SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549




                                   FORM 10-QSB


              (X)     Quarterly Report Pursuant to Section 13 or 15(d)
                        of the Securities Exchange Act of 1934

                      For the quarterly period ended    October 31, 1996

                                       or

              ( )     Transition Report Pursuant to Section 13 or 15(d) of the
                        Securities Exchange Act of 1939

                      For the transition period from              to


Commission File Number:  33-5820-LA




                               SEMICON TOOLS, INC.
        (Exact name of small business issuer as specified in its charter)




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


                 111 Business Park Drive, Armonk, New York 10504

                    (Address of principal executive offices)


Issuer's telephone number, including area code: (914) 636-4325
                                               -----------------


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

                               Yes X   No


Indicate the number of Shares  outstanding  of each of the  Issuer's  classes of
common stock, as of the latest practicable date.


          Class                            Outstanding at October 31, 1996

Common Stock, par value $.001
 per share                                               8,717,500




<PAGE>





























                                      INDEX


Part I.   Financial Information


   Item 1.  Condensed consolidated financial statements:

         Balance sheet as of October 31, 1996                          F-2

         Consolidated statement of operations for nine and three
           months ended October 31, 1996 and 1995                      F-3

         Consolidated statement of cash flows for nine and three
           months    ended October 31, 1996 and 1995                   F-4

         Consolidated statement of shareholders' equity for the
           period ended October 31, 1996                               F-5


         Notes to condensed consolidated financial statements       F-6 - F-12


   Item 2.  Management's discussion and analysis of
                 financial condition



Part II.  Other information


   Signatures







<PAGE>



                      SEMICON TOOLS, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEET

                                OCTOBER 31, 1996

                                   (UNAUDITED)






                                     ASSETS

Current assets:
  Cash                                                        $   94,314
  Accounts receivable, less allowance
   for doubtful accounts of $6,500                               247,652
  Inventory                                                      302,978
  Due from officers                                                8,313
  Prepaid expenses and other assets                               80,177
                                                                ----------

    Total current assets                                         733,434

Property and equipment (Note 3)                                  394,614
                                                               ----------

Other assets:
  Goodwill, net of amortization                                  103,077
  Other assets                                                    13,891
                                                                  ------
                                                                 116,968
                                                                 -------

                                                              $1,245,016
                                                              ==========



                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Current portion of long-term debt (Note 8)                  $   26,986
  Notes payable, shareholders (Note 9)                            84,464
  Accounts payable                                               318,858
  Accrued interest                                               178,658
                                                               ----------

    Total current liabilities                                    608,966

Long term debt, net of current portion (Note 8)                  170,000
                                                               ----------

Commitments and contingencies (Note 6)

Shareholders' equity:
  Common stock par value $.001; 100,000,000
   shares authorized 8,717,500 shares issued and
   outstanding (Note 7)                                            8,718
  Additional paid in capital                                   2,500,720
  Retained earnings (deficit)                                ( 2,043,388)
                                                               ----------
                                                                 466,050
                                                               ----------

                                                              $1,245,016
                                                              ==========








                   See  notes  to  condensed   consolidated  financial
statements.
                                                                          F-2


<PAGE>



                      SEMICON TOOLS, INC. AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS)

              NINE AND THREE MONTHS ENDED OCTOBER 31, 1996 AND 1995

                                    (AUDITED)








                      Nine months ended                     Three months ended
                          October 31                            October 31
                        1996           1995              1996            1995
                                    (Restated                       (Restated
                                     Note 13)                        Note 13)
                       ----          ---------           ----        ---------


Net sales            $1,111,072      $  826,384        $ 364,070  $  289,909

Cost of sales           287,396         237,096           77,594     102,229
                     ----------      ----------         ---------   ----------

Gross profit            823,676         589,288          286,476     187,680

Selling, general and
administrative expenses 701,938         778,178          258,993     282,183
                     ----------      ----------          ---------   ----------

Income (loss)
 from operations        121,738     (   188,890)          27,483    ( 94,503)
                     ----------     ------------         ---------   ----------

Other income (expenses):
  Rental income           1,000          10,850            1,000     (   350)
  Interest expense  (    26,078)       ( 34,887)        (  8,176)    (11,414)
                     ----------       ----------        ---------    ----------
                    (    25,078)       ( 24,037)       (   7,176)  (  11,764)
                     ----------       ----------       --------     ----------

Income (loss) before
 income taxes           96,660      (   212,927)         20,307   (   106,267)
                     ----------      ----------        ---------   ----------

Net income (loss)   $   96,660      ($  212,927)      $  20,307   ($  106,267)
                     ==========      ==========        =========   ==========

Income (loss) per
 common share       $     0.01      (  $  0.06)      $     0.00  ($     0.03)
                     ==========      ==========       ==========   ==========

Weighted average number
 of common shares
 outstanding         7,026,898       3,542,436        8,570,489    3,991,521
                     ==========     ==========        =========    ==========

















     See notes to condensed consolidated financial statements.
                                                                         F-3


<PAGE>



                      SEMICON TOOLS, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

                   NINE MONTHS ENDED OCTOBER 31, 1996 AND 1995

                                   (UNAUDITED)


                                                       1996             1995
                                                                     (Restated
                                                                      Note 13)


Cash flows from operating activities:
  Net income (loss)                                  $ 96,660       ($212,927)
  Adjustments to reconcile net income to
   cash provided from operating activities:
     Depreciation and amortization                     11,012         280,734
     Compensatory stock issued                         30,000          98,650
  Changes in operating assets and liabilities:
    Increase in accounts receivable                 (  75,465)      (  54,139)
    Increase in inventories                         (  42,485)      (   8,600)
    (Increase) decrease in prepaid expenses
     and other current assets                       (  28,327)      (  14,283)
    (Decrease) increase in accounts payable
     accrued expenses and payroll taxes payable     ( 187,225)      (  14,345)
                                                     --------        --------

      Net cash used in operating activities         ( 195,830)         75,090
                                                     --------        --------

Investing activities:
  Use of cash:
    Purchase of property and equipment              (  10,503)      (  11,415)
                                                     --------        --------

Financing activities:
  Source of cash:
    Proceeds from sale of stock                       328,125
Use of cash:
    Decrease in notes payable                                       (  10,186)
    Decrease in notes payable, shareholders         (  31,649)      (  11,824)
    Payment of long term debt                       (  34,695)      (  25,703)
                                                     --------        --------

      Net cash provided from financing activities     261,781       ( 47,713)
                                                     --------        --------

Net increase in cash                                   55,448         15,962

Cash, beginning of year                                38,866            891
                                                     --------        --------

Cash, end of year                                    $ 94,314       $ 16,853
                                                     ========       ========

Supplemental  disclosures  of cash flow  information:
 Cash paid during the year for:

    Interest                                        $  2,597        $  6,053
                                                    ========        ========
    Income taxes                                    $      0       $      0
                                                    ========        ========

Supplemental schedule of non-cash investing and
financing activities:
  Issuance of common stock for purchase of
   subsidiary (Note 12)                             $125,048
  Issuance of common stock for conversion of debt,
   agreements, services and payment of interest       36,000       $ 98,650
                                                    --------       --------

                                                    $161,048       $ 98,650
                                                    ========       ========





     See notes to condensed consolidated financial statements.
                                                                      F-4

<PAGE>



                      SEMICON TOOLS, INC. AND SUBSIDIARIES

            CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

                   NINE MONTHS ENDED OCTOBER 31, 1996 AND 1995
                                   (UNAUDITED)
                                                                        Total
                                              Additional     Retained   Share-
                                     Common   paid in        earnings   holders'
                           Shares    Stock    capital       (deficit)   Equity
Balance at Jan. 31, 1994  2,520,000 $2,520  $1,362,855    ($1,323,782) $ 41,593

Stock issued for services   5,000        5       2,497                    2,502

Stock issued for
settlement agreement       50,000       50      24,950                   25,000

Sale of stock             350,000      350      99,650                  100,000

Stock issued for services 760,000      760     379,240                  380,000

Net loss for the year
 ended Jan. 31, 1995                                    (   267,231) ( 267,231)
                        ---------    ------   ----------   ----------  --------

Balance at Jan. 31, 1995 3,685,000    3,685   1,869,192 ( 1,591,013)   281,864

Stock issued for settlement
 of accounts payable       600,000      600      73,050                 73,650

Stock issued for consulting
 services                  150,000      150       9,900                 10,050

Shares issued for exchange
 of loans                  670,000      670      39,330                 40,000

Sale of stock               62,500       63      23,375                 23,438

Net loss for the year
 ended Jan. 31, 1996                                    (   329,839) ( 329,839)
                          ---------   ------   ---------- ----------  --------

Balance at Jan. 31, 1996 5,167,500  $ 5,168  $2,014,847 ($1,920,852)  $ 99,163

Issuance of stock on
 exercise of stock
 options (Note 5)        2,550,000    2,550    237,450                 240,000

Sale of stock (Note 7)      75,000       75     28,050                  28,125

Issuance of stock for
 consulting services
 (Note 7)                  150,000      150      7,350                   7,500

Issuance of stock regarding
 acquisition of subsidiary
 (Notes 2, 7 and 12)       300,000      300    124,748                 125,048

Sale of stock (Note 7)     400,000      400     59,600                  60,000

Prior period adjustment,
 loss in equity of
 unconsolidated subsidiary
 (Note 14)                                                (  219,196)( 219,196)

Issuance of stock for
 services (Note 7)          75,000       75     28,675                  28,750

Net income for the nine
 months ended
 October 31, 1996                                             96,660    96,660
                          ---------   ------ ----------   ----------  --------

Balance at Oct. 31, 1996  8,717,500   $8,718  $2,500,720 ($2,043,388) $466,050
                         =========    ====== ==========   ==========  ========


        See  notes  to  condensed   consolidated  financial statements

                                                                          F-5


<PAGE>



                      SEMICON TOOLS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







     1. The accompanying  unaudited  financial  statements have been prepared in
accordance with generally accepted  accounting  principles for interim financial
information and with the instructions to Form 10-QSB.  Accordingly,  they do not
include all of the  information  and  footnotes  required by generally  accepted
accounting  principles  for  complete  financial  statements.  In the opinion of
management,  all adjustments  considered  necessary for a fair presentation have
been  included.  The  results  of  operations  for the six  months  ended is not
necessarily  indicative  of the  results to be expected  for the full year.  For
further  information,   refer  to  the  consolidated  financial  statements  and
footnotes  thereto  included in the  Company's  annual report for the year ended
January 31, 1996 included in its Annual Report filed on Form 10-KSB.


2.  Organization of the Company:

     Semicon Tools, Inc. (the "Company"), a Nevada corporation, is primarily in
     the business of selling small precision disposable diamond tools used to
     manufacture electronic components and devices.

      One of the Company's wholly-owned subsidiaries,  East Coast Sales Company,
      Inc.  ("ECS")  is  a  Connecticut   corporation  which  distributes  and
       fabricates   technical  ceramic  products  and  distributes  clean  room
       supplies  and tools.  This  Company,  which was  acquired on January 26,
       1990,  was accounted for in a manner similar to the pooling of interests
       method of accounting.  The total cost of the acquisition,  $309,000, was
       paid for by the issuance of a $300,000 note, bearing interest at 10% per
       annum,  and the issuance of 9,000,000  shares of the Company's $.001 par
       value common stock.

     On June 22, 1996, the Company  purchased the assets of DTI Technology, SDN
      BHD (DTI).  DTI's product line is similar to that of Semicon Tools, Inc.
      The  total  cost  of the  acquisition,  $125,048,  was  paid  for by the
      issuance of 300,000 shares of the Company's $.001 par value common stock
       with a negotiated fair value of $.42 per share.


3.  Property and equipment:

    Major classifications of property and equipment are as follows:

                 Manufacturing equipment                          $382,759
                 Other equipment and technology                    451,665
                 Office equipment                                   20,535
                                                                  --------
                                                                   854,959
                 Less accumulated depreciation                     460,345
                                                                   -------

                                                                  $394,614
                                                                  ========









                                                                        F-6


<PAGE>



                      SEMICON TOOLS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





4.  Investment in foreign affiliate:

   As of June 22, 1996, the Company purchased 100% of DTI Technology,  SDN BHD.
The  Company  issued  300,000  shares of common  stock and the  transaction  was
recorded at a cost of $125,048.  This  investment  is recorded  under the equity
method of accounting.


      During the year ended  January 31, 1993,  the Company  sold  non-exclusive
      rights  to  certain  processing  and  manufacturing  technology  to this
      affiliate.  This sale included  processing  technology and patent rights
      for the manufacture of hub and hubless diamond dicing blades.  The value
      assigned to this  technology was $200,000 for which payment was received
      in the form of 500,000 shares of the affiliate's common stock.

    In addition to the sale of technology,  the Company also sold machinery and
     equipment,  reflected in the books of the Company at a net book value of
      $17,367, to this affiliate, for aggregate proceeds of $68,463.


5.  Common stock options:

    On  March 6, 1996 the Company  entered into an  investment  agreement  for a
       three year term.  The consultant  shall assist  management in broadening
       the Company's exposure to the financial community and securing necessary
       funding to meet its needs  according to the terms of the agreement.  The
       consultant  shall be  compensated by having the option to purchase up to
       6,000,000 of the Company's  common shares at prices varying from $.10 to
      $1.75 during the period commencing on March 6, 1996 and ending September
      30, 1996. As of September 30, 1996, 2,550,000 shares had been issued for
       $240,000.  This  agreement was  terminated on September 30, 1996 and all
       options had been cancelled.


6.  Commitments and contingencies:

    The Company is currently  obligated  under a lease  agreement for office and
        manufacturing  facilities.  This lease,  which  expires on May 31, 1998,
        requires the following future minimum rental payments:

                           October 31, 1997                       $40,493
                           October 31, 1998                        24,802
                                                                  -------
                                                                  $65,295
                                                                  =======

      Rent expense for the nine months ended  October 31, 1996 and 1995 amounted
        to $29,923 and $28,125, respectively.

    The Company also leases three  vehicles  under  operating  leases with terms
        expiring  through  1998.  Total  lease  expense was $11,895 for the nine
        months ended October 31, 1997 and 1996.

      Future minimum rentals are as follows:

                           1996                                $11,907
                           1997                                  3,957
                                                               -------
                                                               $15,864
                                                               =======





                                                                        F-7


<PAGE>



                      SEMICON TOOLS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





6.  Commitments and contingencies (continued):

      OnDecember  1,  1995,  the  Company  signed a letter of  intent  with Ling
        Dynamic  SDN BHN and  Cable-Vision  Technologies  (M) SDN  BHN.  Semicon
        Tools,  Inc.  is to  exchange  5,000,000  of its  common  stock for 100%
        ownership  in  Ling  Dynamic.  For  a  100%  ownership  in  Cable-Vision
        Technologies,  Semicon  intends to issue  3,000,000 of its common shares
        and also  remit  $2,500,000.  This  letter  of  intent  is not a binding
        agreement. Management feels at this time that the consummation of either
        letter of intent is not probable.

      The Company has entered into written sales  agreements with two employees.
        The  agreements  are on a year to year basis and call for the payment of
        commissions,  varying  from 1 to 4  percent,  on the  sale  of  selected
        products.

      The Company  entered into a  consulting  agreement on August 29, 1996 with
        Toby  Investment  Group  to  provide  professional   corporate  finance,
        financial public relations, management consulting and advisory services.
        The consultant was issued options to purchase the Company's common stock
        from August 29, 1996  through  October 31,  1996.  A total of  7,900,000
        shares were offered at prices of $.15 to $1.00 per share. At October 31,
        1996,  the Company  received  $60,000 and issued  400,000  shares of its
        common stock.  At October 31, 1996,  the  consulting  agreement had been
        terminated at the option of the Company and all stock options cancelled.

     On April 8,  1996,  the  Company  reached a  settlement  with  their  prior
        accountants  of fees due from  the  Company.  The  agreement  calls  for
        monthly  installments of $4,000  commencing  April 1, 1996 and ending on
        September 1, 1996 for a total $24,000.  The balance reflected at January
        31, 1996 on the  Company's  accounts  payable was $28,068.  The books at
        October 31, 1996 have been adjusted to reflect this settlement.


7.    Common stock:

      During the six months ended July 31, 1996,  the Company  issued  shares of
        its common shares in non-cash transactions as follows:

                                   Number
                                    of      Total
      Date       Issuee            shares   Value     Reason for issuance

   03/05/96   Richard Staper     100,000  $ 5,000       Consulting services

   03/05/96   Richard Korlinchak  50,000    2,500       Consulting services

   06/22/96   Lee Beng Wang      100,000   33,921  Acquisition of DTI Technology

   06/22/96   LS Technology       50,000   16,961  Acquisition of DTI Technology

   06/22/96   Eugene Pian        150,000   74,166  Acquisition of DTI Technology

   08/31/96   Mark Gasarch        50,000   25,000        Legal services

   08/31/96   Paul Alper          25,000    3,500        Consulting services
                                 -------  --------

                                 525,000 $161,048
                                 ======= ========


      The Company sold  3,025,000  common  shares during the nine month period
      ended October 31, 1996 for $328,125.

                                                                           F-8


<PAGE>



                      SEMICON TOOLS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS








8.      Long-term debt:
                                                  Long-term   Current
                                          Rate    Portion     Portion  Maturity


         Note payable, Citibank   (a)      10%               $26,986     1998

         Note payable, shareholders (b) 13.5%-15%  $170,000              1998
                                                   --------  -------
                                                   $170,000  $26,986
                                                   ========  =======


         (a)      Note payable to Citibank is payable in monthly installments of
                  $3,855 including  interest.  The note is collateralized by all
                  assets  of  the  Company  and   guaranteed  by  its  principle
                  shareholder.

         (b)      Notes payable to two  shareholders in the aggregate  amount of
                  $170,000.  These notes are  subordinate  to the borrowing from
                  Citibank and will become due when the bank is paid in full.


        The maturities of these loans are as follows:


                            October 31, 1997                       $ 26,986
                            October 31, 1998                        170,000
                                                                    --------

                                                                   $196,986
                                                                   ========



9.      Notes payable, shareholders:

        Notes payable consist of the following past due  obligations.  The terms
        of these notes have not been extended and are payable on demand:

        Notes payable to  shareholders  were payable in monthly  installments of
        $2,326,  including  interest at 14%.  The note matured in July 1994 and
        amounted to $81,464.

     Demand note payable to shareholder  carries interest at 10% and amounted to
       $3,000.

      Shareholders have not demanded payment in the current year.














                                                                        F-9


<PAGE>



                      SEMICON TOOLS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS






10.     Income taxes:

        As of October 31, 1996 the Company had net operating loss  carryovers of
         approximately $1,900,000 expiring in various years through 2008.

        Effective  February 1, 1993, the Company adopted  Statement of Financial
         Accounting  Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
         109"),  the  cumulative  effect  of  which  was  not  material  to  the
         consolidated  financial  statements  and  is  therefore  not  presented
         separately.  Under  the  asset and  liability  method of SFAS No.  109,
         deferred tax assets and  liabilities  are recognized for the future tax
         consequences  attributable  to the  differences  between the  financial
         statement carrying amounts of existing assets and liabilities and their
         respective tax bases and operating  loss and tax credit  carryforwards.
         Deferred  tax assets and  liabilities  are measured  using  enacted tax
         rates  expected  to apply to taxable  income in the year in which those
         temporary  differences  are expected to be recovered or settled.  Under
         SFAS No. 109,  the effect on deferred tax assets and  liabilities  of a
         change in tax rates is recognized in income in the period that includes
         the enactment date; this effect was immaterial during the period ending
         July 31, 1996 and 1995.  The  deferred  tax asset less the deferred tax
         liabilities has been reduced by a valuation  allowance equal to the net
         tax benefit from the net operating loss carryovers.


        Provision for income taxes:

                                                   1996             1995
                                                   ----             ----

                  Current                      $ 27,470        $      0
                  Deferred                    (  27,470)
                                               --------

                     Total                     $      0        $      0
                                               ========          ========


        The component of deferred income tax expense (benefit) is as follows:


                  Tax benefit of net operating
                    loss carryfoward          ($ 27,470)        $      0
                                               ========             =======

        The components of deferred tax assets and liabilities is as follows:

            Deferred tax asset:

           Net operating loss carryfoward     $570,000          $592,905
                                              --------          --------

             Total deferred tax asset          570,000           592,905

               Valuation allowance           ( 570,000)        ( 592,905)
                                              --------          --------

                                              $      0          $      0
                                              ========          ========






                                                                        F-10


<PAGE>



                      SEMICON TOOLS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




11.     Consulting agreements:

        As of December 30,  1994,  the Company  entered  into an  agreement  for
         consulting  services to advise and assist it in its  ongoing  business,
         investor and financial public relations.  Such services are to include,
         as necessary  and as  authorized by the client,  the  preparation  of a
         business  plan,  the  development  of new  business,  press  relations,
         releases  and  conferences,  distribution  of the  Company's  financial
         reports and the making of both individual and business  contracts.  The
         agreement  is for a one  year  term  with  the  consultant  to  receive
         compensation  of  $380,000  in the form of  760,000  shares  of  common
         stocks,  valued at $.50 per share.  The  agreement may be terminated by
         either party by notice or if either party has failed to comply with any
         of the terms,  conditions or provisions of the agreement. As of October
         31, 1996, the agreement was no longer in force.

        The Company also entered into an investment banking consultant agreement
         effective  December  31, 1994 for a period of  thirty-six  months.  The
         consultant  shall  advise  the  Company  on  capital  structure,   make
         introductions to financial institutions and provide advice of financing
         strategies and special projects. The consultant shall be compensated on
         a per introduction  basis using the Lehman formula  (5-4-3-2-1).  As of
         July 31, 1996 no remuneration  had been paid, nor were any amounts owed
         to this consultant.


12.     Acquisition of subsidiary:

        On June  22,  1996,  the  Company  acquired  100% of the  assets  of DTI
         Technology,  SDN, BHD for a total cost of $125,048.  The Company issued
         300,000 of its common shares to the shareholders of DTI Technology. The
         condensed balance sheet of DTI Technology, SDN BHD at June 22, 1996 was
         as follows:

                                  BALANCE SHEET

                                     ASSETS



            Current assets                                       $112,003
            Property and equipment                                312,997
                                                                  -------

               Total assets                                      $425,000
                                                                 ========


                      LIABILITIES AND SHAREHOLDERS' EQUITY


            Current liabilities                                  $299,952
            Shareholders' equity                                  125,048
                                                                  -------

               Total liabilities and shareholders'
                 equity                                          $425,000
                                                                 ========


        The restated  assets and  liabilities  of DTI have been  included in the
         consolidated  balance sheet at July 31, 1996. The results of operations
         for DTI for the period June 22, 1996 to October 31, 1996  resulted in a
         net loss of $8,723.


                                                                        F-11


<PAGE>



                      SEMICON TOOLS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







13.     Restated financial statements for July 31, 1995:


        The Company has restated the financial statements as of July 31, 1995 to
         reflect  an error in  interest  expense.  This  change  resulted  in an
         increase in net income of $29,528 for the nine and three  months  ended
         October 31, 1996.



14.     Prior period adjustment:

        Until July 31, 1996, the Company had recorded an investment in a foreign
         affiliate at cost with the intention of accounting for this  investment
         using the equity method.  The Company had a 9 1/4% interest and because
         the books and records of the affiliate were not readily available,  the
         losses of the  affiliate  were  never  recorded  by the  Company.  This
         investment has been written down to zero,  the correct value  according
         to the information that has now become available.







































                                                                      F-12


<PAGE>






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





      I.      Financial Condition

           Note:  The comparative comments that are made in this Section 1,
   Financial Condition are made with respect to Form 10-QSB, Amendment No 1 for
    the period ending July 31, 1996.  The Amendment accounts for the facts that
                (i)    The foreign subsidiary holding of 9-1/4% interest in KBR
                 (Malaysia) SON. BHD. no longer is extant, and
                 (ii)   the DTI Technology, SBN. BHD. acquisition cost is
                 $125,048 and not $280,000 and
                 (iii)  certain associated DTI assets were accordingly restated.
      The Amendment neither affected the Income Statement nor had any meaningful
      impact on the cash position.
                     In  comparing  the quarter  ending  October 31, 1996 to the
      previous balance sheet at July 31, 1996, therefore, elements were affected
      by the Company's continuing  profitable operation and the additional sales
      of stock mostly upon the exercise of options by consultants:
                     (i) A reduction in cash of $32,626, or 25%, was utilized in
      increasing current assets by $97,472 or 15.3% and total assets by $117,437
      or 10.4%, specifically both accounts receivable and inventories by a total
      of $83,384 and prepaid expenses by $38,400.
                     (ii)    Current liabilities remained about the same.
             The Financial Condition, therefore, is indicative of the ability
             of the Company to currently internally service its operating needs



<PAGE>







      II.     Results of Operation

              For  the  nine  months  ended   October  31,  1996,   the  Company
      experienced  its highest sales since it expanded with the  acquisition  of
      East Coast Sales Company on January 26, 1990 (See "Financial  Statements -
      Note 2"), a level almost equal to its highest annual (12 months) sales. In
      addition,  for the nine month  period,  its income from  operations is its
      highest.  These results are  attributable to strength shown in most of the
      product lines with ceramics, blades and scribes contributing more than the
      others.  The Company  anticipates this trend to continue for the remainder
      of the fiscal year with the annual  sales  achieving  its  highest  level,
      especially  as  reported in the trade  journals,  with  resurgence  of the
      growth of the  semi-conductor  chip market,  the Company's  major industry
      sector.

              Net sales for the quarter  ended  October  31, 1996 were  $364,070
      compared to $289,909 for the comparable  period of the preceding  year, an
      increase of approximately 25.6%. The Company's gross profit margin for the
      third quarter of 1996  increased by 21.6% as compared to the third quarter
      of  1995.  This  satisfactory   gross  profit  margin  resulted  from  the
      continuing  higher margins of the mix of specific products sold during the
      1996 quarter,  specifically, the sale of resin blades, scribes, gloves and
      ceramic  value-added  cutting  services.  With the  increase in net sales,
      there was a 52.6%  increase in gross profit for the third  quarter of 1996
      as compared to the third  quarter of 1995 and income  from  operations  of
      $27,483  compared to a loss of $94,503 for the two  quarters,  1996 versus
      1995. The  combination of the increase in net sales and a 8.2% decrease in
      selling,  general and  administrative  expenses  resulted in a $20,307 net
      income for the third quarter of 1996 compared to a net loss of $106,287 in
      the comparable 1995 quarter.






<PAGE>







              For the nine months  ended  October 31, 1996  compared to the nine
      months ended October 31, 1995, sales increased from $826,384 to $1,111,072
      or  34.4%,  gross  profit  margins  improved  slightly,  and  income  from
      operations  was  $121,738,  compared to 1995's nine month loss of $188,890
      (reflecting  a  positive  change  of  $310,628).  The  combination  of the
      increase  in  net  sales  and  9.8%  decrease  in  selling,   general  and
      administrative  expenses  resulted  in a $96,660  net  income for the nine
      months of 1996 compared to a net loss of $212,927 in the  comparable  1995
      nine months.

              In addition, although the impact on the results of operations were
      minor for the nine months ending October 31, 1996, (a loss of $8,723), the
      Company anticipates  additional  significant sales and income results from
      the  operation of the DTI  Technology,  SDN, BHD  acquisition.  The latter
      wholly-owned  Malaysian facility will be building its sales volume for its
      "start-up" position over the remaining three months of the fiscal year.

              Management  continues  to  take  steps  to  hold  expenses  at the
      favorable  current  level,  identify  new and more  economical  sources of
      supply and to expand its sales  base.  Management  believes,  although  no
      assurance can be given,  that the higher  revenue trend will continue into
      the next fiscal year.

      III.    Liquidity and Capital Resources

              Following  several years of being in default of certain  financial
      conditions  associated with the Company's bank loan  agreement,  which the
      bank always  waived,  the Company  has come into  compliance.  Regardless,
      since  the bank  loan  principal  is now below  $50,000,  those  financial
      conditions no longer are applicable.






<PAGE>






              For the second  consecutive  quarter,  the Company's current ratio
      exceeds 1.0 being at 1.20 at October 31, 1996. The quarterly net income of
      $20,307 and the nine month net income of $96,660, coupled with the sale of
      $328,126 of common  stock during the nine months  ending  October 31, 1996
      abetted this ratio.

              The latter two occurrences contributed significantly to supporting
      increases in accounts receivable and inventories and netting the Company a
      cash increase for the nine months ending October 31, 1996 of $55,448. As a
      result,  bolstered  by the  Company's  sales  and net  income  projections
      through  the  end of  the  current  fiscal  year,  the  Company  does  not
      anticipate  any  liquidity  problems,  as it has during  the past  several
      years. Should its cash position reach what the Company considers, from the
      standpoint of its budgetary needs, a safe and riskless  position,  it will
      probably  begin to reduce the level of notes payable to  stockholders  and
      the associated periodic interest expense.

              However,  the Company  has a major  interest in making a strategic
      acquisition (See "Financial Statements - Note 6"). In any such transaction
      of the type it  contemplates,  outside  financing  will be  required.  The
      Company  has  not as yet  identified  such  financing  nor are  there  any
      assurances that when required that it will be available.

      IV.     Inflationary Impact

              Since the inception of operations, inflation has not significantly
      affected the  operating  results of the Company.  However,  inflation  and
      changing  interest  rates have had a significant  effect on the economy in
      general and therefore could affect the operating results of the Company in
      the future.



<PAGE>


                                   SIGNATURES



In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                            SEMICON TOOLS, INC.
Date: December 11, 1996                     (Registrant)



                                         By_/s/Eugene J. Pian
                                        --------------------
                                        Eugene J. Pian, President and Principal
                                                        Executive Officer




                                        By_/s/Craig Pian
                                        ----------------
                                        Craig Pian, Vice President,Treasurer,
                                                    Principal Financial and
                                                    Accounting Officer