TABLE OF CONTENTS




|                              |                                                                  |                                                |  |  |  |  |  | 
|----------------------------- | ---------------------------------------------------------------- | ---------------------------------------------- |  |  |  |  |  | 
|Part I. Financial Information
|                              | Item 1. Consolidated Financial Statements                       
|                              |                                                                  | CONSOLIDATED BALANCE SHEET                    
|                              |                                                                  | CONSOLIDATED STATEMENT OF INCOME              
|                              |                                                                  | CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
|                              |                                                                  | CONSOLIDATED STATEMENT OF CASH FLOWS          
|                              |                                                                  | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    
|                              | Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
|SIGNATURES                   

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, 2001

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, 2001
|                                       |  |                              
|Common Stock,
par value $.001per share |  | 14,241,600                   





---



INDEX

|           |  |                                                                                           |            | 
|---------- |  | ----------------------------------------------------------------------------------------- | ---------- | 
|Part I.    |  | Financial Information                                                                    
|          
|          
|          
|          
|          
|Item 1.    |  | Consolidated financial statements:                                                       
|          
|          
|          
|          
|          
|           |  | Balance sheet as of April 30, 2001                                                        | F-2       
|          
|          
|          
|          
|          
|           |  | Statement of income for the three months ended
     April 30, 2001 and 2000               | F-3       
|          
|          
|          
|          
|          
|           |  | Statement of comprehensive income for the three months
     ended April 30, 2001 and 2000 | F-4       
|          
|          
|          
|          
|          
|           |  | Statement of cash flows for the three months ended
     April 30, 2001 and 2000           | F-5       
|          
|          
|          
|          
|          
|           |  | Notes to consolidated financial statements                                                | F-6 - F-11
|          
|          
|          
|          
|          
|Item 2.    |  | Managements discussion and analysis of
     financial condition                         
|          
|          
|          
|          
|          
|Part II.   |  | Other information                                                                        
|          
|          
|          
|          
|          
|Signatures





---



SETO HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET - APRIL 30, 2001

|                                       |                                                                                            |                                            |                           |                                      |         |           |  | 
|-------------------------------------- | ------------------------------------------------------------------------------------------ | ------------------------------------------ | ------------------------- | ------------------------------------ | ------- | --------- |  | 
|                                      
|                                       |                                                                                            |                                            |                           | ASSETS                              
|                                      
|                                      
|                                      
|                                      
|Current assets:                       
|                                      
|                                      
|                                      
|                                      
|                                       | Cash                                                                                       |                                            | $                         | 735,771                              |        
|                                      
|                                      
|                                      
|                                      
|                                       | Accounts receivable, less
allowance
     for doubtful accounts of $10,350                  |                                            |                           | 772,095                              |        
|                                      
|                                      
|                                      
|                                      
|                                       | Inventory                                                                                  |                                            |                           | 840,182                              |        
|                                      
|                                      
|                                      
|                                      
|                                       | Prepaid expenses and other assets                                                          |                                            |                           | 77,887                               |        
|                                      
|                                      
|                                      
|                                      
|                                       | Deferred tax asset, current portion                                                        |                                            |                           | 114,209                              |        
|                                       |                                                                                            |                                            |                           |                                     
|                                       |                                                                                            |                                            | Total current assets      |                                      |         | 2,540,144 | 
|                                       |                                                                                            |                                            |                           |                                     
|Property and equipment                 |                                                                                            |                                            | 589,758                   |                                     
|                                       |                                                                                            |                                            |                           |                                     
|Other assets:                         
|                                      
|                                      
|                                      
|                                      
|                                       |                                                                                            | Goodwill, net of amortization              |                           |                                      | 828,360 |          
|                                      
|                                      
|                                      
|                                      
|                                       |                                                                                            | Prepaid license fees                       |                           |                                      | 35,717  |          
|                                      
|                                      
|                                      
|                                      
|                                       |                                                                                            | Security deposits                          |                           |                                      | 11,238  |          
|                                      
|                                      
|                                      
|                                      
|                                       |                                                                                            | Deferred tax asset, net of current portion |                           |                                      | 220,917 |          
|                                      
|                                      
|                                      
|                                      
|                                       |                                                                                            | Net assets of discontinued operations      |                           |                                      | 240 962 |          
|                                       |                                                                                            |                                            |                           |                                     
|                                       |                                                                                            |                                            | 1,337,194                 |                                     
|                                       |                                                                                            |                                            |                           |                                     
|                                      
|                                      
|                                      
|                                      
|                                       |                                                                                            | $                                          | 4,467,096                 |                                     
|                                       |                                                                                            |                                            |                           |                                     
|                                      
|                                       |                                                                                            |                                            |                           | LIABILITIES AND SHAREHOLDERS EQUITY
|                                      
|                                      
|                                      
|                                      
|                                      
|Current liabilities:                  
|                                      
|                                      
|                                      
|                                      
|                                       | Current portion of long-term debt                                                          |                                            | $                         | 86,462                               |        
|                                      
|                                      
|                                      
|                                      
|                                       | Notes payable                                                                              |                                            |                           | 995,830                              |        
|                                      
|                                      
|                                      
|                                      
|                                       | Accounts payable                                                                           |                                            |                           | 699,494                              |        
|                                      
|                                      
|                                      
|                                      
|                                       | Accrued expenses                                                                           |                                            |                           | 246,619                              |        
|                                       |                                                                                            |                                            |                           |                                     
|                                       |                                                                                            |                                            | Total current liabilities |                                      |         | 2,028,405 | 
|                                       |                                                                                            |                                            |                           |                                     
|Long-term debt, net of current portion |                                                                                            |                                            | 82,593                    |                                     
|                                       |                                                                                            |                                            |                           |                                     
|Deferred lease liability               |                                                                                            |                                            | 18,000                    |                                     
|                                       |                                                                                            |                                            |                           |                                     
|Deferred income taxes payable          |                                                                                            |                                            | 41,189                    |                                     
|                                       |                                                                                            |                                            |                           |                                     
|Commitments and contingencies         
|                                      
|                                      
|                                      
|                                      
|Shareholders equity:                 
|                                      
|                                      
|                                      
|                                      
|                                       | Common stock par value $.001;
100,000,000
     shares authorized; 14,271,000 shares issued |                                            |                           | 14,271                               |        
|                                      
|                                      
|                                      
|                                      
|                                       | Additional paid in capital                                                                 |                                            |                           | 4,364,035                            |        
|                                      
|                                      
|                                      
|                                      
|                                       | Currency translation adjustment                                                            |                                            |                           | (219,119                             | )      
|                                      
|                                      
|                                      
|                                      
|                                       | Retained earnings (deficit)                                                                |                                            |                           | (1,853,252                           | )      
|                                       |                                                                                            |                                            |                           |                                     
|                                       |                                                                                            |                                            | 2,305,935                 |                                     
|                                      
|                                      
|                                      
|                                      
|                                       | Less common shares held in treasury, 29,400
shares at cost                                 |                                            |                           | (9,026                               | )      
|                                       |                                                                                            |                                            |                           |                                     
|                                       |                                                                                            |                                            | 2,296,909                 |                                     
|                                       |                                                                                            |                                            |                           |                                     
|                                      
|                                      
|                                      
|                                      
|                                       |                                                                                            | $                                          | 4,467,096                 |                                     
|                                       |                                                                                            |                                            |                           |                                     

See notes to consolidated financial statements.

F-2



---



SETO HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

THREE MONTHS ENDED APRIL 30, 2001 AND 2000

|                                             |                                               |         |           |         |      |          |           |         |      | 
|-------------------------------------------- | --------------------------------------------- | ------- | --------- | ------- | ---- | -------- | --------- | ------- | ---- | 
|                                             |                                               |         |           |         |      |          |           | 2000   
|                                             |                                               |         |           | 2001    |      | Restated
|                                             |                                               |         |           |         |      |         
|Net sales                                    |                                               | $       | 1,402,840 |         |      | $        | 1,112,287 |        
|                                            
|                                            
|                                            
|                                            
|Cost of sales                                |                                               |         | 787,372   |         |      |          | 506,956   |        
|                                             |                                               |         |           |         |      |          |           |        
|Gross profit                                 |                                               |         | 615,468   |         |      |          | 605,331   |        
|                                            
|                                            
|                                            
|                                            
|Selling, general and administrative
expenses |                                               |         | 468,456   |         |      |          | 451,302   |        
|                                             |                                               |         |           |         |      |          |           |        
|Income from operations                       |                                               |         | 147,012   |         |      |          | 154,029   |        
|                                             |                                               |         |           |         |      |          |           |        
|Other income (expenses):                    
|                                            
|                                            
|                                            
|                                            
|                                             | Interest income                               |         |           | 3,839   |      |          |           | 295     |     
|                                            
|                                            
|                                            
|                                            
|                                             | Interest expense                              |         |           | (28,903 | )    |          |           | (28,129 | )   
|                                            
|                                            
|                                            
|                                            
|                                             | Foreign currency exchange                     |         |           | 2       |      |          |           | (2,401  | )   
|                                             |                                               |         |           |         |      |          |           |        
|                                             |                                               |         | (25,062   | )       |      |          | (30,235   | )      
|                                             |                                               |         |           |         |      |          |           |        
|Income before income taxes (benefit)         |                                               |         | 121,950   |         |      |          | 123,794   |        
|                                            
|                                            
|                                            
|                                            
|Income tax (benefit)                         |                                               |         | 1,300     |         |      |          | (12,337   | )      
|                                             |                                               |         |           |         |      |          |           |        
|Income from continuing operations            |                                               |         | 120,650   |         |      |          | 136,131   |        
|                                             |                                               |         |           |         |      |          |           |        
|Discontinued operations:                    
|                                            
|                                            
|                                            
|                                            
|                                             | Income (loss) from operations of subsidiaries |         |           | (21,380 | )    |          |           | 136,740 |     
|                                             |                                               |         |           |         |      |          |           |        
|Net income                                   |                                               | $       | 99,270    |         |      | $        | 272,871   |        
|                                             |                                               |         |           |         |      |          |           |        
|Earnings per share information:             
|                                            
|                                            
|                                            
|                                            
|                                             | Income from continuing operations
Basic       |         | $         | 0.01    |      |          | $         | 0.01    |     
|                                             |                                               |         |           |         |      |          |           |        
|                                             |                                               | Diluted |           | $       | 0.01 |          |           | $       | 0.01 | 
|                                             |                                               |         |           |         |      |          |           |        
|                                             | Discontinued operations:                     
|                                            
|                                            
|                                            
|                                            
|                                             |                                               | Basic   |           | $       | 0.00 |          |           | $       | 0.01 | 
|                                             |                                               |         |           |         |      |          |           |        
|                                             |                                               | Diluted |           | $       | 0.00 |          |           | $       | 0.01 | 
|                                             |                                               |         |           |         |      |          |           |        

See notes to consolidated financial statements.

F-3



---



SETO HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

THREE MONTHS ENDED APRIL 30, 2001 AND 2000

|                                      |                                         |   |        |  |          |   |         |         |  
|------------------------------------- | --------------------------------------- | - | ------ |  | -------- | - | ------- | ------- | -
|                                     
|                                     
|                                      |                                         |   |        |  |          |   | 2000   
|                                      |                                         |   | 2001   |  | Restated
|                                      |                                         |   |        |  |         
|Net income                            |                                         | $ | 99,270 |  |          | $ | 272,871 |        
|                                     
|                                     
|                                     
|                                     
|Other comprehensive loss, net of tax:
|                                     
|                                     
|                                     
|                                     
|                                      | Foreign currency translation adjustment |   |        |  |          |   |         | (53,300 | )
|                                      |                                         |   |        |  |          |   |         |        
|Comprehensive income                  |                                         | $ | 99,270 |  |          | $ | 219,571 |        
|                                      |                                         |   |        |  |          |   |         |        
|                                     
|                                     

See notes to consolidated financial statements.

F-4



---



SETO HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

THREE MONTHS ENDED APRIL 30, 2001 AND 2000

|                                        |                                                                                |                                                    |                                                      |         |         |         |          |         |        |          |  
|--------------------------------------- | ------------------------------------------------------------------------------ | -------------------------------------------------- | ---------------------------------------------------- | ------- | ------- | ------- | -------- | ------- | ------ | -------- | -
|                                        |                                                                                |                                                    |                                                      |         |         |         |          |         | 2000  
|                                        |                                                                                |                                                    |                                                      |         | 2001    |         | Restated
|                                        |                                                                                |                                                    |                                                      |         |         |         |         
|Operating activities:                  
|                                       
|                                       
|                                       
|                                       
|                                        | Income from continuing operations                                              |                                                    | $                                                    | 120,650 |         |         | $        | 136,131 |       
|                                       
|                                       
|                                       
|                                       
|                                        | Adjustments to reconcile net income to cash
provided by continuing operations:
|                                       
|                                       
|                                       
|                                       
|                                        |                                                                                | Depreciation and amortization                      |                                                      |         | 25,977  |         |          |         | 40,011 |         
|                                       
|                                       
|                                       
|                                       
|                                        |                                                                                | Compensatory stock surrendered                     |                                                      |         | (25,200 | )      
|                                       
|                                       
|                                       
|                                       
|                                        |                                                                                | Changes in other operating assets and
liabilities:
|                                       
|                                       
|                                       
|                                       
|                                        |                                                                                |                                                    | Accounts receivable                                  |         |         | (82,056 | )        |         |        | 43,052   |  
|                                       
|                                       
|                                       
|                                       
|                                        |                                                                                |                                                    | Inventories                                          |         |         | (31,530 | )        |         |        | (36,455  | )
|                                       
|                                       
|                                       
|                                       
|                                        |                                                                                |                                                    | Prepaid expenses and other current assets            |         |         | 44,220  |          |         |        | (268,908 | )
|                                       
|                                       
|                                       
|                                       
|                                        |                                                                                |                                                    | Deferred tax assets                                  |         |         |         |          |         |        | (12,337  | )
|                                       
|                                       
|                                       
|                                       
|                                        |                                                                                |                                                    | Other assets                                         |         |         | (40,008 | )        |         |        | 7,383    | )
|                                       
|                                       
|                                       
|                                       
|                                        |                                                                                |                                                    | Accounts payable, and accrued expenses               |         |         | 161,564 |          |         |        | (431,605 | )
|                                       
|                                       
|                                       
|                                       
|                                        |                                                                                |                                                    | Deferred lease liability                             |         |         | 1,500   |          |         |        | 1,500    |  
|                                        |                                                                                |                                                    |                                                      |         |         |         |          |        
|                                        |                                                                                |                                                    | Net cash provided by (used in)
continuing operations |         |         | 175,117 |          |         |        | (521,228 | )
|                                       
|                                       
|                                       
|                                       
|                                        |                                                                                |                                                    | Net cash provided by discontinued
operations         |         |         | 29,993  |          |         |        | 288,360  |  
|                                        |                                                                                |                                                    |                                                      |         |         |         |          |        
|                                        |                                                                                |                                                    | Net cash provided by (used in) operating
activities  |         |         | 205,110 |          |         |        | (232,868 | )
|                                        |                                                                                |                                                    |                                                      |         |         |         |          |        
|Investing activities:                  
|                                       
|                                       
|                                       
|                                       
|                                        | Purchase of property and equipment                                             |                                                    |                                                      |         |         |         |          | (8,278  | )     
|                                       
|                                       
|                                       
|                                       
|                                        |                                                                                |                                                    | Net cash used in investing activities                |         |         |         |          |         |        | (8,278   | )
|                                        |                                                                                |                                                    |                                                      |         |         |         |          |        
|Financing activities:                  
|                                       
|                                       
|                                       
|                                       
|                                        | Proceeds from issuance of common stock and
subscriptions                       |                                                    |                                                      |         |         |         |          | 610,000 |       
|                                       
|                                       
|                                       
|                                       
|                                        | Proceeds from financing                                                        |                                                    |                                                      | 14,677  |         |         |          | 70,000  |       
|                                       
|                                       
|                                       
|                                       
|                                        | Payment of debt                                                                |                                                    |                                                      | (83,245 | )       |         |          | (17,089 | )     
|                                        |                                                                                |                                                    |                                                      |         |         |         |          |        
|                                        |                                                                                |                                                    | Net cash provided by (used in)
financing activities  |         |         | (68,568 | )        |         |        | 662,911  |  
|                                        |                                                                                |                                                    |                                                      |         |         |         |          |        
|Effect of exchange rate changes on cash |                                                                                |                                                    |                                                      |         |         |         | (53,300  | )      
|                                        |                                                                                |                                                    |                                                      |         |         |         |          |        
|Net increase in cash                    |                                                                                |                                                    | 136,542                                              |         |         |         | 368,465  |        
|                                       
|                                       
|                                       
|                                       
|Cash, beginning of period               |                                                                                |                                                    | 599,229                                              |         |         |         | 349,547  |        
|                                        |                                                                                |                                                    |                                                      |         |         |         |          |        
|Cash, end of period                     |                                                                                | $                                                  | 735,771                                              |         |         | $       | 718,012  |        
|                                        |                                                                                |                                                    |                                                      |         |         |         |          |        

See notes to consolidated financial statements.

F-5



---



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, 2001 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 and SDN
BHD, Hong Kong Batteries Industries, Ltd. after elimination of all
significant intercompany transactions and accounts.                                                                                                         
|  
|  
|  
|  
|  
|   |  | The financial statements for the three months ended April 30, 2000 have
been restated to give effect to the disposition of Fimas SDN BHD and
the discontinuation of Fuji Fabrication, SDN BHD. (See Note 12)                                                                                                                                                                                                                              
|  
|  
|  
|  
|  
|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        |  | $ | 150,961 | 
|                             
|                             
|                             
|                             
|Manufacturing equipment       |  |   | 584,857 | 
|                             
|                             
|                             
|                             
|Office equipment              |  |   | 128,486 | 
|                              |  |   |         | 
|                              |  |   | 864,304 | 
|                             
|                             
|                             
|                             
|Less accumulated depreciation |  |   | 274,546 | 
|                              |  |   |         | 
|                              |  | $ | 589,758 | 
|                              |  |   |         | 

F-6



---



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, 2002 |  | $ | 60,000  | 
|              
|              
|              
|              
|April 30, 2003 |  |   | 64,500  | 
|              
|              
|              
|              
|April 30, 2004 |  |   | 66,000  | 
|              
|              
|              
|              
|April 30, 2005 |  |   | 66,000  | 
|              
|              
|              
|              
|April 30, 2006 |  |   | 66,000  | 
|              
|              
|              
|              
|Thereafter     |  |   | 487,500 | 
|               |  |   |         | 
|               |  | $ | 810,000 | 
|               |  |   |         | 

| |  |                                                                                                              
| |  | -------------------------------------------------------------------------------------------------------------
| |  | Rent expense amounted to $16,921 and $20,792 for the three months ended
April 30, 2001 and 2000, respectively

|   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|6. |  | Notes payable and long-term debt:                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|  
|  
|  
|  
|   |  | The Company had an outstanding line of credit with a financial institution
in the amount of $1,000,000. The line of credit carries interest at an
annual rate of 2.9% plus the 30 day dealer commercial paper rate with
an expiration date of October 31, 2001. As of April 30, 2001, the
Company had utilized $995,830 of the line of credit. The loan is
secured by the personal guarantee of the Companys president and the
assets of Seto Holdings, Inc.
|  
|  
|  
|  
|  
|   |  | Long-term debt of the domestic companies consists of the following:                                                                                                                                                                                                                                                                                                                                                                                          

|                     |    |   |  |  |  |      |    |      |  |           |         |  |  |  |      | 
|-------------------- | -- | - |  |  |  | ---- | -- | ---- |  | --------- | ------- |  |  |  | ---- | 
|                     |    |   |  |  |  |      |    |      |  | Balance  
|                     |    |   |  |  |  |      |    |      |  | April 30,
|                     |    |   |  |  |  | Rate |    | 2000 |  | Maturity 
|                     |    |   |  |  |  |      |    |      |  |          
|Equipment loan       | (a | ) |  |  |  |      | 15 | %    |  | $         | 47,169  |  |  |  | 2004 | 
|                    
|                    
|                    
|                    
|Shareholder          | (b | ) |  |  |  |      | 15 | %    |  |           | 90,511  |  |  |  | 2004 | 
|                    
|                    
|                    
|                    
|Shareholder          | (b | ) |  |  |  |      | 10 | %    |  |           | 31,375  |  |  |  | 2002 | 
|                     |    |   |  |  |  |      |    |      |  |           |         | 
|                     |    |   |  |  |  |      |    |      |  |           | 169,055 | 
|                    
|                    
|                    
|                    
|Less current portion |    |   |  |  |  |      |    |      |  |           | 86,462  | 
|                     |    |   |  |  |  |      |    |      |  |           |         | 
|                     |    |   |  |  |  |      |    |      |  | $         | 82,593  | 
|                     |    |   |  |  |  |      |    |      |  |           |         | 

|                                              |  |                                                                                                                                  
|--------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------
|(a)                                           |  | The note is payable in monthly installments of $1,607, including
interest. Equipment which cost $57,426 is pledged as collateral.
|                                             
|                                             
|                                             
|                                             
|                                             
|(b)                                           |  | The notes are payable to shareholders in monthly amounts aggregating
$8,364, including interest.                                 
|                                             
|The maturities of these loans are as follows: |  |                                                                                                                                  

|     |                   |   |         |        | 
|---- | ----------------- | - | ------- | ------ | 
|     | April 30, 2002    |   | $       | 86,492 | 
|    
|    
|    
|    
|     | April 30, 2003    |   |         | 63,420 | 
|    
|    
|    
|    
|     | April 30, 2004    |   |         | 17,555 | 
|    
|    
|    
|    
|     | April 30, 2005    |   |         | 1,587  | 
|     |                   |   |         |       
|     |                   | $ | 169,054 |       
|     |                   |   |         |       
|    
|    
|    
|    
|DTI:
|    
|    
|    
|    
|     | Capitalized lease |   | $       | 24,699 | 
|     |                   |   |         |       
|     | Due to directors  |   | $       | 69,501 | 
|     |                   |   |         |       

F-7



---



SETO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|   |  |                                                                         
|-- |  | ------------------------------------------------------------------------
|7. |  | Income taxes:                                                           
|  
|  
|  
|  
|  
|   |  | Provision for income taxes (benefit)for the three months ended April 30:

|          |                         |  |      |       |      |  |   |          |  
|--------- | ----------------------- |  | ---- | ----- | ---- |  | - | -------- | -
|          |                         |  | 2001 |       | 2000
|          |                         |  |      |       |     
|Domestic:
|         
|         
|         
|         
|          | Current                 |  | $    | 1,300 |      |  | $ | 31,500   |  
|         
|         
|         
|         
|          | Deferred                |  |      |       |      |  |   | (43,837  | )
|          |                         |  |      |       |      |  |   |         
|          | Total (benefit) expense |  | $    | 1,300 |      |  |   | ($12,337 | )
|          |                         |  |      |       |      |  |   |         

| |  |                                                                                                                                                
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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:

|                                                                 |  |      |       |      |  |   |          |  
|---------------------------------------------------------------- |  | ---- | ----- | ---- |  | - | -------- | -
|                                                                 |  | 2001 |       | 2000
|                                                                 |  |      |       |     
|Income tax computed at the domestic
     federal statutory rates |  | $    | 7,893 |      |  | $ | 24,000   |  
|                                                                
|                                                                
|                                                                
|                                                                
|State tax (net of federal benefit)                               |  |      | 1,300 |      |  |   | 7,500    |  
|                                                                
|                                                                
|                                                                
|                                                                
|Reduction in valuation allowance                                 |  |      | (7893 | )    |  |   | (43,837  | )
|                                                                 |  |      |       |      |  |   |          |  
|Net income tax expense (benefit)                                 |  | $    | 1,300 |      |  |   | ($12,337 | )
|                                                                 |  |      |       |      |  |   |          |  

| |  |                                                                                
| |  | -------------------------------------------------------------------------------
| |  | 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      |   |         | 139,874 | 
|                                |                          |   |         |        
|                                |                          | $ | 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 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|  
|  
|  
|  
|8. |  | 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, 2006. Compensation is set at a base of
$125,000 and $110,000 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 Vice President also received 50,000 stock
options at $.50 in February 2000. The options were not part of the
1997 Non-statutory Stock Option Plan effectuated March 25, 1997. As of
April 30, 2001, none of these options had been exercised.

F-8



---



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 April 30, 2006. Compensation is set at a
base of $60,000 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 550,000 stock options
exercisable at $.50 per share, none of which have been exercised as of
April 30, 2001. These options were not part of the 1997 non-statutory
stock option Plan effectuated March 25, 1997.
|  
|  
|  
|  
|  
|9. |  | Computation of earnings per share:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|                                                          |               |  |                              |           |      |  |            |           | 
|--------------------------------------------------------- | ------------- |  | ---------------------------- | --------- | ---- |  | ---------- | --------- | 
|                                                          |               |  | Three months ended April 30,
|                                                          |               |  |                             
|                                                          |               |  | 2001                         |           | 2000
|                                                          |               |  |                              |           |     
|Weighted average number of
     common shares outstanding |               |  | 14,361,000                   |           |      |  | 18,673,600 |          
|                                                         
|                                                         
|                                                         
|                                                         
|Assumed conversion of                                    
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | stock options |  |                              | 5,525,000 |      |  |            | 6,000,000 | 
|                                                          |               |  |                              |           |      |  |            |          
|Weighted average number of
     common shares outstanding |               |  | 19,886,000                   |           |      |  | 24,673,600 |          
|                                                          |               |  |                              |           |      |  |            |          

|    |  |                                                                                                                                                                                                                                                                                                                                                                                    
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10. |  | 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:                                                                                                                                                                                                                                                                                         

|                    |               |                        |           |           |         |           |           |        |         | 
|------------------- | ------------- | ---------------------- | --------- | --------- | ------- | --------- | --------- | ------ | ------- | 
|                    |               |                        |           | April 30, |         | April 30,
|                    |               |                        |           | 2001      |         | 2000     
|                    |               |                        |           |           |         |          
|Sales to customers:
|                   
|                   
|                   
|                   
|                    | Industry A:  
|                   
|                   
|                   
|                   
|                    |               | Ceramics               |           | $         | 430,637 |           |           | $      | 401,382 | 
|                   
|                   
|                   
|                   
|                    | Industry B:  
|                   
|                   
|                   
|                   
|                    |               | Diamond tools          |           |           | 217,342 |           |           |        | 261,676 | 
|                   
|                   
|                   
|                   
|                    | Industry C:  
|                   
|                   
|                   
|                   
|                    |               | Rechargeable batteries |           |           | 738,441 |           |           |        | 433,925 | 
|                   
|                   
|                   
|                   
|                    | Miscellaneous |                        |           | 16,420    |         |           |           | 15,304 |        
|                    |               |                        |           |           |         |           |           |       
|                    |               | $                      | 1,402,840 |           |         | $         | 1,112,287 |       
|                    |               |                        |           |           |         |           |           |       

F-9



---



SETO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|    |  |                                                          
|--- |  | ---------------------------------------------------------
|10. |  | Principal products and segmentation of sales (continued):

|                          |               |   |           |           |           |   |           |           |  
|------------------------- | ------------- | - | --------- | --------- | --------- | - | --------- | --------- | -
|                          |               |   | April 30, |           | April 30,
|                          |               |   | 2001      |           | 2000     
|                          |               |   |           |           |          
|Operating profit or loss:
|                         
|                         
|                         
|                         
|                          | Industry A    |   | $         | 148,942   |           |   | $         | 118,865   |  
|                         
|                         
|                         
|                         
|                          | Industry B    |   |           | (82,363   | )         |   |           | (34,819   | )
|                         
|                         
|                         
|                         
|                          | Industry C    |   |           | 72,802    |           |   |           | 63,893    |  
|                         
|                         
|                         
|                         
|                          | Miscellaneous |   |           | 7,631     |           |   |           | 6,090     |  
|                          |               |   |           |           |           |   |           |          
|                          |               | $ | 147,012   |           |           | $ | 154,029   |          
|                          |               |   |           |           |           |   |           |          
|Identifiable assets:     
|                         
|                         
|                         
|                         
|                          | Industry A    |   | $         | 583,701   |           |   | $         | 454,889   |  
|                         
|                         
|                         
|                         
|                          | Industry B    |   |           | 1,489,337 |           |   |           | 1,746,975 |  
|                         
|                         
|                         
|                         
|                          | Industry C    |   |           | 992,583   |           |   |           | 682,294   |  
|                          |               |   |           |           |           |   |           |          
|                          |               | $ | 3,065,621 |           |           | $ | 2,884,158 |          
|                          |               |   |           |           |           |   |           |          

| |  |                                                  
| |  | -------------------------------------------------
| |  | Foreign and domestic operations and export sales:

|                     |               |   |           |           |           |   |           |           | 
|-------------------- | ------------- | - | --------- | --------- | --------- | - | --------- | --------- | 
|                     |               |   | April 30, |           | April 30,
|                     |               |   | 2001      |           | 2000     
|                     |               |   |           |           |          
|Sales to customers: 
|                    
|                    
|                    
|                    
|                     | United States |   | $         | 438,469   |           |   | $         | 674,268   | 
|                    
|                    
|                    
|                    
|                     | Far East      |   |           | 718,831   |           |   |           | 200,434   | 
|                    
|                    
|                    
|                    
|                     | Canada        |   |           | 245,540   |           |   |           | 237,585   | 
|                     |               |   |           |           |           |   |           |          
|                     |               | $ | 1,402,840 |           |           | $ | 1,112,287 |          
|                     |               |   |           |           |           |   |           |          
|Operating profit:   
|                    
|                    
|                    
|                    
|                     | United States |   | $         | 14,701    |           |   | $         | 93,372    | 
|                    
|                    
|                    
|                    
|                     | Far East      |   |           | 129,371   |           |   |           | 27,756    | 
|                    
|                    
|                    
|                    
|                     | Canada        |   |           | 2,940     |           |   |           | 32,901    | 
|                     |               |   |           |           |           |   |           |          
|                     |               | $ | 147,012   |           |           | $ | 154,029   |          
|                     |               |   |           |           |           |   |           |          
|Identifiable assets:
|                    
|                    
|                    
|                    
|                     | United States |   | $         | 950,343   |           |   | $         | 1,748,377 | 
|                    
|                    
|                    
|                    
|                     | Far East      |   |           | 1,563,467 |           |   |           | 519,725   | 
|                    
|                    
|                    
|                    
|                     | Canada        |   |           | 551,811   |           |   |           | 616,056   | 
|                     |               |   |           |           |           |   |           |          
|                     |               | $ | 3,065,621 |           |           | $ | 2,884,158 |          
|                     |               |   |           |           |           |   |           |          

F-10



---



SETO HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|    |  |                                    
|--- |  | -----------------------------------
|11. |  | Supplemental cash flow information:

|                                                                           |                                                        |   |        |  |      |   |        |         | 
|-------------------------------------------------------------------------- | ------------------------------------------------------ | - | ------ |  | ---- | - | ------ | ------- | 
|                                                                           |                                                        |   | 2001   |  | 2000
|                                                                           |                                                        |   |        |  |     
|                                                                          
|Interest paid during the period                                            |                                                        | $ | 28,903 |  |      | $ | 84,346 |        
|                                                                           |                                                        |   |        |  |      |   |        |        
|Income taxes paid during the period                                        |                                                        | $ | 0      |  |      | $ | 0      |        
|                                                                           |                                                        |   |        |  |      |   |        |        
|Supplemental schedule of
non-cash investing
     and financing activities:
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Issuance of common shares for
consulting
     contract |   |        |  |      |   | $      | 220,600 | 
|                                                                           |                                                        |   |        |  |      |   |        |        

|    |  |                                                                                                                                                                                                                                                                                                                                                        
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|12. |  | Discontinued operations:                                                                                                                                                                                                                                                                                                                               
|   
|   
|   
|   
|   
|    |  | On February 1, 2001, the Company adopted a formal plan to sell Fuji
Fabrication, SDN, BHD. The anticipated disposal date is approximately
July 31, 2001. The assets of Fuji Fabrication to be sold consist
primarily of inventories and equipment.                                                                                                     
|   
|   
|   
|   
|   
|    |  | Operating results of Fuji Fabrication for the three months ended April 30,
2001 are shown separately in the accompanying consolidated statement
of income. The consolidated statement of income for April 30, 2000 has
been restated and operating results of Fuji Fabrication are also shown
separately.                                              
|   
|   
|   
|   
|   
|    |  | Net sales of Fuji Fabrication for 2001 and 2,000 were $33,259 and
$255,889, respectively. These amounts are not included in net sales in
the accompanying consolidated statement of income.                                                                                                                                                            
|   
|   
|   
|   
|   
|    |  | In January 2001, the Company disposed of its subsidiary FIMAS SDN BHD and
took back the 5,000,000 shares of its common stock issued in the
acquisition. The net sales of Fimas SDN BHD for the three months ended
April 30, 2000 amounted to $3,921,246. This amount is not included in
net sales in the accompanying consolidated statement of income.

F-11



---






MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Overview and General Developments



|1. |  | At the end of fiscal year 2001 ending January 31, 2001, the Company
disassociated itself from Fimas Sdn. Bhd. (Fimas). Following that
step, Management further evaluated its holdings and product lines and
concluded that it would discontinue the operation of Fuji Fabrication Sdn.
Bhd. (Fuji) located in Malaysia. Management stated that to a large
extent, Fuji had become a duplication of the manufacturing and marketing
efforts of Hong Kong Batteries Industries Ltd. (HKbil) and that its
strategic closing would not affect the Companys overall battery business.
HKbil has several sources of supply with more attractive pricing
structures.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Fuji discontinued operations as of February 1. At the same time,
Management has arranged for a $290,000 asset sale of Fujis equipment,
supplies and material while the Company itself will work down Fujis
receivables and payables. The agreement is in place for the asset sale
calling for a cash payment of $150,000 at the time of asset shipment and
$140,000 over the following three (3) months. That shipment is anticipated
to take place by July 31 (see Liquidity and Capital Resources).                                                                                                                                                             
|  
|   |  | As part of the overall evaluation, Management decided that its SETO
Tech Sdn. Bhd subsidiary (formerly SETO Tech dot com) held a very promising
potential and that it would take steps to enhance and further its business;
to wit: from a relatively dormant year, it projects sales of approximately
$1,000,000 and net income of $100,000. This Malaysian subsidiary provides
contract manufacturing services from multiple third party sources for U.S.
companies seeking lower cost products for their domestic market.                                                                                                                                        
|  
|   |  | Management does not foresee any further organizational restructuring in
the near future. It strongly believes that the Companys product lines are
now consolidated, stabilized and better focussed and that its operations
will be efficient and more profitable. As a result, Management forecasts a
fiscal year 2002 sales increase of at least 42% to $8.0 million and net
income in excess of $600,000.                                                                                                                                                                                                                                                        





---





| |  | Going forward, the Companys prime product lines will be technical
ceramics, diamond coated tools, rechargeable batteries and accessories and
contract manufacturing services.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2. Financial Condition



| |  | Management believes its financial condition remains healthy. As of
April 30, 2001, its cash position is $735,771, essentially the same as that
at the end of the previous quarter. The decreases from the previous quarter
in total current assets and total assets, 9.9% and 3.6% respectively, are
normal results of the impact of the residual expenses of the earlier
mentioned Fimas disassociation and the more current Fuji discontinuation
which are reflected in decreases in accounts receivable, inventory and
prepaid expenses and other assets, 10.0%, 11.5%, and 50.1% respectively. On
the other side of the ledger and in a positive vein, total current
liabilities dropped 9.1% and long-term debt dropped 32.3% while total
shareholders equity increased by 3.3% to $2,296,909 as compared to the
previous quarter.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

FIRST QUARTER 2001 COMPARED TO 2000

In the fiscal quarter ended April 30, 2001, net sales increased 26.2% to
$1,402,840 from $1,112,287 and, disregarding the discontinued operation, income
from operations decreased 11.4% to $121,950 from $136,131 compared to the
previous fiscal quarter ended April 30, 2000. Both factors were mostly
attributable to the battery line of HKbil with its substantial 70.2% increase
in sales and its relatively low gross profit margin of 21.7% which reduced the
Companys gross profit margin by 23.2%. As far as costs were concerned, there
was a 17.7% improvement in selling, general and administrative expenses as a
percentage of sales when comparing the quarter ending April 30, 2001 to the
previous years quarter.

Management commented that it was more than satisfied with the results of
the current quarter since it had experienced an absorption of one time expenses
associated with the aforementioned disassociation of (Fimas) and the
discontinuation of (Fuji). Management further pointed out that extrapolating
the first quarter operating results to predict the results for the fiscal year
was not appropriate because of the anticipated sales increases in the ceramics,
battery and contract manufacturing services product lines.





---



Further, the minimum annual sales forecast of $8.0 million is supported by a $2.0 million
backlog to be shipped over the next four (4) months.

LIQUIDITY AND CAPITAL RESOURCES

At April 30, 2001, the Company had current assets of $2,540,144, inclusive
of $735,771 of unrestricted cash, and current liabilities of $2,028,405
yielding a current ratio of 1.25:1, essentially identical to the ratio of
January 31, 2001. The current ratio is in the upper range of its historical
experience so that Management believes that this measure of a companys ability
to meet current obligations reflects positively on the Companys financial
condition. This is particularly true when one takes into consideration the
expenses associated with the disassociation (Fimas) and the discontinuance
(Fuji).

As described in the Overview and General Developments section, Fujis
asset sale should generate $290,000 in cash over a period of less than 6 months
hence. Although a distinct benefit, Management does not feel that this cash
inflow is essential to meeting its needs and that standard cash flow will
suffice for the remainder of the fiscal year.

There are no plans for large scale, high priced equipment purchases as of
now. The Company did, however, just purchase a laminar flow 10K clean room
work station ($4000) and a computerized profile projector ($30,000). In
addition, it will shortly purchase two (2) portable 10K clean rooms ($40,000).
All of the latter are for its DTI Technology Sdn. Bhd subsidiary in Malaysia
and will be paid for as a consequence of Malaysian financial institution
equipment lease loan facility.

On the other hand, although no such prospects are presently known, funds
for any strategic acquisitions, which the Company has decided to restrict to
the U.S., will have to emanate from new financing sources. Although
discussions are in process for such transactions and additional sources would
have to be explored, there is no assurance that such funds will become
available and if so, that it will be sufficient and on acceptable terms to
satisfy requirements.

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 the first quarter of
fiscal year 2002, the foreign currency exchange gain was $2; and during the
first quarter of fiscal year 2000 the foreign currency exchange loss was $2401,
and thus neither materially impacted operational results.

Management believes that for fiscal year 2002, two factors will continue
to keep its foreign currency exchange losses or gains, if any, 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, as now constituted, 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 may occasionally enter 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 Hong Kong and from the
Companys share of the earnings of these operations, which are denominated in
other currencies.





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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 cost of operation
or the profitability of its products during fiscal year 2002.

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, Hong
Kong, Southeast Asia in general, and other parts of the globe 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,
ceramic, electronic, telecommunication manufacturing industries, and
manufacturing industries in general; 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.





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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

| |                          
| | -------------------------
| | SETO HOLDINGS, INC       
| |                          
| | (Registrant)             
|
| | By  /s/ Eugene J. Pian   
| |                          
| | Eugene J. Pian, President
|
| | Date:  June 14, 2001     

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.

| |                        
| | -----------------------
| | /s/  Eugene J. Pian    
| |                        
| | Eugene J. Pian
Director
|
| | Date:  June 14, 2001   
|
| | /s/  Craig A. Pian     
| |                        
| | Craig A. Pian
Director 
|
| | Date:  June 14, 2001   
|
| | /s/  Francine Pian     
| |                        
| | Francine Pian
Director 
|
| | Date:  June 14, 2001