $         | 5,653,289 |          |   | $         | 3,558,569 | 
|                          |                        |                        |   |           |           |          |   |          
|Operating profit or loss: |                        |                        |   |           |           |          |   |          
|                          | Ceramics               |                        | $ | 265,824   |           |          | $ | 333,978   |          
|                          | Diamond tools          |                        |   | (415,315  | )         |          |   | (254,195  | )        
|                          | Cellular batteries     |                        |   | (54,844   | )         |          |   | 20,046    |          
|                          | Industrial batteries   |                        |   | 276,927   |           |          |   | 18,801    |          
|                          | Contract manufacturing |                        |   | (26,960   | )         |          |   |           |          
|                          |                        |                        |   |           |           |          |   |          
|                          |                        | Total operating profit |   | $         | 45,632    |          |   | $         | 118,630   | 
|                          |                        |                        |   |           |           |          |   |          

|                     |               |             |   |           |           |          |   |           |           | 
|-------------------- | ------------- | ----------- | - | --------- | --------- | -------- | - | --------- | --------- | 
|                     |               |             |   | 2001      |           | 2000    
|                     |               |             |   | Restated  |           | Restated
|                     |               |             |   |           |           |         
|Identifiable assets: |               |             |   |           |           |          |   |          
|                     | United States |             | $ | 2,041,122 |           |          | $ | 1,783,790 |          
|                     | Far East      |             |   | 2,373,612 |           |          |   | 2,074,937 |          
|                     | Canada        |             |   | 203,189   |           |          |   | 241,939   |          
|                     |               |             |   |           |           |          |   |          
|                     |               | Total sales |   | $         | 4,617,923 |          |   | $         | 4,100,666 | 
|                     |               |             |   |           |           |          |   |          

In fiscal 2001, two customers accounted for more than 10% of the Companys
revenue and three customers accounted for 44% of the Companys revenue.

Note 20: Supplemental Cash Flow Information

|                                                                      |  |          |           |          |  |   |           | 
|--------------------------------------------------------------------- |  | -------- | --------- | -------- |  | - | --------- | 
|                                                                      |  | 2001     |           | 2000    
|                                                                      |  | Restated |           | Restated
|                                                                      |  |          |           |         
|Interest paid during the year                                         |  | $        | 152,953   |          |  | $ | 114,933   | 
|                                                                      |  |          |           |          |  |   |           | 
|Income taxes paid during the year                                     |  |          |           |          |  |   |           | 
|                                                                      |  |          |           |          |  |   |           | 
|Supplemental schedule of non-cash investing and financing activities: |  |          |           |          |  |   |           | 
|Issuance of common shares for purchase of subsidiaries                |  |          |           |          |  | $ | 5,245,362 | 
|                                                                      |  |          |           |          |  |   |           | 
|Cancellation of common shares relating to disposition of subsidiary   |  | $        | 4,518,362 |          |  |   |           | 
|                                                                      |  |          |           |          |  |   |           | 



F-21



---



##### 



Note 21: Subsequent Events

On February 1, 2001, the Company adopted a formal plan to sell the assets
of Fuji Fabrication, SDN. BHD. (Fuji) to G Com Net,
Inc. (G Com) of New
York. On October 1, 2001, the Company signed an agreement with G Com for the
purchase of equipment and supplies for $290,547 plus interest. The Company
will assume a demand note and will be due and payable in full on September 30,
2001. In addition, the Company will receive quarterly interest payments of
$7,264 with the first interest payment to be paid on January 1, 2002.

Due to increased competition from China and a decrease in profitability,
on October 31, 2002 the Company adopted a formal plan to discontinue Hong Kong
Batteries Industries, Ltd. The discontinuance of Hong Kong Batteries
Industries, Ltd resulted in the Company writing off $688,183 in goodwill and
incurring an additional $225,759 in disposal costs which consisted mainly of
write offs of cash advances to Hong Kong Batteries and travel expenses.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH 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 Pian   |  |     | 61 |          |  | President, Chief Executive Officer and Director 
|Craig Pian    |  |     | 39 |          |  | Executive Vice President, Treasurer and Director
|Francine Pian |  |     | 41 |          |  | Secretary and Director                          
|Tan Hun Chin  |  |     | 39 |          |  | 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 Company from its inception in 1975
until its acquisition by the Company in January 1990. From 1969 to 1975, Mr.
Pian was a division manager for Consolidated Refining Company, where he was
responsible for organizing a division that manufactured materials necessary to
plate and stamp semiconductor materials and supervising all the sales and
manufacturing. From 1960 to 1969, he was vice president of Semi Alloys, Inc.
where he was responsible for the manufacture and sales of fabricated metal
products to the semiconductor industry.

Craig Pian Craig 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. Craig 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. Craig Pian
graduated from 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 the
Companys secretary since March 1996. Ms. Pian graduated from the Laboratory
Institute of Merchandising in New York City with a degree in marketing.





---



##### 



Tan Hun Chin Mr. Tan, a resident of Malaysia, has been a director of the
Company since November 1998. Since 1991 Mr. Tan has been a managing director
of Gentlecare Learning Center (M) Sdn. Bhd., a childcare center in Malaysia.
Since 1996 he has also been an executive director of Intellect Technology Aura
(M) Sdn. Bhd., and electronic subcontract manufacturing company. He has been a
managing director of Fuji Fabrication Sdn. Bhd. Since it became a wholly owned
subsidiary of the Company in June 1998. Mr. Tan holds a management and
business degrees from the United Kingdom and Canadian Universities.

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

Based solely on a review of copies for Forms 3, 4, and 5 received, and on
written representations from its officers and directors that is updating
Section 16(a) forms were required to be filed by them, we believe that no
officer or director filed a late report or failed to file a required report
under Section 16(a) of the Exchange Act during or in respect at the year ended
January 31, 2001.

ITEM 10. EXECUTIVE COMPENSATION

On May 1, 1996, the Company entered into employment agreements with its
President and Vice President. The term of the agreements has been extended to
April 30, 2006. Compensation is set at a base of $125,000 and $110,000 for the
President and Vice President, respectively, with each getting a bonus of 5% of
the increase in SETO Holdings, Inc. /East Coast Sales Companys consolidated
net income over the net income from the previous years. Each employee also
received 1,000,000 stock options at $0.25, 1,000,000 stock options at $0.10 and
500,000 stock options at $0.50. The Vice President also received 50,000 stock
options at $0.50 in February 2000. On December 6, 2001 the President received
250,000 stock options and the Vice President received 150,000 stock options
with both having an exercise price of $.15 per share in exchange for 400,000
shares of common stock they both received in April 2001. These shares were
duly cancelled by the Company on December 6, 2001. These options were not part
of the 1997 Non-statutory Stock Option Plan effectuated March 25, 1997. As of
January 31, 2001, 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 has been
extended to April 30, 2006. Compensation is set at a base of $60,000 with a
bonus of 2% of any increase in SETO Holdings, Inc. /East Coast Sales Companys
consolidated net income over the net income from the previous years. The
employee also received 500,000 stock options exercisable at $0.50 per share.
On December 6, 2001 the employee received 100,000 options exercisable at $.15
per share in exchange for the 100,000 shares of common received in April 2001.
These shares were duly cancelled by the Company on December 6, 2001. These
options were not part of the 1997 Non-statutory Stock Option Plan effectuated
March 25, 1997. As of January 31, 2001, none of these options had been
exercised.

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 information for our
Chief Executive Officer and our executive officers who had total annual salary
and bonus for any of the last three fiscal years exceeding $100,000.

|                                     |  |                     |      |              |  |       |         |          |  |          |   |  |  |              |   |                     |  |            |         | 
|------------------------------------ |  | ------------------- | ---- | ------------ |  | ----- | ------- | -------- |  | -------- | - |  |  | ------------ | - | ------------------- |  | ---------- | ------- | 
|                                     |  |                     |      |              |  |       |         |          |  |          |   |  |  |              |   |                     |  | Long-Term 
|                                     |  | Annual Compensation |      | Compensation
|                                     |  |                     |      |             
|                                     |  |                     |      |              |  |       |         |          |  |          |   |  |  |              |   |                     |  | Securities
|                                     |  |                     |      |              |  |       |         |          |  |          |   |  |  | Other Annual |   | Underlying Options/
|Name and Principal Position          |  | Year                |      | Salary       |  | Bonus |         | Comp (1) |  | SARs (#)
|                                     |  |                     |      |              |  |       |         |          |  |         
|Eugene Pian, Chief Executive Officer |  |                     | 2000 |              |  |       | 110,000 |          |  |          |  |  |  |              |  |                     |  |            |        | 
|                                     |  |                     | 1999 |              |  |       | 110,000 |          |  |          |  |  |  |              |  |                     |  |            |        | 
|                                     |  |                     | 1998 |              |  |       | 107,499 |          |  |          |  |  |  |              |  |                     |  |            | 500,000 | 
|                                    
|Craig Pian, Executive Vice           |  |                     | 2000 |              |  |       | 113,423 |          |  |          |  |  |  |              |  |                     |  |            | 50,000  | 
|President and Treasurer              |  |                     | 1999 |              |  |       | 91,384  |          |  |          |  |  |  |              |  |                     |  |            |        | 
|                                     |  |                     | 1998 |              |  |       | 83,769  |          |  |          |  |  |  |              |  |                     |  |            | 500,000 | 



---

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

Options/SAR Grants in the Last Fiscal Year

|            |  |              |        |                     |  |                  |    |                 |  |                   |      |                 |  |  |          |  |  |   |      | 
|----------- |  | ------------ | ------ | ------------------- |  | ---------------- | -- | --------------- |  | ----------------- | ---- | --------------- |  |  | -------- |  |  | - | ---- | 
|            |  | Number of    |        | % of Total          |  |                  |    |                 |  |                   |      |                 |  |  |          | 
|            |  | Securities   |        | Options/SARS        |  |                  |    |                 |  |                   |      |                 |  |  |          | 
|            |  | Underlying   |        | Granted to          |  |                  |    |                 |  |                   |      |                 |  |  |          | 
|            |  | Options/SARS |        | Employees in Fiscal |  | Exercise or Base |    |                 |  |                   |      | Market Price on
|Name        |  | Granted (#)  |        | Year                |  | Price ($/share)  |    | Expiration Date |  | Date of Grant ($)
|            |  |              |        |                     |  |                  |    |                 |  |                  
|Eugene Pian |  |              | 0      |                     |  |                  |   |                 |  |                   |     |                 |  |  |         |  |  |   |     | 
|Craig Pian  |  |              | 50,000 |                     |  |                  | 16 | %               |  | $                 | 0.50 |                 |  |  | 02/04/02 |  |  | $ | 0.48 | 

Aggregated Option/SAR Exercises in Fiscal Year 2003 and Option/SAR Values at January 31, 2001

|            |  |                    |   |              |  |             |   |               |  |                              |           |                              |  |  |   |  |  |  |         |  |  |  |   | 
|----------- |  | ------------------ | - | ------------ |  | ----------- | - | ------------- |  | ---------------------------- | --------- | ---------------------------- |  |  | - |  |  |  | ------- |  |  |  | - | 
|            |  |                    |   |              |  |             |   |               |  | Number of Securities         |           |                              |  |  |   |  |  | 
|            |  |                    |   |              |  |             |   |               |  | Underlying Unexercised       |           | Value of Unexercised        
|            |  |                    |   |              |  |             |   |               |  | Options/SARs Fiscal Year-End |           | in-the-Money Options/SARs at
|            |  |                    |   |              |  |             |   |               |  | (#)                          |           | Fiscal Year-end ($)         
|            |  |                    |   |              |  |             |   |               |  |                              |           |                             
|            |  | Shares Acquired on |   | Value        |  |             |   |               |  |                              |           |                              |  |  |   |  |  |  |         | 
|Name        |  | Exercise (#)       |   | Realized ($) |  | Exercisable |   | Unexercisable |  | Exercisable                  |           | Unexercisable               
|            |  |                    |   |              |  |             |   |               |  |                              |           |                             
|Eugene Pian |  |                    |  |              |  |             |  |               |  |                              | 1,000,000 |                              |  |  | 0 |  |  |  | 390,000 |  |  |  |  | 
|            |  |                    |  |              |  |             |  |               |  |                              | 1,000,000 |                              |  |  | 0 |  |  |  | 540,000 |  |  |  |  | 
|            |  |                    |  |              |  |             |  |               |  |                              | 500,000   |                              |  |  | 0 |  |  |  | 45,000  |  |  |  |  | 
|Craig Pian  |  |                    |  |              |  |             |  |               |  |                              | 1,000,000 |                              |  |  | 0 |  |  |  | 390,000 |  |  |  |  | 
|            |  |                    |  |              |  |             |  |               |  |                              | 1,000,000 |                              |  |  | 0 |  |  |  | 540,000 |  |  |  |  | 
|            |  |                    |  |              |  |             |  |               |  |                              | 500,000   |                              |  |  | 0 |  |  |  | 45,000  |  |  |  |  | 
|            |  |                    |  |              |  |             |  |               |  |                              | 50,000    |                              |  |  | 0 |  |  |  | 4,500   |  |  |  |  | 





---



##### 



ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The following table sets forth certain information as to the number of
shares of our common stock deemed to be owned beneficially by each person known
by the Registrant to be the beneficial owner of more than 5% of our outstanding
common stock, each of its executive officers and directors, and all of its
executive officers and directors as a group at April 13, 2001. Except as
indicated in the footnotes to this table, we believe that the named persons
have sole voting power with respect to the shares indicated:

|                                                           |  |                           |  |                  |           |                     |           |     |       |   |       |  
|---------------------------------------------------------- |  | ------------------------- |  | ---------------- | --------- | ------------------- | --------- | --- | ----- | - | ----- | -
|Name and Address of Beneficial Owner                       |  | Position with Company     |  | Number of Shares |           | Percentage of Class
|                                                           |  |                           |  |                  |           |                    
|Eugene Pian                                                |  | President & Director      |  |                  | 4,364,567 | (1)                 |           |     | 30.46 | %
|c/o Semicon Tools, Inc.                                    |  |                           |  |                  |           |                     |           |     |       |   |       |  
|554 North State Road                                       |  |                           |  |                  |           |                     |           |     |       |   |       |  
|Briarcliff Manor, NY 10510                                 |  |                           |  |                  |           |                     |           |     |       |   |       |  
|                                                           |  |                           |  |                  |           |                     |           |     |       |   |       |  
|Craig Pian                                                 |  | Executive Vice President, |  |                  | 2,700,333 | (2)                 |           |     | 18.85 | %
|c/o Semicon Tools, Inc.                                    |  | Treasurer & Director      |  |                  |           |                     |           |     |       |  
|554 North State Road                                       |  |                           |  |                  |           |                     |           |     |       |   |       |  
|Briarcliff Manor, NY 10510                                 |  |                           |  |                  |           |                     |           |     |       |   |       |  
|                                                           |  |                           |  |                  |           |                     |           |     |       |   |       |  
|Francine Pian                                              |  | Secretary & Director      |  |                  | 1,003,560 | (3)                 |           |     | 7.01  | %
|c/o Semicon Tools, Inc.                                    |  |                           |  |                  |           |                     |           |     |       |   |       |  
|554 North State Road                                       |  |                           |  |                  |           |                     |           |     |       |   |       |  
|Briarcliff Manor, NY 10510                                 |  |                           |  |                  |           |                     |           |     |       |   |       |  
|                                                           |  |                           |  |                  |           |                     |           |     |       |   |       |  
|Tan Hun Chin                                               |  | Director                  |  |                  | 580,000   | (4)                 |           |     | 4.05  | %
|#35, Lintang Delima 3, Greenlane                           |  |                           |  |                  |           |                     |           |     |       |   |       |  
|11700 Penang, Malaysia                                     |  |                           |  |                  |           |                     |           |     |       |   |       |  
|                                                           |  |                           |  |                  |           |                     |           |     |       |   |       |  
|All Directors and Executive Officer
as a group (4 persons) |  |                           |  |                  |           |                     | 8,648,460 | (5) |       |   | 60.37 | %



---

|(1) |  | Includes currently exercisable options to purchase 2,500,000
shares of common stock, 225,000 shares of common stock held under
voting trusts which terminate when the shareholder sell his stock,
and 25,000 shares owned by his spouse as to which he disclaims
beneficial ownership.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Includes currently exercisable options to purchase 2,550,000
shares of common stock.                                                                                                                                                                                                  
|   
|(3) |  | Includes currently exercisable options to purchase 550,000
shares of common stock                                                                                                                                                                                                     
|   
|(4) |  | Includes currently exercisable options to purchase 550,000
shares of common stock                                                                                                                                                                                                     
|   
|(5) |  | Includes currently exercisable options to purchase 6,150,000
shares of common stock.                                                                                                                                                                                                  

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None





---



##### 



ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K



| | (a) |  | Index of Exhibits
| | --- |  | -----------------

| |  |       |  |                                                                        
| |  | ----- |  | -----------------------------------------------------------------------
| |  | 3(a)  |  | Articles of Incorporation(1)                                           
| |  | 3(b)  |  | By-Laws(1)                                                             
| |  | 3(c)  |  | Amendment to Articles of Incorporation(2)                              
| |  | 10(a) |  | Agreement of merger with Semicon Tools, Inc., a New York Corporation(2)
| |  | 10(b) |  | Articles of Merger(2)                                                  
| |  | 10(c) |  | Certificate of Merger(2)                                               
| |  | 10(d) |  | Patent License(1)                                                      
| |  | 10(e) |  | Patent No. 4,219.004(1)                                                
| |  | 10(f) |  | License Agreement with Bookuk Industry Company, Ltd.(1)                
| |  | 10(i) |  | Thermode/Synthrode Supplier Agreement(1)                               
| |  | 10(j) |  | East Coast Sales Acquisition Agreement(3)                              
| |  | 10(k) |  | $300,000 Promissory Note(3)                                            
| |  | 10(l) |  | Amendment to East Coast Sales Acquisition Agreement(4)                 
| |  | 10(m) |  | Teik Tatt Holding
Co. (1979) Sdn. Bhd. Acquisition Agreement(5)        
| |  | 10(n) |  | Teik Tatt Holding Co. disposition agreement(6)                         
| |  | 10(o) |  | Hong Kong Batteries
Industries, Ltd.(8)                                
| |  | 10(p) |  | Fimas Sdn. Bhd. Acquisition Agreement(8)                               
| |  | 10(q) |  | Fimas Sdn. Bhd. Disposition Agreement(10)                              
| |  | 16    |  | The required letter from the former accountants (previously filed).    
| |  | 21    |  | List of Subsidiaries (filed herewith).                                 
| |  | 23    |  | Consent of Independent Accountants (filed herewith).                   
| |  | 99.1  |  | Section 906 Certification Letter (filed herewith).                     



|1.  |  | Incorporated by Reference from Registrants Registration
Statement on Form S-18 declared effective 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 December 10, 1998.                            
|   
|7.  |  | Incorporated by Reference from Registrants Form 8-K
Report dated December 9, 1999.                             
|   
|8.  |  | Incorporated by Reference from Registrants Form 8-K
Report dated December 10, 1999.                            
|   
|9.  |  | Incorporated by Reference from Registrants Form 8-K
Report dated January 29, 1993.                             
|   
|10. |  | Incorporated by Reference from Registrants Form 8-K Report dated January 31, 2001.                             





---



##### 



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, thereto duly
authorized.

| |  |                                                                          
| |  | -------------------------------------------------------------------------
| |  | SETO Holdings, Inc.                                                      
| |  | Registrant                                                               
| |  |                                                                          
| |  | By: /s/ Eugene J. Pian
Eugene J. Pian, President
Date: September 18, 2003

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: September 18, 2003
| |  |                                                 
| |  |                                                 
| |  | /s/ Craig A. Pian                               
| |  |                                                 
| |  | Craig A. Pian
Director
Date: September 18, 2003 
| |  |                                                 
| |  |                                                 
| |  | /s/ Francine Pian                               
| |  |                                                 
| |  | Francine Pian
Director
Date: September 18, 2003 





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##### 



CERTIFICATION PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

I, Eugene J. Pian, certify that:



|1. |  | I have reviewed SETO Holdings, Inc. and
Subsidiaries Amendment No. 1 to the Annual Report on Form
10-KSB for the year ended January 31, 2001;                                                                                                                                                                  
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report
does not contain any untrue statement of a material fact
or omit to state a material fact necessary to the
statements made, in light of the circumstances under which
such statements were made, not misleading with respect to
the period covered by this report; and
|  
|3. |  | Based on my knowledge, the financial
statements, and other financial information included in
this annual report, fairly present in all material
respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the
periods presented in this annual report.           

|                                                          |  | 
|--------------------------------------------------------- |  | 
|Date: September 18, 2003                                  |  | 
|                                                          |  | 
|/s/ Eugene J. Pian
Eugene J. Pian
Chief Executive Officer |  | 





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##### 



CERTIFICATION BY THE EXECUTIVE VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER

I, Craig Pian, certify that:



|1. |  | I have reviewed SETO Holdings, Inc. and
Subsidiaries Amendment No. 1 to the Annual Report on Form
10-KSB for the year ended January 31, 2001;                                                                                                                                                                  
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report
does not contain any untrue statement of a material fact
or omit to state a material fact necessary to the
statements made, in light of the circumstances under which
such statements were made, not misleading with respect to
the period covered by this report; and
|  
|3. |  | Based on my knowledge, the financial
statements, and other financial information included in
this annual report, fairly present in all material
respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the
periods presented in this annual report.           

|                         |  | 
|------------------------ |  | 
|Date: September 18, 2003 |  | 
|                         |  | 
|/s/ Craig Pian           |  | 
|Craig Pian               |  | 
|Chief Executive Officer  |  | 





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##### 



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



|1. |  | No annual report to security holders covering 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.