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, 1998 

                                       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 October 31, 1998

Common Stock, par value $.001
 per share                                               11,723,500




<PAGE>





























                                      INDEX


Part I.   Financial Information


   Item 1.  Condensed consolidated financial statements:

         Balance sheet as of October 31, 1998                           F-2

         Statement of income for the nine and three months
       ended October 31, 1998 and 1997                                  F-3

         Statement of comprehensive income for the nine and
           three months ended October 31, 1998 and 1997                 F-4

         Statement of cash flows for the nine months ended
           October 31, 1998 and 1997                                    F-5

         Notes to condensed consolidated financial statements        F-6 - F-15


   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)

             CONDENSED CONSOLIDATED BALANCE SHEET - OCTOBER 31, 1998
                                   (UNAUDITED)







                                     ASSETS

Current assets:
  Cash                                                          $   69,764
  Accounts receivable, less allowance
   for doubtful accounts of $7,350                                 443,514
  Inventory                                                        700,908
  Prepaid expenses and other assets                                 63,908
  Deferred tax asset, current portion                               69,316
                                                                  ----------

    Total current assets                                         1,347,410

Property and equipment, net of depreciation                      1,177,551
                                                                ----------

Other assets:
   Security deposits                                                13,222
   Goodwill, net of amortization                                   117,231
   Deferred tax asset, net of current portion                      138,632
                                                                ----------

                                                                   269,085
                                                                -----------
                                                                     

                                                                $2,794,046
                                                                ==========



                      LIABILITIES AND SHAREHOLDERS' EQUITY


Current liabilities:
  Current portion of long-term debt                             $   60,706
  Notes payable, bank                                              275,000
  Accounts payable                                                 265,486
  Accrued expense and payroll taxes payable                        145,523
                                                                 ----------

    Total current liabilities                                      746,715
                                                                   -------

Long-term debt, net of current portion                             199,973
                                                                 ----------

Commitments and contingencies

Shareholders' equity:
  Common stock par value $.001; 100,000,000
   shares authorized; 11,723,500 shares issued and
   outstanding                                                      11,723
  Additional paid in capital                                     3,412,094
  Currency translation adjustment                              (   208,532)
  Retained earnings                                            ( 1,367,927)
                                                                ----------

                                                                 1,847,358
                                                                 ---------

                                                                $2,794,046
                                                                ==========




     See notes to condensed consolidated financial statements
                                                                           F-2


<PAGE>



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

                   CONDENSED CONSOLIDATED STATEMENT OF INCOME

              NINE AND THREE MONTHS ENDED OCTOBER 31, 1998 AND 1997
                                   (UNAUDITED)
<TABLE>
<CAPTION>
<S>                                         <C>          <C>                      <C>         <C>    
                                                                                           
                                                          Nine Months                          Three Months
                                                             ended                                 ended
                                                          October 31,                            October 31,
                                           
                                                 1998                1997              1998                1997
                                                 ----                ----              ----                ----

Net sales                                    $ 1,882,093         $1,491,823         $  684,811        $   557,043

Cost of sales                                    670,722            497,013            322,216            183,934
                                             -----------         ----------         ----------        -----------

Gross profit                                   1,211,371            994,810            362,595            373,109

Selling, general and
 administrative expenses                         997,961            817,536            322,765            286,320
                                             -----------         ----------         ----------        -----------

Income (loss) from
 operations                                      213,410            177,274             39,830             86,789
                                             -----------         ----------         ----------        -----------

Other charges (credits):
  Interest expense                                33,271             27,667              9,301              8,548
  Miscellaneous income                     (     21,056)                           (    21,056)                   
                                            -----------          ----------          ----------         -----------
                                                  12,215             27,667        (    11,755)              8,548
                                             -----------         ----------          ----------         -----------


Income before income taxes                       201,195            149,607             51,585             78,241

Deferred income tax
 expense (benefit)                                 6,302             40,600        (     4,607)             14,036
                                             -----------         ----------          ----------         -----------

Income from continuing
 operations                                      194,893            109,007             56,192             64,205
                                             -----------         ----------          ----------        -----------

Discontinued operations:
  Income (loss) from
   operations of Teik Tatt
   Holding Co., SDN BHD                        1,017,537                           (    56,366)
  Loss on disposal of Teik
   Tatt Holding Co., SDN
   BHD                                     (  1,447,290)                           ( 1,390,924)                   
                                            -----------          ----------          ----------         -----------

                                           (    429,753)                           ( 1,447,290)                   
                                            -----------          ----------          ----------         -----------

Net income (loss)                          ($   234,860)         $  109,007        ($1,391,098)        $    64,205
                                            ===========          ==========         ==========         ===========

Earnings per share:
  Income from continuing
   operations                               $      0.01          $     0.01        $     0.00          $      0.00
  Income from
   discontinued operations                         0.05                                  0.01
  Loss from discontinued
   operations                              (       0.07)                          (      0.07)                0.00
                                             -----------          ----------        ----------          -----------

Net income (loss) per
 share                                     ($      0.01)         $     0.01       ($     0.06)         $      0.00
                                             ===========         ==========         ==========          ===========

Weighted average number
 of common shares
 outstanding                                  19,400,645         13,472,500         19,103,391         13,867,500
                                             ===========         ==========         ==========         ==========

</TABLE>

     See notes to condensed consolidated financial statements.
                                                                            F-3


<PAGE>



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

            CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

              NINE AND THREE MONTHS ENDED OCTOBER 31, 1998 AND 1997
                                   (UNAUDITED)













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





                                                          Nine Months                          Three Months
                                                             ended                                 ended
                                                           October 31,                           October 31,
                                                 1998                1997              1998                1997
                                                 ----                ----              ----                ----



Net income (loss)                            ($234,860)            $109,007       ($1,447,464)            $64,205

Other comprehensive income, net of tax:
   Foreign currency
    translation adjustment                      34,428                                                         
                                                ------                                                         

Comprehensive income                          ($200,432)           $109,007       ($1,447,464)            $64,205
                                               ========            ========        ==========             =======



</TABLE>























     See notes to condensed consolidated financial statements.
                                                                          F-4


<PAGE>



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

                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

                   NINE MONTHS ENDED OCTOBER 31, 1998 AND 1997
                                   (UNAUDITED)


<TABLE>
<CAPTION>
<S>                                                                              <C>                    <C>      
                                                                                        1998              1997
                                                                                        ----              ----

Operating activities:
  Net income (loss)                                                               ($  234,860)           $109,007
  Loss from discontinued operations                                                    429,753
  Adjustments to reconcile net income to
   cash provided from operating activities:
     Depreciation and amortization                                                      44,079             31,949
     Changes in other operating assets and
      liabilities:
        Accounts receivable                                                       (   124,532)         ( 108,931)
        Inventories                                                               (   273,135)         (  70,246)
        Other assets                                                                     8,505         (     800)
        Prepaid expenses and other current assets                                 (     2,797)             40,768
        Accounts payable, accrued expenses and
         payroll taxes payable                                                          58,672         (  40,756)
                                                                                    ----------          ---------

        Net cash used in operating activities                                     (    94,315)         (  39,009)
                                                                                   ----------           --------

Investing activities:
  Purchase of property and equipment                                              (   251,971)         (  50,646)
                                                                                   ----------           --------

        Net cash used in investing activities                                     (   251,971)         (  50,646)
                                                                                   ----------           --------

Financing activities:
  Proceeds from financing                                                              299,352            217,349
  Proceeds from issuance of common stock                                               120,000                500
  Decrease in notes payable, shareholders'                                                             (  84,462)
  Payment of debt                                                                 (    97,814)         ( 102,094)
                                                                                   ----------           --------

        Net cash provided by financing activities                                      321,538             31,293
                                                                                    ----------           --------

Effect of exchange rate changes on cash and
 cash equivalents                                                                 (    11,588)                   
                                                                                   ----------            --------

Net decrease in cash                                                              (    36,336)         (  58,362)

Cash, beginning of period                                                              106,100            116,334
                                                                                    ----------           --------

Cash, end of period                                                                 $   69,764           $ 57,972
                                                                                    ==========           ========

Supplemental disclosure:
  Cash paid during the period for:
    Interest                                                                        $2,193,281           $ 22,761
                                                                                    ==========           ========
    Income taxes                                                                    $        0           $      0
                                                                                    ==========           ========

Supplementary schedule of non-cash investing and financing activities:
   Issuance of common stock for purchase of
    subsidiary                                                                      $  757,894           $      0
                                                                                    ==========           ========
   Issuance of common stock for consulting fees
    and services                                                                    $   18,110           $      0
                                                                                    ==========           ========

</TABLE>




     See notes to condensed consolidated financial statements.
                                                                            F-5


<PAGE>



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

              NOTES TO CONDENSED 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 three 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, 1998 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 and other
         base material tools used to cut and separate electronic  components and
         devices.  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 9,000,000  shares  (60,000  shares,  as
         restated  (see Note 7) of the  Company's  $.001 par value  common stock
         (see also Note 5).

        The Company's  wholly-owned  subsidiary,  DTI  Technology,  SDN BHD is a
         Malaysian corporation which manufactures a product line similar to that
         of Semicon Tools,  Inc. Semicon Tools,  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 wholly-owned subsidiary, Teik Tatt Holding Co., SDN BHD, a
         Malaysian  corporation,  manufactures  rubber bands,  plastic ropes and
         recycles  plastic  and metal from wire  cable,  electronic  devices and
         circuit broads.  In November 1997, the Company issued 10,000,000 shares
         of  unregistered  common shares in exchange for 100% of the outstanding
         shares of Teik Tatt Holding Co., SDN BHD, the value of the shares being
         the  net  book  value  of  the  acquired   Company  of   $6,560,040  or
         approximately  $.66 per share.  The  acquisition was accounted for as a
         purchase. This transaction was reversed effective September 15, 1998





                                                                           F-6


<PAGE>



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

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS










2.      Organization of the Company (continued):

         when the Company returned all shares that it owned of Teik Tatt Holding
         Co. in exchange for the 10,000,000 shares of its common stock, which
         were immediately cancelled.

        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.

        On September 1, 1998, the Company issued  1,270,000 shares of its common
         stock to acquire a Malaysian company, Southsonic Corporation, Inc., SDN
         BHD.  Southsonic's  only asset  consists  of four  buildings  which the
         Company  intends  to  occupy.  The value of the  purchase  amounted  to
         $657,894 or approximated  $.51 per share. The acquisition was accounted
         for as a purchase.


3. Summary of significant accounting policies:

        Principles of consolidation:
         The  consolidated  financial  statements  of Semicon  Tools,  Inc.  and
           subsidiaries  include all the accounts of Semicon Tools,  Inc.,  East
           Coast Sales Company, DTI Technology,  SDN BHD, Fuji Fabrication,  SDN
           BHD and Southsonic  Corporation,  Inc., SDN BHD after  elimination of
           all  significant  intercompany   transactions  and  its  subsidiaries
           accounts.  The financial  statements give  retroactive  effect to the
           acquisition of DTI  Technology,  SDN BHD which has been accounted for
           as an acquisition as if in a pooling of interest method at historical
           cost of the assets acquired.


4. Property and equipment:

        Major classifications of property and equipment are as follows:

        Buildings and improvements                              $  682,387
        Manufacturing equipment                                  1,015,318
        Office equipment                                            20,770
                                                                ----------
                                                                 1,718,475
        Less accumulated depreciation                              540,924
                                                                ----------

                                                                $1,177,551
                                                                ==========








                                                                          F-7


<PAGE>



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

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS








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
         $37,917 as of October 31, 1998.

        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 $131 as of October 31, 1998.



6. Commitments and contingencies:

        In November  1995 the Company  moved its  operations  and was  obligated
         under a lease agreement for office and manufacturing  facilities.  This
         lease expired on May 31, 1998. Rent expense  amounted to $9,641 for the
         nine  months  ended  October  31,  1998 and $28,923 for the nine months
         ended October 31, 1997.

        In April  1998,  the  Company  moved  its  New  York  operations  and is
         currently  obligated under a lease agreement with a related party which
         expires on April 30, 2013.  Annual rent expense is as follows:  $60,000
         for each of the first five  years,  $66,000 for each of the second five
         years and $72,000 for each of the final five years. The Company is also
         obligated  for insurance and the increase in real estate taxes over the
         base year as stipulated in the lease.  The Company also paid two months
         rent at $3,000  per  month to an  outside  party for the same  premises
         before the property  was  purchased  by the related  party.  This lease
         requires the following future minimum rental payments:


                           October 31, 1999                          $ 60,000
                           October 31, 2000                            60,000
                           October 31, 2001                            60,000
                           October 31, 2002                            60,000
                           October 31, 2003                            60,000
                           Thereafter                                 660,000
                                                                      --------

                                                                     $960,000
                                                                     ========



        Rent expense  amounted to $45,000 for the nine months ended  October 31,
         1998.






                                                                         F-8


<PAGE>



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

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS








6.      Commitments and contingencies (continued)

        The Company also leases three vehicles under operating leases with terms
         expiring  through 1998. Total lease expense was $26,576 and $27,538 for
         the period ended October 31, 1998 and 1997, respectively.

        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 by one of the employees.



7. Common stock:

        During the nine months  ended  October  31,  1998,  the  Company  issued
         450,000  shares of its common shares with net proceeds of $120,000 upon
         the exercise of certain common stock purchase options.

        The Company  issued  100,000 shares of its common shares to acquire Fuji
         Fabrication,  SDN  BHD  and  1,270,000  shares  to  acquire  Southsonic
         Corporation,  Inc.,  SDN BHD. It also issued  36,000 shares for certain
         consulting and professional services rendered.



8. Long-term debt:

                                                   Long-term  Current
                                           Rate     Portion   Portion   Maturity

    Note payable, Bank of New York (a)  Prime + 1% $ 25,305   $21,000     2001

    Note payable, shareholder      (b)       15%    100,000               2000

    Note payable, shareholder      (c)       10%     74,668    39,706     2002
                                                    --------   -------

                                                   $199,973    $60,706


        (a)    Note   payable,   Bank  of  New  York,   is  payable  in  monthly
               installments  of  $1,386,   excluding  interest.   Machinery  and
               equipment with a cost of $57,000 is pledged as collateral on this
               note.

        (b)    Note payable,  shareholder,  became due when the note to Citibank
               was paid in full in 1997. The  shareholder  has waived his demand
               right and the Company is currently  negotiating terms for payment
               of the note.










                                                                         F-9


<PAGE>



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

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS







8.      Long-term debt (continued):


        (c)      On April 23, 1997,  the Company  renegotiated  an existing loan
                 with  a  certain  shareholder  resulting  in a  new  obligation
                 payable in monthly installments of $4,053 including interest at
                 10%.


        The maturities of these loans are as follows:


                           October 31, 1999                      $ 60,706
                           October 31, 2000                        60,488
                           October 31, 2001                        39,485
                           October 31, 2002                       100,000
                                                                  --------

                                                                 $260,679
                                                                 ========


9. Notes payable, banks:

        The Company also has an outstanding  line of credit with the Bank of New
         York for  $350,000  at  October  31,  1998.  The loan is secured by the
         personal  guarantee of one of the Company's major  shareholders and the
         assets of Semicon  Tools,  Inc.  At October 31,  1998,  the Company had
         utilized $275,000 of this line.


10. Income taxes:

        Effective  February 1, 1993, the Company adopted  Statement of Financial
         Accounting  Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
         109"),  the  cumulative  effect  of  which  was  not  material  to  the
         consolidated  financial  statements  and  is  therefore  not  presented
         separately.  Under  the  asset and  liability  method of SFAS No.  109,
         deferred tax assets and  liabilities  are recognized for the future tax
         consequences  attributable  to the  differences  between the  financial
         statement carrying amounts of existing assets and liabilities and their
         respective tax bases and operating  loss and tax credit  carryforwards.
         Deferred  tax assets and  liabilities  are measured  using  enacted tax
         rates  expected  to apply to taxable  income in the year in which those
         temporary  differences  are expected to be recovered or settled.  Under
         SFAS No. 109,  the effect on deferred tax assets and  liabilities  of a
         change in tax rates is recognized in income in the period that includes
         the enactment  date;  this effect was immaterial for the periods ending
         October 31, 1998 and 1997. The deferred tax asset less the deferred tax
         liabilities has been reduced by a valuation  allowance equal to the net
         tax benefit in excess of the  estimated  taxable  profits over the next
         three years.








                                                                         F-10


<PAGE>



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

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS










10.  Income taxes (continued):

        Provision for income taxes (benefit):
                                                     1998              1997
                                                     ----              ----

                    Current                        $    0           $     0
                    Deferred                        6,302            40,600
                                                   ------           -------

                      Total expense                $6,302           $40,600
                                                   ======           =======



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

                                                              1998        1997
                                                              ----        ----


         Computed tax at the expected statutory rate        $58,508     $40,770
         Surtax exemption                                  (  6,875)
         State income taxes                                   2,005
         Foreign income                                    ( 47,336)   (    170)
                                                            -------     -------

         Income tax expense                                 $ 6,302     $40,600
                                                            =======     =======



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


                                                           1998         1997
                                                           ----         ----

        Deferred tax asset:

          Net operating loss carryforward               $480,000      $498,150
                                                        --------      --------

              Total deferred tax asset                                 498,150

              Valuation allowance                        272,052       445,000
                                                        --------      --------

                                                        $207,948      $ 53,150
                                                        ========       ========











                                                                          F-11


<PAGE>



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

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS









10.  Income taxes (continued):

        The Company has made  adjustments  to eliminate the tax  provisions  for
         foreign  earnings  since said  earnings are  undistributed  and will be
         permanently  invested.  The cumulative amounts of foreign undistributed
         earnings are $1,509,942 at October 31, 1998.



11. 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
         Semicon  Tools/East  Coast Sales  consolidated  net income over the net
         income from the previous  years  exclusive of Teik Tatt Holding Co. Sdn
         Bhd.  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 October  31,  1998,  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 Semicon  Tools/East
         Coast  Sales  consolidated  net  income  over the net  income  from the
         previous  years  exclusive  of Teik Tatt  Holding  Co,  SDN,  BHD.  The
         employee also received  500,000 stock options  exercisable  at $.50 per
         share,  none of which have been exercised as of October 31, 1998. These
         options  were not  part of the 1997  non-statutory  stock  option  Plan
         effectuated March 25, 1997.


12. Consulting agreements:

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











                                                                          F-12


<PAGE>



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

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS









12.     Consulting agreements (continued):

        On February 9, 1998, the Company entered into a consulting agreement for
         the period  February 9, 1998 to December 31, 1998. The consultant  will
         assist Semicon Tools, Inc. in strategic  planning,  corporate planning,
         merger and acquisition and divestitive advice. In consideration for the
         consulting  services,  Semicon  granted an option to the  consultant to
         purchase  600,000  shares of common stock of Semicon  Tools,  Inc. 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  consultant  is also  entitled  to a  finders  fee in the  event the
         consultant first introduces a potential  acquisition to the Company and
         such acquisition is ultimately  consummated.  The agreement calls for a
         payout based on the amounts expended for such acquisition. On March 12,
         1998,  the Company and the  consultant  extended  the  agreement  dated
         February 9, 1998 for a period of twelve months.

        Also on  February  9,  1998,  the  Company  entered  into  a  consulting
         agreement  for the period  February 9, 1998 to December 31,  1998.  The
         consultant  will assist the Company in  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.  The shares  underlying  these
         options  will be  registered  under  the  Securities  Act of 1933.  The
         consultant  is  also  entitled  to a  finders  fee  in  the  event  the
         consultant first introduces a potential  acquisition to the Company and
         such acquisition is ultimately  consummated.  The agreement calls for a
         payout based on the amounts expended for such acquisition.

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

        Also on July 1, 1998,  the  Company  entered  into an  agreement  with a
         consultant for investor  relations counsel for a three month period. In
         consideration  for these  services,  the consultant will be paid $6,500
         and  granted an option to  purchase  50,000  common  shares at $.87 per
         share, with the option expiring July 1, 2000.








                                                                         F-13


<PAGE>



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

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS








12.  Consulting agreements (continued):

        On February 18,  1998,  the Company  entered  into an  agreement  with a
         consultant to provide the Company with a public relations program.  The
         term of the  agreement is from  February 19, 1998 to August 18, 1998, a
         six month  period.  The  agreement  can be cancelled  anytime after the
         first 90 days and calls for a monthly  fee of $2,500 plus out of pocket
         costs not to exceed $2,000. This agreement was not extended and expired
         August 18, 1998.


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

                                                                                  Nine months         Nine months
                                                                                     ended               ended
                                                                                  October 31,         October 31,
                                                                                     1998                1997

              Weighted average number of
               common shares outstanding                                           16,565,649           9,742,500

              Assumed conversion of
               stock options                                                        2,835,000           4,000,000
                                                                                   ----------          ----------

              Weighted average number of
               common shares outstanding                                           19,400,649          13,742,500
                                                                                   ==========          ==========
</TABLE>



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

        On June 30, 1998, the Company  purchased 100% of the outstanding  common
         shares of Fuji  Fabrication,  SDN BHD in a transaction  to be accounted
         for as a purchase.  The  Company  issued  100,000  shares of its common
         stock valued at $.50 per share.

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

                      Current assets                          $ 72,511

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

                      Current liabilities                       17,305
                                                                ------

                      Net assets acquired                       79,001

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

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




                                                                        F-14


<PAGE>


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

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS









15. Acquisition of subsidiary, Southsonic Corporation, Inc., SDN BHD:

        On September 1, 1998,  the Company  purchased  100% of common  shares of
         Southsonic Corporation,  Inc., SDN BHD in a transaction to be accounted
         for as a purchase.  The Company issued  1,270,000  shares of its common
         stock valued at $.51 per share.

        The  assets  acquired  consisted  of four  buildings,  with a  value  of
         $657,894.



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

        As  described  in Note 2,  the  acquisition  of 100% of the  outstanding
         shares  of Teik  Tatt  Holding  Co.,  SDN BHD  was  reversed  effective
         September 15, 1998. The operating results of Teik Tatt Holding Co., SDN
         BHD for the nine and three  months  ended  October  31,  1998 are shown
         separately in the  accompanying  statement of income.  The net sales of
         Teik Tatt  Holding  Co.,  SDN BHD for the nine and three  months  ended
         October 31, 1998 were $22,297,199 and $3,505,431, respectively.
















                                                                        F-15
<PAGE>



Item 2.  Managements Discussion and Analysis or Plan of Operation

General

1. On September  15, 1998,  the Company  reversed its  acquisition  of Teik Tatt
Holding  (1979) Sdn Bhd ("TTH")  because of the  unsuspected  disappearance  and
reduction  of credit  facilities  in  Malaysia.  This  turn of events  mitigated
against TTH's growth and dimmed its future.  Nevertheless,  the  transaction was
mutually deemed acceptable and in the best interests of both parties.

   The  discontinuance of the TTH subsidiary and its operations  reflects on the
Company's Statement of Income as a non-cash,  accounting  transaction except for
approximately  $50,000 under the 1998 nine months column.  The latter amount was
expended for purposes of public relations,  financing searches and miscellaneous
expenses  directly  associated with TTH's business and presence in the corporate
structure.  These  transactions  are  one  time  events  and  for  this  reason,
Management  feels it will  address the portion of the  Statement of Income above
the Discontinued Operations line for the remainder of the discussion.

2. In spite of the  dissociation  from TTH, the Company  still has a presence in
Malaysia which it expects will become more significant in time,  especially Fuji
Fabrication Sdn Bhd.  Accordingly,  economic and political conditions there, and
in  Southeast  Asia as a  whole,  will  remain  of  importance  to the  Company.
Management  believes  that steps  taken by the  Malaysian  Government  since the
outset of the areas downturn,  have had a calming and stabilizing effect. In any
event,  although no assurance can be given, the Company believes that there will
be no adverse effect on its operations or financial condition during 1999.

FINANCIAL CONDITION
    The Company's  financial  condition remains healthy.  Reflecting its highest
level of sales for a quarter from its long  existing  business and the advent of
the revenues  beginning to be derived from its cellular  phone  battery  product
line,  a  comparison  of the Balance  Sheet at October 31, 1998 to July 31, 1998
follows:

       1. Total  assets  increased  by 1.5% to  $2,794,046  and  current  assets
increased by 2.8% to $1,137,410.

       2. Mainly  because  accounts  receivable  increased by 50.6% to match the
sales growth, current liabilities increased by 3.1% to $746,715.

       3.  Other  Balance  Sheet  comparisons  which  Management  views  as also
consistent with increased revenues are:

              a.  Long term debt, net of current portions,
increased by 3.4%
              b. Current debt items increased by 9.6% c. Cash decreased by 56.5%

RESULTS OF OPERATIONS

    Discounting the TTH results while it was a part of the Company, for the nine
months ended October 31, 1998, SETO experienced its highest sales in the history
of the Company. In addition,  for the nine month period ending October 31, 1998,
its income for the continuing operations is also its highest.  These results are
attributable to most of the present product lines,  especially ceramics,  dicing
blades and scribes and the start of the sales for the cellular phone  batteries.
The Company  anticipates  this trend to  continue  for the balance of the fiscal
year and into next year.  Management  reports  that the annual sales will be its
highest for the continuing business product lines.

    In the nine months ended  October 31, 1998 compared to the nine months ended
October 31, 1997,  sales  increased from  $1,491,823 to $1,882,093 or 26%; gross
profit margins continued in the 65% range and income from continuing  operations
was $194,893, compared to 1997's $109,007 or an increase of 78.8% ($85,886).

    Sales for the quarter ended October 31, 1998 for the  continuing  operations
was the  highest  quarter in the  Company's  history.  Net sales for the quarter
ended October 31, 1998 were $684,811 as compared to $559,043 for the  comparable
period  ending  October 31,  1997,  an increase of 23%.  Income from  continuing
operations  for the quarter ended October 31, 1998 were $56,192,  8.2% of sales,
compared to a slightly higher $64,205,  or 11.5% for the comparable period ended
October 31,  1997.  An out of normal cost of sales of 47.1 % due to a unique mix
of products was the cause of the anomaly.


    With regard to cost of sales,  as the cellular phone battery  business grows
it will impact the average gross profit  historical  figure of 65%. The material
cost of  manufacturing  the batteries will be the reason whereas the labor costs
remain in line. As volume grows cost of materials will decrease considerably.

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


Liquidity and Capital Resources

    At October  31,  1998,  the Company had  current  assets of  $1,347,410  and
current  liabilities of $746,715 yielding a positive working capital position of
$600,695 and a current  ratio of 1.8:1.  These  routine  measures of a company's
ability  to  meet  current  obligations  reflects  positively  on the  Company's
liquidity  and  internal  resources  for the current  level of business and will
contribute to satisfying  its  suppliers of goods and services  concerned  about
credit-worthiness.

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

    During the quarter,  certain stock  options were  exercised in the amount of
$35,000 and the Company initiated its stock buyback program by purchasing 29,400
shares in October 1998 and 20,000 in December  1998.  Although the Company still
feels that the market price of the its shares are undervalued, it has decided to
delay its buyback  program for a while and utilize the capital for the growth of
the Company.



    During the quarter ending October 31, 1998, the Company purchased a computer
precision saw for $33,000 in conjunction  with the increase of its ceramic value
added fabrication product line, of which $24,000 was financed.  As at the end of
the quarter, there were no material commitments for like capital expenditures.

Effects of Foreign Currency Fluctuations
    The  Company's  foreign  operations  are subject to certain risks related to
fluctuations  in foreign  currency  exchange rates. As of now, the fixing of the
Malaysian  ringgit at 3.8 to the US dollar has stabilized  matters and mitigated
any material adverse effect on net income.  However in the future, that exchange
rate  could  float and  fluctuate  and could  impact  results of  operations  or
financial  position.  If it does,  the Company  does not expect  results will be
materially changed.

Disclosure about Market Risk
The Company is exposed to market risks  primarily from changes in interest rates
and foreign currency  exchange rates. To manage exposure to these  fluctuations,
the Company occasionally enters into various hedging  transactions.  The Company
does not use  derivatives  for trading  purposes,  or to  generate  income or to
engage  in   speculative   activity,   and  the  Company  never  uses  leveraged
derivatives.  The Company does not use derivatives to hedge the value of its net
investments  in these  foreign  operations.  The  Company  exposure  to  foreign
exchange  rate  fluctuations  results  from  investment  in foreign  ventures in
Malaysia and from the Company's share of the earnings of these operations, which
are denominated in the Malaysian ringgit.

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





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

Forward-Looking Statements
This  "Managements  Discussion  and  Analysis  or Plan of  Operation",  contains
statements which are not historical  facts and are forward-  looking  statements
which  reflect  managements  expectations,   estimates  and  assumptions.   Such
statements  are based on  information  available at the time this form 10QSB was
prepared and involved risks and  uncertainties  that could cause future results,
performance  or  achievements  of  the  Company  to  differ  significantly  from
projected  results.  Factors  that could cause actual  future  results to differ
materially  include,  among others,  the risks of doing business in Malaysia and
southeast  Asia,   including,   without   limitation:   economic  and  political
conditions,  foreign currency translation risks, tariffs and other foreign trade
policies  and  dependance  on  inexpensive  labor  in  such  countries,  partial
dependence on the  semiconductor  manufacturing  industry,  availability  of raw
materials, intense competition and technological obsolescence.