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  July 31, 1999

                                       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




                               SETO HOLDINGS, INC.
                          (Formerly 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)


             554 North State Road, Briarcliff Manor, New York 10510

                    (Address of principal executive offices)


Issuer's telephone number, including area code:         (914) 923-5000
                                                      -------------------


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 July 31, 1999

Common Stock, par value $.001
 per share                                               10,949,100




<PAGE>























                                      INDEX


Part I.   Financial Information


   Item 1.  Consolidated financial statements:

         Balance sheet as of July 31, 1999                             F-2

         Statement of income for the six and three
           months July 31, 1999 and 1998                               F-3

         Statement of comprehensive income for the six
           and three months ended July 31, 1999 and 1998               F-4

         Statement of cash flows for the six months ended
           July 31, 1999 and 1998                                      F-5

         Notes to consolidated financial statements                 F-6 - F-14


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



Part II.  Other information


   Signatures







<PAGE>



                      SETO HOLDINGS, INC. AND SUBSIDIARIES
                 (Formerly Semicon Tools, Inc. and Subsidiaries)

                   CONSOLIDATED BALANCE SHEET - JULY 31, 1999




                                     ASSETS

Current assets:
  Cash                                                           $   83,338
  Accounts receivable, less allowance
   for doubtful accounts of $10,500                                 508,728
  Inventory                                                         836,379
  Prepaid expenses and other assets                                 166,439
  Deferred tax asset, current portion                               110,592
                                                                  ----------

    Total current assets                                          1,705,476
                                                                  ---------

Property and Equipment                                              624,898
                                                                    -------

Other assets:
   Goodwill, net of amortization                                    114,275
   Security deposits                                                 11,037
   Deferred tax asset, net of current portion                       224,534
   Loan receivable, officer                                           5,897
                                                                  ----------
                                                                    355,743
                                                                    -------

                                                                 $2,686,117
                                                                 ==========



                      LIABILITIES AND SHAREHOLDERS' EQUITY


Current liabilities:
  Current portion of long-term debt                              $  164,041
  Notes payable, bank                                               270,000
  Accounts payable                                                  391,690
  Accrued expenses                                                   34,568
                                                                   ---------

    Total current liabilities                                       860,299
                                                                   ---------

Long-term debt, net of current portion                              319,481
                                                                  ----------

Deferred lease liability                                              7,500

Commitments and contingencies

Shareholders' equity:
  Common stock par value $.001; 100,000,000
   shares authorized; 10,978,500 shares issued                       10,979
  Additional paid in capital                                      2,913,855
  Currency translation adjustment                               (   155,290)
  Retained earnings (deficit)                                   ( 1,261,681)
                                                                  ----------
                                                                  1,507,863
                                                                  ---------
  Less common shares held in treasury, 29,400
   shares at cost                                                     9,026
                                                                      -----

  Total shareholder's equity                                      1,498,837
                                                                  ---------

                                                                 $2,686,117
                                                                 ==========




     See notes to consolidated financial statements.
                                                                            F-2


<PAGE>



                      SETO HOLDINGS, INC. AND SUBSIDIARIES)
                 (Formerly Semicon Tools, Inc. and Subsidiaries)

                        CONSOLIDATED STATEMENT OF INCOME

                SIX AND THREE MONTHS ENDED JULY 31, 1999 AND 1998

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

                                                          Six Months                           Three Months
                                                            ended                                  ended
                                                           July 31,                               July 31,
                                                1999                1998              1999                 1998
                                                ----                ----              ----                 ----

Net sales                                   $ 1,761,845         $1,197,282         $  861,058         $   616,457

Cost of sales                                   871,065            348,506            377,810             232,075
                                            -----------         ----------         ----------         -----------

Gross profit                                    890,780            848,776            483,248             384,382

Selling, general and
 administrative expenses                        762,493            675,196            366,825             355,148
                                            -----------         ----------         ----------         -----------

Income from operations                          128,287            173,580            116,423              29,234
                                            -----------         ----------         ----------         -----------

Other income (expenses):
  Interest expense                        (     44,631)       (    23,970)       (    21,207)       (     13,863)
  Loss on foreign
   currency exchange                      (        796)                                   492
                                           -----------          ----------         ----------         -----------
                                          (     45,427)       (    23,970)       (    20,715)       (     13,863)
                                           -----------         ----------         ----------         -----------


Income before income taxes
 (benefit)                                       82,860            149,610             95,708              15,371

Income taxes (benefit)                    (      6,553)             10,909             10,347               7,309
                                           -----------          ----------         ----------         -----------

Income from continuing
 operations                                      89,413            138,701             85,361               8,062

Discontinued operations:
  Income from operations
   of subsidiary                                                 1,073,904                                470,130
                                            -----------         ----------         ----------         -----------

Net income                                  $    89,413         $1,212,605         $   85,361         $   478,192
                                            ===========         ==========         ==========         ===========

Earnings per share
 information:
  Basic:
    Earnings per share
     from continuing
     operations                          $         0.01         $     0.01          $   0.01          $      0.00
    Earnings per share
     from discontinued
     operations                                    0.00               0.04              0.00                 0.02
                                         --------------         -----------          --------           ----------

Net income per share                        $      0.01         $     0.05          $   0.01          $      0.02
                                         ==============         ===========           =======           ===========

  Diluted:
    Earnings per share
     from continuing
     operations                             $      0.01         $     0.01        $     0.00          $      0.00
    Earnings per share
     from discontinued
     operations                                    0.00               0.04              0.00                 0.02
                                           -------------        -----------        ----------         ------------

Net income per share                        $      0.01         $     0.05        $     0.00          $      0.02
                                          ==============        ===========        ==========         ============

</TABLE>

     See notes to consolidated financial statements.
                                                                            F-3



<PAGE>



                      SETO HOLDINGS, INC. AND SUBSIDIARIES)
                 (Formerly Semicon Tools, Inc. and Subsidiaries)

                 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

                SIX AND THREE MONTHS ENDED JULY 31, 1999 AND 1998
                                   (UNAUDITED)














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



                                                           Six Months                          Three Months
                                                             ended                                 ended
                                                            July 31,                              July 31,
                                                 1999                1998              1999                1998
                                                 ----                ----              ----                ----



Net income                                       $89,413         $1,212,605            $85,361           $478,192

Other comprehensive income, net of tax:
   Foreign currency
    translation adjustment                                           34,428                            ( 437,941)
                                                 -------         ----------            -------          --------

Comprehensive income                             $89,413         $1,247,033            $85,361           $ 40,251
                                                 =======         ==========            =======           ========

</TABLE>


NOTE: Net income includes
       discontinued operations
       in prior year




















     See notes to consolidated financial statements.
                                                                            F-4


<PAGE>



                      SETO HOLDINGS, INC. AND SUBSIDIARIES
                 (Formerly Semicon Tools, Inc. and Subsidiaries)

                      CONSOLIDATED STATEMENT OF CASH FLOWS

                     SIX MONTHS ENDED JULY 31, 1999 AND 1998






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

                                                                                                           1998
                                                                                        1999             Restated

Operating activities:
  Income from continuing operations                                                   $ 89,413           $ 85,361
  Adjustments to reconcile net income to cash
   provided by continuing operations:
     Depreciation and amortization                                                      35,408             26,415
     Compensatory stock issued                                                          43,300
     Changes in other operating assets and
      liabilities:
        Accounts receivable                                                         ( 120,264)         (  75,740)
        Inventories                                                                 (  75,681)         ( 261,725)
        Prepaid expenses and other current assets                                        3,625         (  36,820)
        Deferred tax assets                                                         (  11,126)
        Other assets                                                                     4,513         (   7,847)
        Accounts payable, and accrued expenses                                         121,691            144,983
        Deferred lease liability                                                         3,000
                                                                                      --------           --------

        Net cash provided by (used in) operating
         activities                                                                     93,879         ( 125,373)
                                                                                      --------          --------

Investing activities:
  Purchase of property and equipment                                                (  78,607)         ( 129,427)
  Increase (decrease) in loan receivable, officer                                        4,917         (  48,128)
                                                                                      --------          --------

        Net cash used in investing activities                                       (  73,690)         ( 177,555)
                                                                                     --------           --------

Financing activities:
  Proceeds from issuance of common stock                                                67,500             85,000
  Proceeds from financing                                                              240,000            250,000
  Payment of debt                                                                   ( 302,175)         (  84,512)
                                                                                     --------           --------

        Net cash provided by financing activities                                        5,325            250,488
                                                                                      --------           --------

Effect of exchange rate changes on cash                                             (   8,238)            106,666
                                                                                     --------            --------

Net increase in cash                                                                    17,276             54,226

Cash, beginning of period                                                               66,062            106,573
                                                                                      --------           --------

Cash, end of period                                                                   $ 83,338           $160,799
                                                                                      ========           ========



</TABLE>









     See notes to consolidated financial statements.
                                                                            F-5


<PAGE>



                      SETO HOLDINGS, INC. AND SUBSIDIARIES
                 (Formerly Semicon Tools, Inc. and Subsidiaries)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS








1.      Organization of the Company:

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



     One of the Company's wholly-owned  subsidiaries,  East Coast Sales Company,
Inc.  ("ECS") is a Connecticut  corporation  which  distributes  and  fabricates
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 60,000  shares of the  Company's
$.001 par value common stock.



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



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


2. Principles of consolidation:

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











                                                                          F-6


<PAGE>



                      SETO HOLDINGS, INC. AND SUBSIDIARIES
                 (Formerly Semicon Tools, Inc. and Subsidiaries)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS








3. Nature of operation, risks and uncertainties:

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


4. Property and equipment:

        Major classifications of property and equipment are as follows:

        Leasehold improvements                                     $  146,700
        Manufacturing equipment                                       995,229
        Office equipment                                               62,934
                                                                   ----------
                                                                    1,204,863
        Less accumulated depreciation                                 579,965
                                                                      -------
                                                                   $  624,898
                                                                   ==========


5.      Goodwill:

     On January 26, 1990,  the Company  acquired  East Coast Sales  Company (its
wholly-owned subsidiary) for a cost of $309,000. The purchase price exceeded the
fair value of the assets by $134,281 which amount was assigned to goodwill,  and
is being  amortized  on a  straight-line  basis  over forty  years.  Accumulated
amortization of goodwill aggregated $40,435 at July 31, 1999.


     On June 30, 1998, the Company acquired Fuji Fabrication, SDN BHD for a cost
of $100,000.  The purchase  price  exceeded fair value of the assets by $20,999,
which amount was assigned to goodwill and is being  amortized  over a forty year
period. Accumulated amortization of goodwill aggregated $568 at July 31, 1999.


6. Commitments and contingencies:

     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








                                                                           F-7


<PAGE>



                      SETO HOLDINGS, INC. AND SUBSIDIARIES
                 (Formerly Semicon Tools, Inc. and Subsidiaries)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS






6.      Commitments and contingencies (continued):

         years.  The Company is also obligated for insurance and the increase in
         real estate taxes over the base year as stipulated  in the lease.  This
         lease requires the following future minimum rental payments:

                           July 31, 2000                           $ 60,000
                           July 31, 2001                             60,000
                           July 31, 2002                             60,000
                           July 31, 2003                             60,000
                           July 31, 2004                             64,500
                           Thereafter                               609,000
                                                                   --------
                                                                   $913,500
                                                                   ========


        Rent expense amounted to $36,158 for the six months ended July 31, 1999.


     The Company also leases three  vehicles under  operating  leases with terms
expiring  through 1999. Total lease expense was $16,683 for the six months ended
July 31, 1999.

7. Common stock:

     During the six months  ended July 31,  1999,  the  Company  issued  450,000
shares of its common  shares with net  proceeds of $92,500  upon the exercise of
certain common stock purchase options.

8. Notes payable and long-term debt:

     The Company has an outstanding line of credit with the a bank for $500,000.
Interest  is payable  monthly at a rate of 1% per year over  prime.  The loan is
secured by the personal  guarantee of the Company's  president and the assets of
Seto Holdings,  Inc. At July 31, 1999, the Company had utilized $270,000 of this
line.


        Long-term debt consists of the following:
                                                     Balance
                                                     July 31,
                                         Rate         1999         Maturity

        Notes payable:
           Bank                (a)        8.45%      $145,833        2002
           Shareholder         (b)        10%          84,969        2002
           Shareholder         (c)        15%         156,639        2004
           Shareholder         (d)        10%          96,081        2002
                                                                  --------
                                                                  483,522
           Less current portion                                   164,041
                                                                  -------

                                                                 $319,481
                                                                 ========






                                                                           F-8


<PAGE>



                      SETO HOLDINGS, INC. AND SUBSIDIARIES
                 (Formerly Semicon Tools, Inc. and Subsidiaries)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS








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

        (a)      The note is  payable  in monthly  installments  of $4,164  plus
                 interest.

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

        (c)      The  note  is  payable  in  monthly   installments  of  $4,731,
                 including interest.

        (d)      The note is payable in monthly installments of $3,633 including
                 interest.


        The maturities of these loans are as follows:

                     July 31, 2000                                   $164,042
                     July 31, 2001                                    172,895
                     July 31, 2002                                    115,062
                     July 31, 2003                                     31,523




9. Income taxes:

         Provision for income taxes (benefit):

                                                     1999                1998
                                                     ----                ----

              Current                              $ 4,573             $     0
              Deferred                            ( 11,126)             10,909
                                                    -------            -------
                Total (benefit) expense           ($ 6,553)            $10,909
                                                   =======             =======


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


                                                         1999            1998
                                                         ----            ----
        Income tax computed at the
         federal statutory rates                       $12,047        $456,879
        State taxes (net of federal benefit)             7,000           2,651
        Foreign income                                (  8,700)      ( 448,621)
        Reduction in valuation allowance              ( 16,900)              0
                                                        -------       --------

         Net income tax expense (benefit)             ($ 6,553)       $ 10,909
                                                       =======        ========









                                                                           F-9


<PAGE>



                      SETO HOLDINGS, INC. AND SUBSIDIARIES
                 (Formerly Semicon Tools, Inc. and Subsidiaries)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





9.      Income taxes (continued):

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

        Deferred tax asset:

           Net operating loss carryforward                    $474,226

                 Total deferred tax asset                      474,226

                 Valuation allowance                           139,100
                                                               -------

                                                              $335,126
                                                              ========

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



10. Employment and consulting agreements:

        Employment agreements:

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


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



     Consulting agreements:

     On February 9, 1998,  the Company  entered into a consulting  agreement for
the period  February  9, 1998 to December  31,  1998,  subsequently  extended to
December 2000 for strategic planning, corporate planning, merger and acquisition
and  divestiture  advice.  In  consideration  for the consulting  services,  the
Company granted an option to the consultant to purchase




                                                                          F-10


<PAGE>



                      SETO HOLDINGS, INC. AND SUBSIDIARIES
                 (Formerly Semicon Tools, Inc. and Subsidiaries)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





10.  Employment and consulting agreements (continued):

        Consulting agreements (continued):

     600,000 shares of common stock at a price of $.50 per share for a period of
two years  commencing  four  months  from the date of  signing.  This option was
reduced to 300,000 shares at $.25 per share. The options were issued pursuant to
the Company's 1997  non-statutory  Stock Option Plan. 140,000 shares were issued
during the six months ended July 31, 1999.


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



     On March 10, 1999,  the Company  entered into a consulting  agreement for a
one  year  period  through  March  2000  for  investor  public   relations.   In
consideration for the consulting  agreement,  the Company paid $5,000 and issued
150,000 shares of unregistered  Company common stock.  In addition,  the Company
granted  options to purchase  50,000  shares of common  stock at $.75 per share,
50,000  shares  at $1.50  per share and $2.00 per share for a period of one year
from  the  date of  signing  the  agreement.  None of these  options  have  been
exercised as of July 31, 1999.



     On April 19, 1999, the Company entered into a consulting  agreement for the
six month period May 1, 1999 through  October 31, 1999,  with an option to renew
for  an  additional  six  months.  The  consultant  received  10,000  shares  of
unregistered Company common stock.



11. Computation of earnings per share:
<TABLE>
<CAPTION>
<S>                                              <C>      <C>         <C>            <C>     <C>          <C>

                                                           Six Months                         Three Months
                                                             ended                               ended
                                                            July 31,                            July 31,
                                                    1999                1998           1999                1998
                                                    ----                ----           ----                ----
        Weighted average number of
         common shares outstanding -
         basic                                    10,828,575        10,075,753        10,948,774       10,137,000

        Assumed conversion of
         stock options                             6,277,500         2,645,000         6,310,000        2,645,000
                                                  ----------        ----------        ----------       ----------

        Weighted average number of
         common shares outstanding-
         diluted                                  17,106,075        12,720,753        17,258,774       12,782,000
                                                  ==========        ==========        ==========       ==========




</TABLE>





                                                                           F-11


<PAGE>



                      SETO HOLDINGS, INC. AND SUBSIDIARIES
                 (Formerly Semicon Tools, Inc. and Subsidiaries)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







12. Common stock options outstanding:

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



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


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


        Summary of options are as follows:
                                                                                      Exercise         Expiration
                                                    Date             Amount            Price              Date

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

        Tan Hun Chin, Director                     11/27/97            500,000             .10           11/27/00
        Consultant                                 06/19/98            160,000             .25           06/09/00
        Consultant                                 03/10/99            150,000        .75-2.00           03/12/00


</TABLE>


13. Principal products and segmentation of sales:

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





                                                                          F-12


<PAGE>



                      SETO HOLDINGS, INC. AND SUBSIDIARIES
                 (Formerly Semicon Tools, Inc. and Subsidiaries)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




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

        Financial  information  relating to the principal  industry segments and
         classes of products:
<TABLE>
<CAPTION>
<S>                                                                                                          <C>
                                                                                                        July 31,
                                                                                     July 31,            1998
                                                                                      1999             Restated
           Sales to customers:
            Industry A:
               Ceramics                                                            $  730,563          $  741,740
            Industry B:
               Diamond tools                                                          337,583             257,799
            Industry C:
               Cellular batteries                                                     575,254              33,403
            Miscellaneous                                                             118,445             164,340
                                                                                   ----------          ----------
                                                                                   $1,761,845          $1,197,282
                                                                                   ==========          ==========

         Operating profit or loss:
            Industry A                                                             $  226,249         $   287,863
            Industry B                                                           (   103,823)       (     93,823)
            Industry C                                                                 44,553               5,880
            Miscellaneous                                                        (    38,692)       (     26,340)
                                                                                  ----------         -----------

                                                                                   $  128,287         $   173,580
                                                                                   ==========         ===========
         Identifiable assets:
            Industry A                                                             $  483,495          $  512,888
            Industry B                                                              1,274,724           1,143,656
            Industry C                                                                520,034              24,180
            Miscellaneous                                                             407,864             265,225
                                                                                   ----------          ----------

                                                                                   $2,686,117          $1,945,949
                                                                                   ==========          ==========


        Two  customers  each  accounted  for more  than 10% of total  sales  and
         together  accounted  for  approximately  38% of total sales for the six
         months ended July 31, 1999.

        Foreign and domestic operations and export sales:

                                                                                    July 31,            July 31,
                                                                                     1999                1998
           Sales to customers:
              United States                                                        $1,068,030          $  725,792
              Far East                                                                317,485             215,751
              Canada                                                                  376,330             255,739
                                                                                   ----------          ----------
                                                                                   $1,761,845          $1,197,282
                                                                                   ==========          ==========

           Operating profit:
              United States                                                        $   77,768          $  105,224
              Far East                                                                 23,117              31,279
              Canada                                                                   27,402              37,077
                                                                                   ----------          ----------
                                                                                   $  128,287          $  173,580
                                                                                   ==========          ==========

           Identifiable assets:
              United States                                                        $1,403,328          $1,244,361
              Far East                                                              1,146,774             595,126
              Canada                                                                  136,015             106,462
                                                                                   ----------          ----------
                                                                                   $2,686,117          $1,945,949
                                                                                   ==========          ==========

</TABLE>


                                                                          F-13


<PAGE>



                      SETO HOLDINGS, INC. AND SUBSIDIARIES
                 (Formerly Semicon Tools, Inc. and Subsidiaries)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS








14. Year 2000 compliance:

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



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



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

        Interest paid during period                                                  $ 44,631          $   23,970
                                                                                     ========          ==========
        Income taxes paid during the period                                          $      0          $        0
                                                                                     ========          ==========

        Supplemental schedule of non-cash investing and financing activities:
            Conversion of accrued interest to
             term loans                                                              $234,590

        Reconciliation of increase in cash:
         Cash at beginning of period, as originally
           reported                                                                                     $ 371,413
         Decrease in cash resulting from disposition
           of foreign subsidiary                                                                          264,840
                                                                                                        ---------
         Cash at beginning of period, as restated                                                       $ 106,573
                                                                                                        =========


</TABLE>




















                                                                         F-14


<PAGE>









ITEM 2.  Management's Discussion and Analysis of Operation.


GENERAL

     In fiscal year 1998 which ended January 31, 1999,  the Company  altered its
business  plans and  objectives  and  reorganized  its product  lines for faster
growth into two major  groupings:  Technical  Products to Industry  and Consumer
Products.  This decision  followed the Company's  June 1998  acquisition of Fuji
Fabrication  SDN BHD ("Fuji") and its cellular  telephone  battery line; and its
September,  1998 sale of Teik Tatt  Holding  Co.  (1979) SDN BHD  ("TTH") to the
former  owner  deemed  mutually  acceptable  and in the  best  interest  of both
parties.


     During the quarter  ended July 31, 1999,  the Company  continued to benefit
from a product line that did not exist in the comparable  1998 quarter;  namely:
Fuji's  cellular  telephone  batteries  which was  launched in July 1998 and had
sales of $571,708 in the first six months ended July 31, 1999.

     The  Company's  financial  condition  remains  healthy,  reported  by Dun &
Bradstreet  as a  satisfactory  liquidity  position and a  satisfactory  debt to
equity ratio.  At July 31, 1999,  the Company has total assets of $2,686,117 and
current  assets of  $1,705,476,  increases over April 30, 1999 of 6.9% and 10.4%
respectively. Stockholders' equity rose 9.6% over April 30, 1999, to $1,498,837.
In  addition,   whereas  current  assets  increased  by  10.4%,   total  current
liabilities  decreased  by 1.3% from  $871,690 to  $860,299,  accompanied  by an
increase  in  the  Company's  long  term  debt,  a  controlled  reallocation  by
Management to better accommodate its growth.

     The  Company  conducts  a  substantial  portion  of its  manufacturing  and
assembly operations in Malaysia. Accordingly,  economic and political conditions
there,  and in  Southeast  Asia as a whole,  will  remain of  importance  to the
Company.  Management believes that steps taken by the Malaysian Government since
the outset of the area's downturn in mid-1977 involving financial  uncertainties
have had a calming and  stabilizing  affect.  Further,  as of the  beginning  of
September,  year old  controls  on capital  movements  have been lifted so as to
enable foreign investors and banks to repatriate their monies. This coupled with
a 1.4%  economic  growth  during  the first six months of the year and a general
recovery  in the area  appears  to bode  well for the  industry.  In any  event,
although  no  assurance  can  be  given,  the  Company  believes  that  regional
circumstances  will  have  no  material  adverse  effect  on the  operations  or
financial condition during the fiscal year which began February 1, 1999.



Results of Operations

     Excluding  discontinued  operations,  for the second quarter ended July 31,
1999 compared to the  corresponding  quarter in the previous year, the Company's
net sales increased 39.7% from $616,457 to $861,058,  and income from continuing
operations increased $76,299, or in excess of nine times from $8,062 to $85,361,
the Company's highest  quarterly income from operations.  The quarterly sales of
$861,058 is virtually  equal to the Company's  highest result which was realized
just in the previous  quarter of this year.  These increases are attributable to
the cellular phone battery product line which the Company acquired one year ago.
Otherwise,  within other product lines there were small sales volume  variations
where one customer closed for vacation and another initiated its delivery from a
blanket order.

<PAGE>










     The Company's combined gross profit margin is now at a 50% level. This is a
result of the new mix of  products  and is  typified  by East Coast  Sales Co.'s
gross profit of 67.5% and Fuji's 24.2%  reflecting  the products  themselves and
their make/buy breakdown.


     For the six months  ended July 31,  1999,  compared to the six months ended
July 31, 1998,  sales of  $1,761,845  were the highest  (excluding  discontinued
operations)  for  that  fiscal  time  period,  increasing  47.2%  over  sales of
$1,197,282  for the previous  year's  comparable  period.  However,  income from
operations  decreased 35.5% from $138,701 to $89,413.  This change was primarily
due to a  decrease  in gross  profit  from  70.9%  to 50.6% or 28.6%  (explained
above);  first quarter  non-cash  one-time  charges related to stock options and
additional  expenses;  and initial  marketing  expenses for the  cellular  phone
product  line.  Management  stated that the first quarter 1999 impact on the six
months  results  ended July 31, 1999 was an anomaly and that its second  quarter
results reflect more of the normal operations of the Company as now constituted.


     With a backlog of orders  on-hand  amounting  to $1.2 million to be shipped
within the next 3 to 4 months and the  completion of the loan  transfer  process
allowing for a loan application in Malaysia, Management believes that sales will
continue to increase in almost all product  lines for the  remainder of the year
that the Company,  as reflected in the previous  From 10-QSB,  should  report an
annual profit of  approximately  $400,000 or 4 cents per share.  Supporting this
projection are reports from major industry  sources  relative to  semi-conductor
chips and cellular phones that  industry-wide  sales will rise  significantly in
1999.


Liquidity and Capital Resources

     At July 31, 1999,  the Company had current assets of $1,705,476 and current
liabilities of $860,299  yielding a positive  working capital  position of $845,
177 and a current ratio of 1.98:1,  an improvement of 12.4% over the 1.77:1 that
existed at April 30, 1999. These routine measures of a company's ability to meet
current obligations  reflects positively on the Company's liquidity and internal
resources  for the current  level of business and will  contribute to satisfying
its suppliers of goods and services concerned about credit-worthiness.


     As for growth  capital for existing  product  lines,  to some extent it has
been  satisfied by the line of credit with the Company's  U.S. bank which stands
at $500,000. However, because of the capability which Management believes exists
to further increase its sales,  especially in its cellular phone battery product
line  manufactured  in Malaysia by its wholly owned  subsidiary,  the Company is
seeking  additional  capital  infusions  of $300,000 to  $500,000.  Although the
Company currently is in discussions with two separate entities for such funding,
no new definite  source has yet been  identified  and no assurance  can be given
that such financing will be obtained on  commercially  reasonable  terms,  or at
all.

<PAGE>










     Management   believes  that  extraordinary   growth  potential  exists  via
acquisitions  in the Far East in general.  Such Company  acquisition  objectives
would be concentrated in companies in or aligned with the cellular phone battery
and associated  accessory product lines.  Although  Management  further believes
that such  acquisition  purchases  can be made with an  exchange  of stock only,
significant  working capital  requirements  may be needed  following a completed
transaction.  When  such is  required,  no  assurance  can be  given  that  such
financing will be successfully obtained even with due consideration given to the
resulting expanded operation.


     The Company's  moratorium on its stock buyback program  continues while the
priority  for its capital is for growth  purposes.  However,  when the  economic
conditions  appear  appropriate,  including  its stock price in the open market,
this program may be resumed.


     During  the  quarter  ended  July  31,  1999  the  Company  purchased  some
miscellaneous  computer  equipment  increasing its net property and equipment to
$624,898  from  $580,021.  As of the end of this fiscal  quarter,  there were no
anticipated material requirements for capital expenditures.


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


EFFECTS OF FOREIGN CURRENCY FLUCTUATIONS

     The  Company's   foreign   operations  are  subject  to  risks  related  to
fluctuation in foreign currency exchange rates. During this quarter, the foreign
currency  exchange  adjustment  was nil,  and  thus,  in effect  did not  impact
operational results.


     While future  fluctuations in currency  exchange rates could impact results
of  operations  or  financial  conditions,  foreign  operations  are expected to
continue to provide strong financial results and earnings growth.


     A number of economists,  including some high in United States  Government's
financial circles,  believe that the financial crisis which began in mid-1997 in
Southeast Asia has eased and probably has ended.


DISCLOSURES ABOUT MARKET RISK

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


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


<PAGE>








YEAR 2000 COSTS

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


IMPACT OF INFLATION

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


FORWARD-LOOKING STATEMENTS

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