TABLE OF CONTENTS




|                                |                                                |  |  |  |  |  |  | 
|------------------------------- | ---------------------------------------------- |  |  |  |  |  |  | 
|PART I.   FINANCIAL INFORMATION
|                                | CONSOLIDATED BALANCE SHEET  APRIL 30, 2000   
|                                | CONSOLIDATED STATEMENT OF INCOME              
|                                | CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
|                                | CONSOLIDATED STATEMENT OF CASH FLOWS          
|PART II.  OTHER INFORMATION    
|                                | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    



---



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 April 30, 2000

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
incorporation or organization) |  | (I.R.S. Employer
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 April 30, 2000
|                                        |  |                              
|Common Stock, par value $.001
per share |  | 19,343,500                   





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##### Table of Contents



INDEX

|                              |                                                                     |                                                                                      |  |  |            | 
|----------------------------- | ------------------------------------------------------------------- | ------------------------------------------------------------------------------------ |  |  | ---------- | 
|Part I. Financial Information
|                             
|                              | Item 1. Consolidated financial statements:                         
|                             
|                              |                                                                     | Balance sheet as of April 30, 2000                                                   |  |  | F-2        | 
|                             
|                              |                                                                     | Statement of income for the three months
April 30, 2000 and 1999                     |  |  | F-3        | 
|                             
|                              |                                                                     | Statement of comprehensive income for the three months
ended April 30, 2000 and 1999 |  |  | F-4        | 
|                             
|                              |                                                                     | Statement of cash flows for the three months ended
April 30, 2000 and 1999           |  |  | F-5        | 
|                             
|                              |                                                                     | Notes to consolidated financial statements                                           |  |  | F-6 - F-13 | 
|                             
|                              | Item 2. Managements discussion and analysis of
financial condition
|                             
|Part II. Other information   
|                             
|                              | Signatures                                                         





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##### Table of Contents






SETO HOLDINGS, INC. AND SUBSIDIARIES




CONSOLIDATED BALANCE SHEET  APRIL 30, 2000

|                                            |                                                                                       |                                            |                           |                                      |           |           |  | 
|------------------------------------------- | ------------------------------------------------------------------------------------- | ------------------------------------------ | ------------------------- | ------------------------------------ | --------- | --------- |  | 
|                                            |                                                                                       |                                            |                           | ASSETS                              
|                                           
|                                           
|                                           
|                                           
|Current assets:                            
|                                           
|                                           
|                                           
|                                           
|                                            | Cash                                                                                  |                                            | $                         | 789,401                              |          
|                                           
|                                           
|                                           
|                                           
|                                            | Accounts receivable, less allowance
for doubtful accounts of $14,443                  |                                            |                           | 4,031,620                            |          
|                                           
|                                           
|                                           
|                                           
|                                            | Inventory                                                                             |                                            |                           | 2,472,649                            |          
|                                           
|                                           
|                                           
|                                           
|                                            | Prepaid expenses and other assets                                                     |                                            |                           | 711,760                              |          
|                                           
|                                           
|                                           
|                                           
|                                            | Deferred tax asset, current portion                                                   |                                            |                           | 115,821                              |          
|                                            |                                                                                       |                                            |                           |                                     
|                                            |                                                                                       |                                            | Total current assets      |                                      |           | 8,121,251 | 
|                                            |                                                                                       |                                            |                           |                                     
|Property and equipment, net of depreciation |                                                                                       |                                            | 4,396,329                 |                                     
|                                            |                                                                                       |                                            |                           |                                     
|Other assets:                              
|                                           
|                                           
|                                           
|                                           
|                                            |                                                                                       | Goodwill, net of amortization              |                           |                                      | 2,297,400 |          
|                                           
|                                           
|                                           
|                                           
|                                            |                                                                                       | Security deposits                          |                           |                                      | 31,962    |          
|                                           
|                                           
|                                           
|                                           
|                                            |                                                                                       | Deferred tax asset, net of current portion |                           |                                      | 231,642   |          
|                                            |                                                                                       |                                            |                           |                                     
|                                            |                                                                                       |                                            | 2,561,004                 |                                     
|                                            |                                                                                       |                                            |                           |                                     
|                                            |                                                                                       | $                                          | 15,078,584                |                                     
|                                            |                                                                                       |                                            |                           |                                     
|                                            |                                                                                       |                                            |                           | LIABILITIES AND SHAREHOLDERS EQUITY
|                                           
|                                           
|                                           
|                                           
|Current liabilities:                       
|                                           
|                                           
|                                           
|                                           
|                                            | Current portion of long-term debt                                                     |                                            | $                         | 530,649                              |          
|                                           
|                                           
|                                           
|                                           
|                                            | Notes payable, bank                                                                   |                                            |                           | 2,025,594                            |          
|                                           
|                                           
|                                           
|                                           
|                                            | Accounts payable                                                                      |                                            |                           | 2,125,640                            |          
|                                           
|                                           
|                                           
|                                           
|                                            | Accrued expenses                                                                      |                                            |                           | 1,336,316                            |          
|                                            |                                                                                       |                                            |                           |                                     
|                                            |                                                                                       |                                            | Total current liabilities |                                      |           | 6,018,199 | 
|                                            |                                                                                       |                                            |                           |                                     
|Long-term debt, net of current portion      |                                                                                       |                                            | 1,162,735                 |                                     
|                                            |                                                                                       |                                            |                           |                                     
|Deferred lease liability                    |                                                                                       |                                            | 12,000                    |                                     
|                                            |                                                                                       |                                            |                           |                                     
|Deferred income taxes payable               |                                                                                       |                                            | 130,822                   |                                     
|                                            |                                                                                       |                                            |                           |                                     
|Commitments and contingencies              
|                                           
|                                           
|                                           
|                                           
|Shareholders equity:                      
|                                           
|                                           
|                                           
|                                           
|                                            | Common stock par value $.001; 100,000,000
shares authorized; 19,343,500 shares issued |                                            |                           | 19,343                               |          
|                                           
|                                           
|                                           
|                                           
|                                            | Common stock subscriptions                                                            |                                            |                           | 152,500                              |          
|                                           
|                                           
|                                           
|                                           
|                                            | Additional paid in capital                                                            |                                            |                           | 8,863,946                            |          
|                                           
|                                           
|                                           
|                                           
|                                            | Currency translation adjustment                                                       |                                            |                           | (252,275                             | )        
|                                           
|                                           
|                                           
|                                           
|                                            | Retained earnings (deficit)                                                           |                                            |                           | (1,019,660                           | )        
|                                            |                                                                                       |                                            |                           |                                     
|                                            |                                                                                       |                                            | 7,763,854                 |                                     
|                                           
|                                           
|                                           
|                                           
|                                            | Less common shares held in treasury, 29,400
shares at cost                            |                                            |                           | 9,026                                |          
|                                            |                                                                                       |                                            |                           |                                     
|                                            | Total shareholders equity                                                            |                                            |                           | 7,754,828                            |          
|                                            |                                                                                       |                                            |                           |                                     
|                                            |                                                                                       | $                                          | 15,078,584                |                                     
|                                            |                                                                                       |                                            |                           |                                     

See notes to consolidated financial statements.

F-2



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##### Table of Contents



SETO HOLDINGS, INC. AND SUBSIDIARIES




CONSOLIDATED STATEMENT OF INCOME

THREE MONTHS ENDED APRIL 30, 2000 AND 1999

|                                             |                                   |   |           |         |      |   |         |         |  
|-------------------------------------------- | --------------------------------- | - | --------- | ------- | ---- | - | ------- | ------- | -
|                                             |                                   |   | 2000      |         | 1999
|                                             |                                   |   |           |         |     
|Net sales                                    |                                   | $ | 5,289,422 |         |      | $ | 900,787 |        
|                                            
|                                            
|                                            
|                                            
|Cost of sales                                |                                   |   | 4,327,984 |         |      |   | 493,255 |        
|                                             |                                   |   |           |         |      |   |         |        
|Gross profit                                 |                                   |   | 961,438   |         |      |   | 407,532 |        
|                                            
|                                            
|                                            
|                                            
|Selling, general and administrative
expenses |                                   |   | 619,834   |         |      |   | 395,668 |        
|                                             |                                   |   |           |         |      |   |         |        
|Income from operations                       |                                   |   | 341,604   |         |      |   | 11,864  |        
|                                             |                                   |   |           |         |      |   |         |        
|Other income (expenses):                    
|                                            
|                                            
|                                            
|                                            
|                                             | Interest expense                  |   |           | (84,346 | )    |   |         | (23,424 | )
|                                            
|                                            
|                                            
|                                            
|                                             | Loss on foreign currency exchange |   |           | (2,401  | )    |   |         | (1,288  | )
|                                            
|                                            
|                                            
|                                            
|                                             | Interest income                   |   |           | 24,010  |     
|                                             |                                   |   |           |         |      |   |         |        
|                                             |                                   |   | (62,737   | )       |      |   | (24,712 | )      
|                                             |                                   |   |           |         |      |   |         |        
|Income (loss) before income taxes (benefit)  |                                   |   | 278,867   |         |      |   | (12,848 | )      
|                                            
|                                            
|                                            
|                                            
|Income tax (benefit)                         |                                   |   | 5,996     |         |      |   | (16,900 | )      
|                                             |                                   |   |           |         |      |   |         |        
|Net income                                   |                                   | $ | 272,871   |         |      | $ | 4,052   |        
|                                             |                                   |   |           |         |      |   |         |        
|Earnings per share information:             
|                                            
|                                            
|                                            
|                                            
|                                             | Basic                             |   | $         | .01     |      |   | $       | .00     |  
|                                            
|                                            
|                                            
|                                            
|                                             | Fully diluted                     |   | $         | .01     |      |   | $       | .00     |  

See notes to consolidated financial statements.

F-3



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##### Table of Contents



SETO HOLDINGS, INC. AND SUBSIDIARIES




CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

THREE MONTHS ENDED APRIL 30, 2000 AND 1999

|                                        |                                         |   |         |         |      |   |       |  | 
|--------------------------------------- | --------------------------------------- | - | ------- | ------- | ---- | - | ----- |  | 
|                                        |                                         |   | 2000    |         | 1999
|                                        |                                         |   |         |         |     
|Net income                              |                                         | $ | 272,871 |         |      | $ | 4,052 | 
|                                       
|                                       
|                                       
|                                       
|Other comprehensive income, net of tax:
|                                       
|                                       
|                                       
|                                       
|                                        | Foreign currency translation adjustment |   |         | (53,300 | )   
|                                        |                                         |   |         |         |      |   |       | 
|Comprehensive income                    |                                         | $ | 219,571 |         |      | $ | 4,052 | 
|                                        |                                         |   |         |         |      |   |       | 

See notes to consolidated financial statements.

F-4



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##### Table of Contents



SETO HOLDINGS, INC. AND SUBSIDIARIES




CONSOLIDATED STATEMENT OF CASH FLOWS

THREE MONTHS ENDED APRIL 30, 2000 AND 1999

|                                        |                                                                                |                                                    |                                                     |          |        |          |         |         |        |         |  
|--------------------------------------- | ------------------------------------------------------------------------------ | -------------------------------------------------- | --------------------------------------------------- | -------- | ------ | -------- | ------- | ------- | ------ | ------- | -
|                                        |                                                                                |                                                    |                                                     |          | 2000   |          | 1999   
|                                        |                                                                                |                                                    |                                                     |          |        |          |        
|Operating activities:                  
|                                       
|                                       
|                                       
|                                       
|                                        | Net income                                                                     |                                                    | $                                                   | 272,871  |        |          | $       | 4,052   |       
|                                       
|                                       
|                                       
|                                       
|                                        | Adjustments to reconcile net income to cash
provided by continuing operations:
|                                       
|                                       
|                                       
|                                       
|                                        |                                                                                | Depreciation and amortization                      |                                                     |          | 29,920 |          |         |         | 16,394 |        
|                                       
|                                       
|                                       
|                                       
|                                        |                                                                                | Changes in other operating assets and
liabilities:
|                                       
|                                       
|                                       
|                                       
|                                        |                                                                                |                                                    | Accounts receivable                                 |          |        | (516,661 | )       |         |        | (46,765 | )
|                                       
|                                       
|                                       
|                                       
|                                        |                                                                                |                                                    | Inventory                                           |          |        | (69,856  | )       |         |        | (9,840  | )
|                                       
|                                       
|                                       
|                                       
|                                        |                                                                                |                                                    | Prepaid expenses and other current assets           |          |        | (25,961  | )       |         |        | 2,749   |  
|                                       
|                                       
|                                       
|                                       
|                                        |                                                                                |                                                    | Deferred tax assets                                 |          |        | (12,337  | )       |         |        | (16,900 | )
|                                       
|                                       
|                                       
|                                       
|                                        |                                                                                |                                                    | Other assets                                        |          |        | 7,383    |         |         |        | (4,875  | )
|                                       
|                                       
|                                       
|                                       
|                                        |                                                                                |                                                    | Accounts payable, and accrued expenses              |          |        | 638,800  |         |         |        | (3,894  | )
|                                       
|                                       
|                                       
|                                       
|                                        |                                                                                |                                                    | Deferred lease liability                            |          |        | 1,500    |         |         |        | 1,500   |  
|                                       
|                                       
|                                       
|                                       
|                                        |                                                                                |                                                    | Income taxes payable                                |          |        | (151,828 | )      
|                                        |                                                                                |                                                    |                                                     |          |        |          |         |        
|                                        |                                                                                |                                                    | Net cash provided by (used in) operating
activities |          |        | 173,831  |         |         |        | (57,579 | )
|                                        |                                                                                |                                                    |                                                     |          |        |          |         |        
|Investing activities:                  
|                                       
|                                       
|                                       
|                                       
|                                        | Purchase of property and equipment                                             |                                                    |                                                     | (232,403 | )      |          |         | (15,688 | )     
|                                       
|                                       
|                                       
|                                       
|                                        | Decrease in loan receivable, officer                                           |                                                    |                                                     |          |        |          |         | 4,282   |       
|                                       
|                                       
|                                       
|                                       
|                                        | Increase in goodwill                                                           |                                                    |                                                     | (92,260  | )     
|                                        |                                                                                |                                                    |                                                     |          |        |          |         |        
|                                        |                                                                                |                                                    | Net cash used in investing activities               |          |        | (324,663 | )       |         |        | (11,406 | )
|                                        |                                                                                |                                                    |                                                     |          |        |          |         |        
|Financing activities:                  
|                                       
|                                       
|                                       
|                                       
|                                        | Proceeds from issuance of common stock and
subscriptions                       |                                                    |                                                     | 610,000  |        |          |         | 92,500  |       
|                                       
|                                       
|                                       
|                                       
|                                        | Proceeds from financing                                                        |                                                    |                                                     | 70,000   |        |          |         | 90,000  |       
|                                       
|                                       
|                                       
|                                       
|                                        | Payment of debt                                                                |                                                    |                                                     | (49,839  | )      |          |         | (66,849 | )     
|                                        |                                                                                |                                                    |                                                     |          |        |          |         |        
|                                        |                                                                                |                                                    | Net cash provided by financing activities           |          |        | 630,161  |         |         |        | 115,651 |  
|                                        |                                                                                |                                                    |                                                     |          |        |          |         |        
|Effect of exchange rate changes on cash |                                                                                |                                                    | (53,300                                             | )        |        |          | (5,924  | )      
|                                        |                                                                                |                                                    |                                                     |          |        |          |         |        
|Net increase in cash                    |                                                                                |                                                    | 426,029                                             |          |        |          | 40,742  |        
|                                       
|                                       
|                                       
|                                       
|Cash, beginning of period               |                                                                                |                                                    | 363,372                                             |          |        |          | 66,052  |        
|                                        |                                                                                |                                                    |                                                     |          |        |          |         |        
|Cash, end of period                     |                                                                                | $                                                  | 789,401                                             |          |        | $        | 106,794 |        
|                                        |                                                                                |                                                    |                                                     |          |        |          |         |        

See notes to consolidated financial statements.

F-5



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##### Table of Contents






SETO HOLDINGS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|1. |  | The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
considered necessary for a fair presentation have been included. The
results of operations for the 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, 2000 included in its Annual Report filed on Form
10-KSB.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|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, Hong Kong Batteries Industries, Ltd. and Fimas, SDN BHD after
elimination of all significant intercompany transactions and accounts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|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:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

|                              |  |   |           | 
|----------------------------- |  | - | --------- | 
|Buildings                     |  | $ | 800,582   | 
|                             
|                             
|                             
|                             
|Leasehold improvements        |  |   | 79,672    | 
|                             
|                             
|                             
|                             
|Manufacturing equipment       |  |   | 5,663,298 | 
|                             
|                             
|                             
|                             
|Office equipment              |  |   | 574,102   | 
|                              |  |   |           | 
|                              |  |   | 7,117,654 | 
|                             
|                             
|                             
|                             
|Less accumulated depreciation |  |   | 2,721,325 | 
|                              |  |   |           | 
|                              |  | $ | 4,396,329 | 
|                              |  |   |           | 

F-6



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##### Table of Contents



SETO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|5. |  | 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 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:

|               |  |   |         | 
|-------------- |  | - | ------- | 
|April 30, 2001 |  | $ | 60,000  | 
|              
|              
|              
|              
|April 30, 2002 |  |   | 60,000  | 
|              
|              
|              
|              
|April 30, 2003 |  |   | 60,000  | 
|              
|              
|              
|              
|April 30, 2004 |  |   | 66,000  | 
|              
|              
|              
|              
|April 30, 2005 |  |   | 66,000  | 
|              
|              
|              
|              
|Thereafter     |  |   | 558,000 | 
|               |  |   |         | 
|               |  | $ | 870,000 | 
|               |  |   |         | 



|   |  | Rent expense amounted to $20,792 and $18,079 for the three months ended
April 30, 2000 and 1999, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|6. |  | Common stock:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|   |  | During the current period, the Company issued 1,270,500 shares of its
common shares with net proceeds of $458,500 upon the exercise of
certain common stock purchases of options and 144 restricted private placement stock. In addition, the Company
received $152,500 for subscriptions of 144 restricted common stock to be issued.                                                                                                                                                                                                                                                                                                                          
|  
|7. |  | Notes payable and long-term debt:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|   |  | The Company had an outstanding line of credit with the a bank for
$500,000. Interest was payable monthly at a rate of 1% per year over
prime. The loan was secured by the personal guarantee of the Companys
president and the assets of Seto Holdings, Inc. At April 30, 2000, the
Company had utilized $349,135 of this line. In May 2000, this line was
repaid in full and replaced with a line of credit with another
financial institution in the amount of $750,000. The new line of credit
carries interest at an annual rate of 2.9% plus the 30 day dealer
commercial paper rate. The line of credit has an initial expiration
date of April 30, 2001.

F-7



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##### Table of Contents



SETO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|7. |  | Notes payable and long-term debt (continued):                      
|-- |  | -------------------------------------------------------------------
|  
|   |  | Long-term debt of the domestic companies consists of the following:

|               |                      |  |  |    |   |  |      |           |      |   |           |         |  |  |  |      | 
|-------------- | -------------------- |  |  | -- | - |  | ---- | --------- | ---- | - | --------- | ------- |  |  |  | ---- | 
|               |                      |  |  |    |   |  |      |           |      |   | Balance  
|               |                      |  |  |    |   |  |      |           |      |   | April 30,
|               |                      |  |  |    |   |  | Rate |           | 2000 |   | Maturity 
|               |                      |  |  |    |   |  |      |           |      |   |          
|Notes payable:
|              
|              
|              
|              
|               | Bank                 |  |  | (a | ) |  |      | Prime + 1 | %    |   | $         | 108,333 |  |  |  | 2000 | 
|              
|              
|              
|              
|               | Shareholder          |  |  | (b | ) |  |      | 10        | %    |   |           | 53,282  |  |  |  | 2002 | 
|              
|              
|              
|              
|               | Shareholder          |  |  | (c | ) |  |      | 15        | %    |   |           | 130,395 |  |  |  | 2004 | 
|              
|              
|              
|              
|               | Shareholder          |  |  | (d | ) |  |      | 10        | %    |   |           | 69,724  |  |  |  | 2002 | 
|              
|              
|              
|              
|               | Shareholder          |  |  | (e | ) |  |      |           |      |   |           | 13,429  | 
|               |                      |  |  |    |   |  |      |           |      |   |           |        
|               |                      |  |  |    |   |  |      |           |      |   | 375,163   |        
|              
|              
|              
|              
|               | Less current portion |  |  |    |   |  |      |           |      |   |           | 181,514 | 
|               |                      |  |  |    |   |  |      |           |      |   |           |        
|               |                      |  |  |    |   |  |      |           |      | $ | 193,649   |        
|               |                      |  |  |    |   |  |      |           |      |   |           |        



| |  |  | (a) The note was repaid in May 2000 when the line of credit was
refinanced (see above).        
| |  |  | -----------------------------------------------------------------------------------------------
|
| |  |  | (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.                  
|
| |  |  | (e) The Companys principal shareholder has advanced non-interest
bearing funds to the Company.



| |                                              
| | ---------------------------------------------
| | The maturities of these loans are as follows:

|               |  |   |         | 
|-------------- |  | - | ------- | 
|April 30, 2001 |  | $ | 181,514 | 
|              
|              
|              
|              
|April 30, 2002 |  |   | 127,671 | 
|              
|              
|              
|              
|April 30, 2003 |  |   | 52,549  | 
|              
|              
|              
|              
|Indefinite     |  |   | 13,429  | 
|               |  |   |         | 
|               |  | $ | 375,163 | 
|               |  |   |         | 

F-8



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##### Table of Contents



SETO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|7. |  | Notes payable and long-term debt (continued):                                         
|-- |  | --------------------------------------------------------------------------------------
|  
|   |  | Notes payable and long-term debt of the foreign subsidiaries consist of
the following:

|       |                 |                      |           |   |           | 
|------ | --------------- | -------------------- | --------- | - | --------- | 
|Fimas:
|      
|      
|      
|      
|       | Notes payable: 
|      
|      
|      
|      
|       |                 | Bankers acceptances  |           | $ | 1,065,789 | 
|      
|      
|      
|      
|       |                 | Bank overdrafts      |           |   | 101,583   | 
|      
|      
|      
|      
|       |                 | ECR                  |           |   | 56,767    | 
|       |                 |                      |           |  
|       |                 | $                    | 1,224,139 |  
|       |                 |                      |           |  
|       | Long-term debt:
|      
|      
|      
|      
|       |                 | Principal loan       |           | $ | 666,317   | 
|      
|      
|      
|      
|       |                 | Capitalized lease    |           |   | 135,138   | 
|      
|      
|      
|      
|       |                 | Amount due directors |           |   | 83,732    | 
|       |                 |                      |           |  
|       |                 | $                    | 885,187   |  
|       |                 |                      |           |  



| |  | The Companys land and buildings are pledged as collateral. The
loans, which are guaranteed jointly and severally by the Companys
directors, carry interest rates between 2% and 2.25% above the lenders
base lending rates. The directors of Fimas have made interest-free
advances to the Company which are unsecured and have no fixed repayment
terms.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|     |                   |  |   |        | 
|---- | ----------------- |  | - | ------ | 
|DTI:
|    
|    
|    
|    
|     | Capitalized lease |  | $ | 19,602 | 
|     |                   |  |   |       
|     | Due to directors  |  | $ | 54,350 | 
|     |                   |  |   |       



|   |  | Hong Kong Batteries Industries, Ltd.:
The directors of Hong Kong Batteries have made interest-free advances
to the Company in the amount of $188,781 which are unsecured and have
no fixed repayment terms.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|8. |  | Income taxes:                                                                                                                                                                                              
|  
|   |  | Provision for income taxes (benefit):                                                                                                                                                                      

|          |                         |  |      |          |      |  |  |          |  
|--------- | ----------------------- |  | ---- | -------- | ---- |  |  | -------- | -
|          |                         |  | 2000 |          | 1999
|          |                         |  |      |          |     
|Domestic:
|         
|         
|         
|         
|          | Current                 |  | $    | 31,500   |      |  |  | 0        |  
|         
|         
|         
|         
|          | Deferred                |  |      | ( 43,837 | )    |  |  | ($16,900 | )
|          |                         |  |      |          |      |  |  |         
|          | Total (benefit) expense |  |      | ($12,337 | )    |  |  | ($16,900 | )
|          |                         |  |      |          |      |  |  |         

F-9



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##### Table of Contents



SETO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|8. |  | Income taxes (continued):                                                                                                                      
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | 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:

|                                                            |                                  |   |          |       |      |  |          |          |  
|----------------------------------------------------------- | -------------------------------- | - | -------- | ----- | ---- |  | -------- | -------- | -
|                                                            |                                  |   | 2000     |       | 1999
|                                                            |                                  |   |          |       |     
|Income tax computed at the domestic
federal statutory rates |                                  | $ | 24,000   |       |      |  | 0        |         
|                                                           
|                                                           
|                                                           
|                                                           
|State tax (net of federal benefit)                          |                                  |   | 7,500    |       |      |  | 0        |         
|                                                           
|                                                           
|                                                           
|                                                           
|Foreign income                                              |                                  |   | 18,333   |       |      |  | 0        |         
|                                                           
|                                                           
|                                                           
|                                                           
|Reduction in valuation allowance                            |                                  |   | ( 43,837 | )     |      |  | ($16,900 | )       
|                                                            |                                  |   |          |       |      |  |          |         
|                                                            | Net income tax expense (benefit) |   | $        | 5,996 |      |  |          | ($16,900 | )
|                                                            |                                  |   |          |       |      |  |          |         



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

|                    |                                 |                          |         |         |         | 
|------------------- | ------------------------------- | ------------------------ | ------- | ------- | ------- | 
|Deferred tax asset:
|                   
|                   
|                   
|                   
|                    | Net operating loss carryforward |                          | $       | 475,000 |        
|                    |                                 |                          |         |        
|                    |                                 | Total deferred tax asset |         |         | 475,000 | 
|                   
|                   
|                   
|                   
|                    |                                 | Valuation allowance      |         |         | 127,537 | 
|                    |                                 |                          |         |        
|                    |                                 | $                        | 347,463 |        
|                    |                                 |                          |         |        



|   |  | The Company has a net operating loss carry forward of approximately
$1,600,000 for federal and state purposes which will expire in 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|9. |  | 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 April
30, 2000, none of these options had been exercised.

F-10



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##### Table of Contents



SETO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|9.  |  | Employment and consulting agreements (continued):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Employment agreements (continued):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|    |  | 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
April 30, 2000. 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 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.
All options under this agreement were exercised as of April 30, 2000.
The shares underlying these options were issued pursuant to the
Companys 1997 non-statutory Stock Option Plan.
|   
|10. |  | Computation of earnings per share:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

|                                                     |  |      |            |      |  |  |            | 
|---------------------------------------------------- |  | ---- | ---------- | ---- |  |  | ---------- | 
|                                                     |  | 2000 |            | 1999
|                                                     |  |      |            |     
|Weighted average number of
common shares outstanding |  |      | 18,673,600 |      |  |  | 10,693,500 | 
|                                                    
|                                                    
|                                                    
|                                                    
|Assumed conversion of
stock options                  |  |      | 6,000,000  |     
|                                                     |  |      |            |      |  |  |            | 
|Weighted average number of
common shares outstanding |  |      | 24,673,600 |      |  |  | 10,693,500 | 
|                                                     |  |      |            |      |  |  |            | 



| |  | The conversion of stock options was not assumed for the quarter ended
April 30, 1999 as the effect would be antidilutive.
| |  | -------------------------------------------------------------------------------------------------------------------------

F-11



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##### Table of Contents



SETO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|11. |  | 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.
|   
|    |  | Financial information relating to the principal industry segments and
classes of products:                                                                                                                                                                                                                                                                                         

|                          |                     |               |                        |   |             |           |           |   |         |         | 
|------------------------- | ------------------- | ------------- | ---------------------- | - | ----------- | --------- | --------- | - | ------- | ------- | 
|                          |                     |               |                        |   | January 31, |           | April 30,
|                          |                     |               |                        |   | 2000        |           | 1999     
|                          |                     |               |                        |   |             |           |          
|                          | Sales to customers:
|                         
|                         
|                         
|                         
|                          |                     | Industry A:  
|                         
|                         
|                         
|                         
|                          |                     |               | Ceramics               |   | $           | 398,743   |           |   | $       | 379,830 | 
|                         
|                         
|                         
|                         
|                          |                     | Industry B:  
|                         
|                         
|                         
|                         
|                          |                     |               | Diamond tools          |   |             | 261,676   |           |   |         | 109,673 | 
|                         
|                         
|                         
|                         
|                          |                     | Industry C:  
|                         
|                         
|                         
|                         
|                          |                     |               | Cellular batteries     |   |             | 255,889   |           |   |         | 312,110 | 
|                         
|                         
|                         
|                         
|                          |                     | Industry D:  
|                         
|                         
|                         
|                         
|                          |                     |               | Rechargeable batteries |   |             | 433,925   |          
|                         
|                         
|                         
|                         
|                          |                     | Industry E:  
|                         
|                         
|                         
|                         
|                          |                     |               | Consumer electronics   |   |             | 3,921,246 |          
|                         
|                         
|                         
|                         
|                          |                     | Miscellaneous |                        |   | 17,943      |           |           |   | 99,174  |        
|                          |                     |               |                        |   |             |           |           |  
|                          |                     | $             | 5,289,422              |   |             | $         | 900,787   |  
|                          |                     |               |                        |   |             |           |           |  
|Operating profit or loss:
|                         
|                         
|                         
|                         
|                          |                     | Industry A    |                        | $ | 124,955     |           |           | $ | 5,621   |        
|                         
|                         
|                         
|                         
|                          |                     | Industry B    |                        |   | 14,006      |           |           |   | 1,623   |        
|                         
|                         
|                         
|                         
|                          |                     | Industry C    |                        |   | 15,912      |           |           |   | 4,620   |        
|                         
|                         
|                         
|                         
|                          |                     | Industry D    |                        |   | 59,298      |          
|                         
|                         
|                         
|                         
|                          |                     | Industry E    |                        |   | 127,433     |          
|                          |                     |               |                        |   |             |           |           |  
|                          |                     | $             | 341,604                |   |             | $         | 11,864    |  
|                          |                     |               |                        |   |             |           |           |  
|Identifiable assets:     
|                         
|                         
|                         
|                         
|                          |                     | Industry A    |                        | $ | 454,889     |           |           | $ | 463,065 |        
|                         
|                         
|                         
|                         
|                          |                     | Industry B    |                        |   | 1,375,383   |           |           |   | 996,815 |        
|                         
|                         
|                         
|                         
|                          |                     | Industry C    |                        |   | 503,088     |           |           |   | 438,926 |        
|                         
|                         
|                         
|                         
|                          |                     | Industry D    |                        |   | 682,294     |          
|                         
|                         
|                         
|                         
|                          |                     | Industry E    |                        |   | 8,700,765   |          
|                          |                     |               |                        |   |             |           |           |  
|                          |                     | $             | 11,716,419             |   |             | $         | 1,898,806 |  
|                          |                     |               |                        |   |             |           |           |  

F-12



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##### Table of Contents



SETO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|11. |  | Principal products and segmentation of sales (continued):
|--- |  | ---------------------------------------------------------
|   
|    |  | Foreign and domestic operations and export sales:        

|                     |               |   |             |            |           |   |           |           | 
|-------------------- | ------------- | - | ----------- | ---------- | --------- | - | --------- | --------- | 
|                     |               |   | January 31, |            | April 30,
|                     |               |   | 2000        |            | 1999     
|                     |               |   |             |            |          
|Sales to customers: 
|                    
|                    
|                    
|                    
|                     | United States |   | $           | 551,967    |           |   | $         | 546,023   | 
|                    
|                    
|                    
|                    
|                     | Far East      |   |             | 4,645,784  |           |   |           | 162,337   | 
|                    
|                    
|                    
|                    
|                     | Canada        |   |             | 91,671     |           |   |           | 192,427   | 
|                     |               |   |             |            |           |   |           |          
|                     |               | $ | 5,289,422   |            |           | $ | 900,787   |          
|                     |               |   |             |            |           |   |           |          
|Operating profit:   
|                    
|                    
|                    
|                    
|                     | United States |   | $           | 35,647     |           |   | $         | 7,192     | 
|                    
|                    
|                    
|                    
|                     | Far East      |   |             | 300,036    |           |   |           | 2,138     | 
|                    
|                    
|                    
|                    
|                     | Canada        |   |             | 5,921      |           |   |           | 2,534     | 
|                     |               |   |             |            |           |   |           |          
|                     |               | $ | 341,604     |            |           | $ | 11,864    |          
|                     |               |   |             |            |           |   |           |          
|Identifiable assets:
|                    
|                    
|                    
|                    
|                     | United States |   | $           | 1,103,100  |           |   | $         | 1,150,986 | 
|                    
|                    
|                    
|                    
|                     | Far East      |   |             | 10,539,533 |           |   |           | 342,197   | 
|                    
|                    
|                    
|                    
|                     | Canada        |   |             | 73,786     |           |   |           | 405,623   | 
|                     |               |   |             |            |           |   |           |          
|                     |               | $ | 11,716,419  |            |           | $ | 1,898,806 |          
|                     |               |   |             |            |           |   |           |          



|12. |  | Supplemental cash flow information:
|--- |  | -----------------------------------

|                                                                      |                                                   |   |        |         |      |   |        |         | 
|--------------------------------------------------------------------- | ------------------------------------------------- | - | ------ | ------- | ---- | - | ------ | ------- | 
|                                                                      |                                                   |   | 2000   |         | 1999
|                                                                      |                                                   |   |        |         |     
|Interest paid during the period                                       |                                                   | $ | 84,346 |         |      | $ | 23,424 |        
|                                                                      |                                                   |   |        |         |      |   |        |        
|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 | 
|                                                                      |                                                   |   |        |         |      |   |        |        
|                                                                      | Issuance of common shares for
consulting contract |   | $      | 220,600 |     
|                                                                      |                                                   |   |        |        

F-13



---



##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

GENERAL

During the quarter ended April 30, 2000 88.3% of the Companys net sales of
$5,289,422 was derived from its Far East operations (Malaysia and China) and
86.2% of its net sales were derived from its Consumer Products sectors product
lines, all of the latter coming from its Far East subsidiaries. Management
stated that this is the established trend. Concomitantly, while the sales for
the current quarter for ceramics and diamond coated tools was higher than those
of all of the last fiscal year, the Industrial Products to Industry sector at
11.7% of total sales has essentially plateaued, and will most probably only grow
slightly in the next few years.

Disregarding the impact of the fiscal 1997 and 1998 results of the earlier
disassociated acquisition, during the quarter ended April 30,
2000 the Company experienced its highest quarterly net sales, income from
operations and net profit in its history and achieved its greatest net worth.
These results were primarily attributable to the three latest Far East
acquisitions: Fimas SDN BHD (Malaysia, China) Fimas, Hong Kong Batteries
Industries, Ltd. (China) HKBI, and Fuji Fabrication SDN BHD (Malaysia) Fuji.
These subsidiaries cumulatively contributed 87.1% of net sales and 55.7% of net
income. Management points out that, during the first quarter, revenue for those
subsidiaries were actually impacted by the loss of working days due to regional
religious holidays so that it expects the next two quarters to be substantially
improved. On the other hand, the fourth quarter of this fiscal year
will see, to
some extent, a seasonal slowdown.

The Companys financial condition remains healthy. As of April 30, 2000, both
total assets at $15,078,584 and total current assets at $8,121,251 increased
over the previous quarter by 11.8% and 19.0% respectively. Similarly, cash
doubled and total shareholders equity increased by 16.3% to $7,754,828. Long
term debt net of current portion dropped by 6.4% while total current liabilities
increased by 10.8% to $6,018,199, with increases in accounts payable and accrued
expenses normally associated with growing sales volume.

With its substantial amount of revenue derived from Malaysia and China as
delineated above, economic and political conditions in those countries are of
major interest to the Company. Management believes that regional conditions and
circumstances will have no material adverse effect on its operations during this
current fiscal year.

In Malaysia, conditions remain economically strong with a very stable political
future perceived by Management. As for China, Permanent Normal Trade Relations
(PNTR) with the U.S. is almost finalized and, in all probability, will be
followed with membership in the World Trade Organization (WTO) later this year.
Management believes these steps in China will lead to a leveling of the economic
playing field and that the Company is in a very good position, taking into
consideration its operating activities, interests and contacts there, to take
advantage of the new opportunities that should result. Although its current
emphasis in the emergent Far East remains in Malaysia, the Company believes that
it will substantially expand its trade and further its investments in China.
However, no assurance can be given that the Company will be successful in this
regard.

As of the first quarter ended April 30, 2000, the Company had a backlog of
orders of approximately $11 million all of which it expects to ship by September
30th. While purchase orders may be cancelled or postponed, the Company believes
that substantially all of its backlog orders will be shipped and that the
resulting revenues will be realized.





---



##### Table of Contents



FIRST QUARTER 2000 COMPARED TO 1999

The Companys net sales increased by greater than 500% from $900,787 to
$5,289,422 and net income increased by much more than an order of magnitude from
$4,052 to $272,871. As previously indicated, the current quarter ended April 30,
2000 set financial operational results records for the Company.

With the new array of subsidiaries and their associated product lines, a
significant, but expected change in gross profit margin has taken place.
Comparing this years first quarter to last years, the margin for the whole
Company decreased by 59.7% going from 45.2% to 18.2% of net sales. Fimas had a
low margin of 8.0% and East Coast Sales, Inc. had a high of 72.0%. Such a
variation is a function of the specific products and their markets. As an
example, however, of its ultimate contribution to the Companys performance,
Fimas net sales constituted 74.1% of the Companys total and 28.6% of its net
income.

Selling, general and administrative expenses in the current quarter of $619,834
represented only 11.7% of sales compared to the 43.9% for the previous years
quarter ended April 30, 1999. The stabilizing of this expense as a part of a
larger and growing sales base should continue.

Fimas, the Companys highest net sales subsidiary, is essentially a value added
contract electronic manufacturer (CEM). Although the
manufacture of the Companys own products is planned for the future, Management
feels that, as a CEM, Fimas will grow and benefit significantly from the
outsourcings predicted growth rate of 50% per year over the
next two years; for example in Motorola, apparently leading the trend,
just announced that it will now outsource approximately $30 billion of its
consumer electronic production over the next five years.

Also, part of the Companys growth plan involves the joint venturing for
distribution of rechargeable cordless power tools in the U.S. and retail outlets
in Asia, with Europe and the U.S. to follow, for the sale of cellular,
telecommunications and consumer electronic products. No assurance can be given,
however, that these plans will ultimately be implemented or successful.

LIQUIDITY AND CAPITAL RESOURCES

At April 30, 2000, the Company has current assets of $8,121,251, including
$789,401 of unrestricted cash and current liabilities of $6,018,199 yielding a
current ratio of 1.35:1 or an improvement over that of the previous quarter
ended January 31, 2000 of 7.1%. This standard measure of a companys ability to
meet its current obligations reflects positively on the Companys financial
standing. In addition, it demonstrates an ability to internally generate or, as
a result, obtain funds necessary to support its current level of business and
enables the Company to obtain favorable payment terms from its suppliers due to
its credit-worthiness.

Because of its substantial growth plans and prospects, the Company is seeking
funding externally. During the quarter ended April 30, 2000 it received $645,000
in direct cash infusion from the sale of restricted stock and the exercise of
stock options. Also, the Company continues to seek private placement financing
and anticipates that its current line of credit with Merrill Lynch Business
Financials Services, Inc. will be expanded in a relatively short time.





---



##### Table of Contents



In addition to these types of sources, a prime funding requirement amounts to $1
million desired in the next 30 to 60 days to implement a surface mounted
technology assembly line inclusive of equipment and associated infrastructure
support and manpower requirements. This will allow for an increase in production
capacity for Fimas in Malaysia to a level consistent with its plans. Although in
the process of discussions for funding and investment support for these purposes
with more than one party, no assurance can be given that such financing will be
successfully obtained.

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 Malaysian
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 fluctuations in
foreign currency exchange rates. During this quarter, the foreign currency
exchange loss was $2,401, considered nominal, and, thus, in effect did not
impact operational results.

Management believes that for fiscal year 2000, two factors will continue to keep
its foreign currency exchange losses extremely low: Malaysian and Chinese
exchange rates are fixed relative to the U.S. Dollar; and, outside of these
prime Company operating areas, the Company deals in U.S. Dollars almost
exclusively. As a by-product, a number of economists believe that such
predictable policies such as pegging exchange rates yields a key element of
financial stability.

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

DISCLOSURES ABOUT MARKET RISK

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

The Companys exposure to foreign exchange rates fluctuations results from
wholly-owned subsidiary operations in Malaysia and China and from the Companys
share of the earnings of these operations, which are denominated in other currencies.

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 during fiscal year 2000.





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FORWARD LOOKING STATEMENTS

This Managements Discussion and Analysis or Plan of Operation contains
statements which are not historical facts and are forward-looking statements
which reflect managements expectations, estimates and assumptions. Such
statements are based on information available at the time this Form 10-QSB was
prepared and involve risks and uncertainties that could cause future results,
performance and achievements of the Company to differ significantly from
projected results. Factors that could cause actual future results to differ
materially include among others, the risks of doing business in Malaysia and
Southeast Asia, including, without limitation, economic and political
conditions, foreign currency translation risks, tariffs and other foreign trade
policies and dependence on inexpensive labor in such countries, partial
dependence on the semiconductor manufacturing industry, availability of raw
materials, intense competition and technological obsolescence. The Company
assumes no obligation to update such forward-looking statements, if any, at any
time.