SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549




                                   FORM 10-QSB
0
              (X)       Quarterly  Report Pursuant to Section 13 or 15(d) of the
                        Securities Exchange Act of 1934

                      For the quarterly period ended  October 31, 1999

                                       or

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

                      For the transition period from         to


Commission File Number:  33-5820-LA




                               SETO HOLDINGS, INC.
                          (Formerly Semicon Tools, Inc)
        (Exact name of small business issuer as specified in its charter)




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


             554 North State Road, Briarcliff Manor, New York 10510

                    (Address of principal executive offices)


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


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

                                                  Yes X   No


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


            Class                            Outstanding at October 31, 1999

Common Stock, par value $.001
 per share                                               11,299,100




<PAGE>











                                      INDEX


Part I.   Financial Information


   Item 1.  Consolidated financial statements:

         Balance sheet as of October 31, 1999                          F-2

         Statement of income for the nine and three
           months October 31, 1999 and 1998                            F-3

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

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

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


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



Part II.  Other information


   Signatures





<PAGE>



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

                  CONSOLIDATED BALANCE SHEET - OCTOBER 31, 1999




                                     ASSETS

Current assets:
  Cash                                                           $   53,404
  Accounts receivable, less allowance
   for doubtful accounts of $10,500                                 506,447
  Inventory                                                         877,785
  Prepaid expenses and other assets                                 180,488
  Deferred tax asset, current portion                               110,592
                                                                  ----------

    Total current assets                                          1,728,716
                                                                  ---------

Property and Equipment                                              618,605
                                                                    -------

Other assets:
   Goodwill, net of amortization                                    113,305
   Security deposits                                                 11,037
   Deferred tax asset, net of current portion                       224,534
                                                                  ----------
                                                                    348,876
                                                                    -------

                                                                 $2,696,197
                                                                 ==========



                      LIABILITIES AND SHAREHOLDERS' EQUITY


Current liabilities:
  Current portion of long-term debt                              $  167,376
  Notes payable, bank                                               270,000
  Accounts payable                                                  464,588
  Accrued expenses                                                   45,735
                                                                  ----------

    Total current liabilities                                       947,699
                                                                    -------

Long-term debt, net of current portion                              311,596
                                                                  ----------

Deferred lease liability                                              9,000
                                                                      -----

Commitments and contingencies

Shareholders' equity:
  Common stock par value $.001; 100,000,000
   shares authorized; 11,328,500 shares issued                       11,329
  Additional paid in capital                                      2,957,505
  Currency translation adjustment                               (   154,897)
  Retained earnings (deficit)                                   ( 1,377,009)
                                                                  ----------
                                                                  1,436,928
  Less common shares held in treasury, 29,400
   shares at cost                                               (     9,026)
                                                                  ----------

  Total shareholders' equity                                      1,427,902
                                                                  ---------

                                                                 $2,696,197
                                                                 ==========

     See notes to consolidated financial statements.
                                                                           F-2

<PAGE>

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

                        CONSOLIDATED STATEMENT OF INCOME

              NINE AND THREE MONTHS ENDED OCTOBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
<S>                                        <C>          <C>                       <C>         <C>
                                                         Nine Months                           Three Months
                                                            ended                                  ended
                                                          October 31,                           October 31,
                                                1999                1998              1999                 1998
                                                ----                ----              ----                 ----

Net sales                                   $ 2,482,794         $1,903,149         $  720,949          $  705,867

Cost of sales                                 1,268,536            670,722            397,471             322,216
                                            -----------         ----------         ----------          ----------

Gross profit                                  1,214,258          1,232,427            323,478             383,651

Selling, general and
 administrative expenses                      1,166,926            997,961            404,433             322,765
                                            -----------         ----------         ----------          ----------

Income (loss) from
 operations                                      47,332            234,466       (    80,955)              60,886
                                            -----------         ----------        ----------           ----------

Other income (expenses):
  Interest expense                        (     79,557)       (    33,271)       (    34,926)        (     9,301)
  Loss on foreign
   currency exchange                      (        242)                                   554
                                           -----------          ----------         ----------          ----------
                                          (     79,799)       (    33,271)       (    34,372)        (     9,301)
                                           -----------         ----------         ----------          ----------
Income (loss) before
 income taxes (benefit)                   (     32,467)            201,195       (   115,327)              51,585

Income taxes (benefit)                    (      6,553)              6,302                           (     4,607)
                                           -----------          ----------         ----------         ----------

Income (loss) from
 continuing operations                    (     25,914)            194,893       (   115,327)              56,192

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

Net loss                                  ($    25,914)       ($  234,860)       ($  115,327)        ($1,391,098 )
                                           ===========         ==========         ==========          ==========
Earnings per share
 information:
  Basic:
    Earnings per share
     from continuing
     operations                          $      0.00           $     0.02        ($     0.01)         $     0.00
    Earnings per share
     from discontinued
     operations                                 0.00          (      0.04)              0.00         (      0.11)
                                          -----------           ----------         ----------          ----------

Net income (loss)
 per share                               $      0.00          ($     0.02)       ($     0.01)        ($     0.11)
                                          ===========           ==========          =========          ==========
  Diluted:
    Earnings per share
     from continuing
     operations                          $      0.00           $     0.01        ($     0.01)         $     0.01
    Earnings per share
     from discontinued
     operations                                 0.00          (      0.03)              0.00         (      0.11)
                                         -----------            ----------         ----------          ----------

Net income (loss) per
 share                                   $      0.00          ($     0.02)       ($     0.01)        ($     0.10)
                                         ===========            ==========         ==========         ==========
</TABLE>
     See notes to consolidated financial statements.                        F-3
<PAGE>



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

                 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

              NINE AND THREE MONTHS ENDED OCTOBER 31, 1999 AND 1998
                                   (UNAUDITED)









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

                                                          Nine Months                          Three Months
                                                             ended                                 ended
                                                          October 31,                           October 31,
                                                 1999                1998              1999                1998
                                                 ----                ----              ----                ----



Net loss                                       ($25,914)         ($234,860)         ($137,825)       ($1,447,464)

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

Comprehensive income                           ($25,914)         ($200,432)         ($137,825)       ($1,447,464)
                                                =======           ========           ========         ==========



NOTE: Net income includes
       discontinued operations
       in prior year





</TABLE>









     See notes to consolidated financial statements.
                                                                           F-4


<PAGE>



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

                      CONSOLIDATED STATEMENT OF CASH FLOWS

                   NINE MONTHS ENDED OCTOBER 31, 1999 AND 1998





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


                                                                                                           1998
                                                                                        1999             Restated

Operating activities:
  Income (loss) from continuing operations                                          ($ 25,914)           $194,893
  Adjustments to reconcile net income to cash
   provided by continuing operations:
     Depreciation and amortization                                                      58,414             44,079
     Compensatory stock issued                                                          43,300
     Changes in other operating assets and
      liabilities:
        Accounts receivable                                                         ( 122,165)         ( 124,532)
        Inventories                                                                 ( 117,087)         ( 273,135)
        Prepaid expenses and other current assets                                       21,077         (   2,797)
        Deferred tax assets                                                         (  11,126)
        Other assets                                                                     4,512              8,505
        Accounts payable and accrued expenses                                          209,947             58,672
        Deferred lease liability                                                         4,500
                                                                                      --------           --------

        Net cash provided by (used in) operating
         activities                                                                     65,458         (  94,315)
                                                                                      --------          --------

Investing activities:
  Purchase of property and equipment                                                (  94,350)         ( 251,971)
                                                                                     --------           --------

        Net cash used in investing activities                                       (  94,350)         ( 251,971)
                                                                                     --------           --------

Financing activities:
  Proceeds from issuance of common stock                                                80,000            120,000
  Proceeds from financing                                                              281,890            299,352
  Payment of debt                                                                   ( 337,801)         (  97,814)
                                                                                     --------           --------

        Net cash provided by financing activities                                       24,089            321,538
                                                                                      --------           --------

Effect of exchange rate changes on cash                                             (   7,845)         (  11,588)
                                                                                     --------           --------

Net decrease in cash                                                                (  12,648)         (  36,336)

Cash, beginning of period                                                               66,052            106,100
                                                                                      --------           --------

Cash, end of period                                                                   $ 53,404           $ 69,764
                                                                                      ========           ========



</TABLE>







     See notes to consolidated financial statements                         F-5


<PAGE>



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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS








1.      Organization of the Company:

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

     One of the Company's wholly-owned  subsidiaries,  East Coast Sales Company,
Inc.  ("ECS") is a Connecticut  corporation  which  distributes  and  fabricates
technical  ceramic products and distributes  clean room supplies and tools. This
Company,  which was acquired on January 26, 1990,  was accounted for in a manner
similar to the pooling of interests method of accounting.  The total cost of the
acquisition,  $309,000, was paid for by the issuance of a $300,000 note, bearing
interest at 10% per annum,  and the issuance of 60,000  shares of the  Company's
$.001 par value common stock.


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


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


2. Principles of consolidation:

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











                                                                           F-6


<PAGE>



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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS








3. Nature of operation, risks and uncertainties:

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



4. Property and equipment:

        Major classifications of property and equipment are as follows:

        Leasehold improvements                                  $  146,700
        Manufacturing equipment                                  1,000,220
        Office equipment                                            73,685
                                                                 ----------
                                                                 1,220,605
        Less accumulated depreciation                              602,000
                                                                   -------
                                                                $  618,605
                                                                ==========


5.      Goodwill:

     On January 26, 1990,  the Company  acquired  East Coast Sales  Company (its
wholly-owned subsidiary) for a cost of $309,000. The purchase price exceeded the
fair value of the assets by $134,281 which amount was assigned to goodwill,  and
is being  amortized  on a  straight-line  basis  over forty  years.  Accumulated
amortization of goodwill aggregated $41,275 at October 31, 1999.

     On June 30, 1998, the Company acquired Fuji Fabrication, SDN BHD for a cost
of $100,000.  The purchase  price  exceeded fair value of the assets by $20,999,
which amount was assigned to goodwill and is being  amortized  over a forty year
period.  Accumulated  amortization  of goodwill  aggregated  $700 at October 31,
1999.


6. Commitments and contingencies:

     The Company is obligated under a lease agreement with an entity owned by an
officer of the Company which  expires on April 30, 2013.  Annual rent expense is
as follows:  $60,000  for each of the first five years,  $66,000 for each of the
second five years and $72,000 for each of the final five








                                                                           F-7


<PAGE>



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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS






6.      Commitments and contingencies (continued):

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

                           October 31, 2000                        $ 60,000
                           October 31, 2001                          60,000
                           October 31, 2002                          60,000
                           October 31, 2003                          63,000
                           October 31, 2004                          66,000
                           Thereafter                               589,500
                                                                   --------
                                                                   $898,500


     Rent  expense  amounted to $54,237 for the nine  months  ended  October 31,
1999.

     The Company also leases three  vehicles under  operating  leases with terms
expiring through 1999. Total lease expense was $26,154 for the nine months ended
October 31, 1999.


7. Common stock:

     During the nine months ended October 31, 1999,  the Company  issued 500,000
shares of its common  shares with net  proceeds of $80,000  upon the exercise of
certain common stock purchase options.


8. Notes payable and long-term debt:

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


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

    Notes payable:
       Bank                   (a)      8.45%        $137,500          2002
       Shareholder            (b)      10%            74,668          2002
       Shareholder            (c)      15%           148,215          2004
       Shareholder            (d)      10%            87,513          2002
       Shareholder            (e)      8.5%           31,076       Indefinite
                                                    --------
                                                     478,972
           Less current portion                      167,376
                                                     -------

                                                    $311,596
                                                    ========




                                                                            F-8


<PAGE>



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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS








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

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

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

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

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

        (e) The note payable is subordinated to the bank line of credit.


        The maturities of these loans are as follows:

                        October 31, 2000                         $167,371
                        October 31, 2001                          164,080
                        October 31, 2002                           98,098
                        October 31, 2003                           18,347
                        Thereafter                                 31,076



9. Income taxes:

         Provision for income taxes (benefit):

                                                       1999              1998
                                                       ----              ----

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


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

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

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







                                                                           F-9


<PAGE>



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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





9.      Income taxes (continued):

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

        Deferred tax asset:

           Net operating loss carryforward                          $474,226
                                                                    --------

                 Total deferred tax asset                            474,226

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

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

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



10. Employment and consulting agreements:

        Employment agreements:

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


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


  Consulting agreements:

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




                                                                         F-10


<PAGE>


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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


10.  Employment and consulting agreements (continued):

   Consulting agreements (continued):

     600,000 shares of common stock at a price of $.50 per share for a period of
two years  commencing  four  months  from the date of  signing.  This option was
reduced to 300,000 shares at $.25 per share. The options were issued pursuant to
the Company's 1997  non-statutory  Stock Option Plan. 190,000 shares were issued
during the nine months ended October 31, 1999.

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


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


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


     On August 17, 1999, the Company  entered into a consulting  agreement for a
one  year  period  through  August  2000  for  investor  public  relations.   In
consideration for the consulting agreement, the Company issued 300,000 shares of
unregistered Company common stock.


11. Computation of earnings per share:

<TABLE>
<CAPTION>
<S>                                              <C>          <C>                   <C>        <C>
                                                              Nine Months                       Three Months
                                                                 ended                             ended
                                                              October 31,                       October 31,
                                                    1999                1998           1999                1998
                                                    ----                ----           ----                ----
        Weighted average number of
         common shares outstanding -
         basic                                    10,915,565        10,193,324        11,207,245       10,353,500

        Assumed conversion of
         stock options                             6,238,025         2,835,000         6,260,000        2,835,000
                                                  ----------        ----------        ----------       ----------

        Weighted average number of
         common shares outstanding-
         diluted                                  17,153,590        13,028,324        17,467,245       13,188,500
                                                  ==========        ==========        ==========       ==========


</TABLE>



                                                                     F-11
<PAGE>



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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







12. Common stock options outstanding:

     On March 25, 1997,  the Company  effectuated a  Non-statutory  Stock Option
Plan  for  the  purpose  of  advancing  the  interests  of the  Company  and its
stockholders  by helping  the  Company  obtain and  retain the  services  of key
management  employees,   officers,   directors  and  consultants.  The  Plan  is
administered  by the  Non-statutory  Stock  Option  Committee  of the  Board  of
Directors of the Company.  The  committee has full  authority and  discretion to
determine  the  eligible  participants  to be granted the  options,  the date of
issuance,  exercise  price and  expiration  date. The total number of shares set
aside for the Plan is 6,500,000.


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




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

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

    Tan Hun Chin, Director    11/27/97        500,000      .10    11/27/00
    Consultant                06/19/98        110,000      .25    06/09/00
    Consultant                03/10/99        150,000 .75-2.00    03/12/00




13. Principal products and segmentation of sales:

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





                                                                          F-12


<PAGE>



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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

        Financial  information  relating to the principal  industry segments and
         classes of products:
<TABLE>
<CAPTION>
<S>                                                                              <C>               <C>

                                                                                                    October 31,
                                                                                  October 31,            1998
                                                                                      1999             Restated
           Sales to customers:
            Industry A:
               Ceramics                                                            $  934,300          $1,124,021
            Industry B:
               Diamond tools                                                          509,715             397,275
            Industry C:
               Cellular batteries                                                     872,174             168,758
            Miscellaneous                                                             166,605             213,095
                                                                                   ----------          ----------
                                                                                   $2,482,794          $1,903,149
                                                                                   ==========          ==========

         Operating profit or loss:
            Industry A                                                             $  225,439         $   358,707
            Industry B                                                           (   189,332)       (    104,010)
            Industry C                                                                 65,649              21,638
            Miscellaneous                                                        (    54,424)       (     41,869)
                                                                                  ----------         -----------

                                                                                   $   47,332         $   234,466
                                                                                   ==========         ===========
         Identifiable assets:
            Industry A                                                             $  422,080          $  387,203
            Industry B                                                              1,308,180           1,671,191
            Industry C                                                                558,073             309,337
            Miscellaneous                                                             407,864             426,315
                                                                                   ----------          ----------

                                                                                   $2,696,197          $2,794,046
                                                                                   ==========          ==========

        Two  customers  each  accounted  for more  than 10% of total  sales  and
         together  accounted for  approximately  34% of total sales for the nine
         months ended October 31, 1999.

        Foreign and domestic operations and export sales:

                                                                                  October 31,         October 31,
                                                                                     1999                1998
           Sales to customers:
              United States                                                        $1,505,070          $1,153,689
              Far East                                                                447,399             342,947
              Canada                                                                  530,325             406,513
                                                                                   ----------          ----------
                                                                                   $2,482,794          $1,903,149
                                                                                   ==========          ==========

           Operating profit:
              United States                                                        $   28,693          $  142,133
              Far East                                                                  8,529              42,251
              Canada                                                                   10,110              50,082
                                                                                   ----------          ----------
                                                                                   $   47,332          $  234,466
                                                                                   ==========          ==========
           Identifiable assets:
              United States                                                        $1,634,435          $1,693,751
              Far East                                                                485,855             503,487
              Canada                                                                  575,907             596,808
                                                                                   ----------          ----------
                                                                                   $2,696,197          $2,794,046
                                                                                   ==========          ==========
</TABLE>

                                                                       F-13
<PAGE>


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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





14. Year 2000 compliance:

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

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

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

15. Supplemental cash flow information:
                                                                                                          1998
                                                                                       1999             Restated

        Interest paid during period                                                  $ 79,557          $   34,926
                                                                                     ========          ==========
        Income taxes paid during the period                                          $      0          $        0
                                                                                     ========          ==========

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

        Reconciliation of increase in cash:
         Cash at beginning of period, as originally
           reported                                                                                     $ 371,413
         Decrease in cash resulting from disposition
           of foreign subsidiary                                                                          265,313
                                                                                                        ---------
         Cash at beginning of period, as restated                                                       $ 106,100
                                                                                                        =========
</TABLE>


16. Subsequent events:

     On November 19, 1999,  the Company  announced the  acquisition of Hong Kong
Batteries  Industries,  Ltd. based in Hong Kong. The purchase price is 2,000,000
restricted  shares of the  Company's  common stock with  1,500,000  shares to be
issued  immediately and an additional 500,000 restricted shares after the profit
guarantee  is met for the fiscal year ending in 2001.  The  acquisition  will be
accounted for as a purchase at the time of closing.

     On December 1, 1999, the Company announced the acquisition of Fimas SDN BHD
Malaysia and its subsidiaries based in Malaysia with a manufacturing facility in
Taichang,  China.  The  purchase  price is  6,000,000  restricted  shares of the
Company's common stock with 5,000,000 to be issued immediately and an additional
1,000,000  restricted  shares  after the profit  guarantee is met for the fiscal
year ending in 2001. The acquisition  will be accounted for as a purchase at the
time of closing.





                                                                          F-14
<PAGE>

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

GENERAL

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

After  this  current  quarter  closed,  several  significant  subsequent  events
occurred, all consistent with the new plans and objectives:

   a. In the Consumer Products Grouping area, two acquisitions were made:

           1)     On November 19, 1999, the Company acquired Hong Kong Batteries
                  Industries,  Ltd ("HK Batteries")  located in Hong Kong with a
                  manufacturing  facility in Main Land China. With sales of $2.5
                  million and $130,000 in profit  forecast for the current year,
                  HK Batteries  product line  complements  and  supplements  the
                  cellular phone product line of the Company's Fuji subsidiary.

           2)     On  November  27,  1999,  the Company  acquired  Fimas Sdn Bhd
                  ("Fimas")  located  in  Malaysia  with a factory  in Main Land
                  China.  Fimas manufactures and markets high quality electronic
                  consumer  products  including DVD players,  CD ROM drives,  CD
                  players  and  home  theater  systems.  With a very  impressive
                  customer base already in place,  the Company also  anticipates
                  selling most products in the U.S.A.  utilizing its  E-Commerce
                  approach  and other  marketing  methods.  Projected  sales for
                  current  year  is  $17.5  million  and  projected   profit  is
                  $500,000.

   b.    In the  Technical  Products  Grouping  area,  on  December  6, 1999 the
         Company signed a joint venture with International Bearing Networks, LLC
         ("IBN") for the  fabrication of diamond dicing blades  utilizing  IBN's
         proprietary  application  process.  The latter  will  multiply a blades
         usable  life and make such  product  the dicing  blade of choice in the
         marketplace, completely altering the acceptability and, thus, reception
         of the Company's dicing blade product line.

Had the two above  mentioned  acquisitions  been in place for the entire  fiscal
year, annual operational results are projected to have been $24 million in sales
with profit in excess of $500,000.

The Company's  financial condition remains healthy. As of October 31, 1999, both
total assets at $2,696,197 and total current assets at $1,728,716 increased over
last  quarter's  report,  the former only  nominally  and the latter by 1.4%. At
October 31, 1999,  Inventory and Prepaid expenses and other assets rose 5.0% and
1.7% to $877,785  and $180,488  respectively  over July 31, 1999  offsetting  an
equivalent  decrease in cash. The Accounts payable increase of 18.6% to $464,588
primarily  accounted  for  the  total  current  liabilities  increase,  part  of
Management's  controlled  reallocation  to  accommodate  its growth mode.  Total
Shareholder's  equity  decreased  by 4.7%  to  $1,427,902  over  July  31,  1999
reflecting some of the non-recurring expenses experienced due to the acquisition
process.

The  Company  has  conducted  a  substantial  portion of its  manufacturing  and
assembly  operations in Malaysia and will now also be  fabricating  in Main Land
China. Accordingly, economic and political conditions there, and in East Asia as
a whole,  will remain of  importance  to the Company.  Management  believes that
although  risks  exist,  there are  signs  that the  foundations  of a new Asian
economy  are  strengthening  and  improving  from  where  they were  immediately
following  the  problems  sparked in  Thailand  in July 1997.  In  Malaysia,  in
particular,  real Gross  National  Product  continues  to grow and  balances  of
payments  are  healthy.  In China,  the  Company is  entering  its  economy at a
propitious  time.  China's  imminent  entry  into the World  Trade  Organization
portends more of an open market and favorable foreign investment climate. In any
event,  although no assurance can be given,  the Company  believes that regional
circumstances  will  have  no  material  adverse  effect  on its  operations  or
financial condition during the foreseeable future.



<PAGE>







Results of Operations


Excluding any  consideration  given to the  discontinued  operations of TTH, the
Company experienced its highest sales level for both the nine month period ended
October 31 and for a third  fiscal  quarter.  In  addition,  the quarter  ending
October 31, 1999 realized its third best quarterly  sales.  Further,  it appears
that its cost of sales is leveling at 55%. All of this is attributed to the Fuji
cellular  phone  product line which began July 1, 1998 with the  acquisition  of
that Malaysian company.  Fuji's nine (9) month sales of $868,778 represented 35%
of total  sales  and its  cost of sales  was  approximately  77%,  substantially
influencing the average ratio for the Company's new mix of product lines.


For the third quarter  ended  October 31, 1999  compared to the previous  year's
quarter ended October 31, 1998, the Company's  sales  increased 2.1% to $720,949
from $705,867.  Income from continuing  operations went from a profit of $56,192
for the previous  quarter  ended  October 31, 1998 to a loss of $115,327 for the
current quarter.


For the nine(9)  months ended  October 31, 1999 compared to the (9) months ended
October 31,  1998,  sales  increased  by 30.5% to  $2,482,794  from  $1,903,149.
However,  income from  continuing  operations went from a profit of $194,893 for
the period ended  October 31, 1998 to a loss of $25,914 for the current nine (9)
months.


With an emphasis on its high sales levels and a backlog for the  Company,  prior
to the closing on the  acquisitions,  exceeding $1 million to be shipped  within
the next 3 to 4 months,  Management  believes  the next  quarter  and the fiscal
year's results will be more than satisfactory. Reasons for this are:


   a.    The current quarter's operating results were strongly influenced by the
         acquisition  process leading to the transaction closing on Fimas and HK
         Batteries.  There were costs associated with the search for candidates,
         the due diligence, negotiation and legal activities.


   b.    Approximately  two month's worth of operating results from Fimas and HK
         Batteries, the payback for the acquisition process costs, will be added
         to the Company in the Fourth (4th) quarter and, it is  projected,  will
         result in profitable  fiscal year sales of approximately  $7.0 million.
         As previously  pointed out in the General  section,  proforma sales for
         the year is anticipated to be $24 million with an associated  profit in
         excess of $500,000.


   c.    The fact that most major U.S.  companies in the cellular phone business
         are  strategically  retreating  from  the  manufacturing  business  and
         concentrating  on Research and Development and Marketing.  Coupled with
         continuing  increasing customer demand for cellular phones, Fuji and HK
         Batteries should benefit significantly.


   d.    One time  non-cash  charges  associated  with  stock  option  exercises
         ($25,000  this past quarter) and certain  public  relations and initial
         marketing  expenses for cellular phones should  disappear or be greatly
         diminished.









<PAGE>








Liquidity and Capital Resources


At July 31,  1999,  the  Company had current  assets of  $1,728,716  and current
liabilities of $947,699 yielding a positive working capital position of $781,017
and a current ratio of 1.82:1.  Although this is 8.1% less than the 1.98:1 ratio
that existed at July 31, 1999,  Management  is very  confident  with that result
because it falls into the high end of its  historical  experience.  Thus,  these
routine  measures of a company's  ability to meet  current  obligations  reflect
positively  on the Company's  liquidity  and internal  resources for the current
level of business and will  contribute to satisfying  its suppliers of goods and
services concerned with its credit-worthiness.


As  for  growth  capital  for  its  existing  product  lines  and  those  of the
acquisitions made post-October 31, the Company is in the process of seeking ways
to improve its bank loans and lines of credit.  Beside  ceilings  being  raised,
Management stated that certain restructuring, for example more use of term loans
and  non-asset  based  arrangements,  can yield greater  flexibility  and value.
Further,  Management believes that equity infusions in the late part of the next
fiscal year which begins  February 1, 2000 will be extremely  helpful.  Although
the  Company has had some  discussion  for both types of funding and has several
third parties  alerted to assist it, no definite  source has yet been identified
and  no  assurance  can be  given  that  such  financing  will  be  obtained  on
commercially reasonable terms, or at all.


     Management  continues to believe that other extraordinary  growth potential
exists via  acquisitions in the Far East and hopes to close another  transaction
in the next year.Although no such assurance can be given along these lines. Such
acquisition  objectives  will be  concentrated  in  companies in or aligned with
existing  product  lines.   Although  Management  further  commented  that  such
acquisition  purchases  can be made with an exchange  of stock only,  as was the
case with HK Batteries and Fimas,  significant working capital  requirements may
be needed following a completed transaction. When such is required, no assurance
can be given that such  financing  will be  successfully  obtained even with due
consideration given to the resulting expanded operation.

The  Company's  moratorium on its stock  buy-back  program  continues  while the
priority for its capital is for growth  purposes.  For all intents and purposes,
there are no near term  plans to  resurrect  it. On the other  hand,  during the
quarter ended October 31, 1999, one  outstanding  stock option was exercised and
the Company realized $12,500 in cash.


During  the  quarter  ended  October  31,  1999  the  Company   purchased   some
miscellaneous equipment. Within the next six (6) months, the Company anticipates
purchasing two (2) dicing saws costing $75,000 for its  fabrication  facility in
Malaysia.  Management  believes  that it will have no  trouble  financing  these
purchases with Malaysian institutions although no assurance can be given that
such will be the case.


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







<PAGE>




EFFECTS OF FOREIGN CURRENCY FLUCTUATIONS

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

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

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


DISCLOSURES ABOUT MARKET RISK

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

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

YEAR 2000 COSTS

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

As for suppliers and contractors, the Company has not investigated their
circumstances but has no reason to believe that dealing with the year 2000
will be a problem.


IMPACT OF INFLATION

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


FORWARD-LOOKING STATEMENTS

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