<PAGE>


                   UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, D.C.  20549

                                     FORM 10-QSB

          [X]  Quarterly Report under Section 13 or 15(d) of the 
               Securities Exchange Act of 1934
          
               For the quarterly period ended September 30, 1998
          
          [ ]  Transition Report under Section 13 or 15(d) of the
               Securities Exchange Act of 1934
          
               For the transition period from _________ to _________

                           Commission file number:  0-8128

                                 FREMONT CORPORATION
          -----------------------------------------------------------------
          (Exact name of small business issuer as specified in its charter)

                      Delaware                             76-0402886      
          -------------------------------            ----------------------
          (State or other jurisdiction of               (I.R.S. Employer 
          incorporation or organization)             Identification Number)

                         9454 Wilshire Boulevard, 6th Floor 
                           Beverly Hills, California 90212
          -----------------------------------------------------------------
                       (Address of principal executive offices)

          Issuer's telephone number, including area code:  (310) 358-1006

                                    Not applicable
          -----------------------------------------------------------------
                (Former name, former address and former fiscal year, 
                            if changed since last report.)

     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 [ ] 

     As of September 30, 1998, the issuer had 5,861,639 shares of common 
stock issued and outstanding.

Transitional Small Business Disclosure Format:  Yes [ ]  No [X]


                                      1


<PAGE>


                         FREMONT CORPORATION AND SUBSIDIARIES

                                        INDEX


PART I.   FINANCIAL INFORMATION

     Item 1.  Financial Statements

              Consolidated Balance Sheets (Unaudited) - 
                December 31, 1997 and September 30, 1998

              Consolidated Statements of Operations (Unaudited) -
                Three Months and Nine Months Ended 
                September 30, 1997 and 1998

              Consolidated Statements of Cash Flows (Unaudited) -
                Nine Months Ended September 30, 1997 and 1998

              Notes to Consolidated Financial Statements
                (Unaudited) - Nine Months Ended 
                September 30, 1997 and 1998

     Item 2.  Management's Discussion and Analysis or 
                Plan of Operation


PART II.  OTHER INFORMATION

     Item 6.  Exhibits and Reports on Form 8-K


SIGNATURES


                                      2


<PAGE>


                         FREMONT CORPORATION AND SUBSIDIARIES
                       CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                               (Amounts in thousands,  
                     except number of shares and per share data)

<TABLE>
<CAPTION>

                           December 31, 1997  September 30, 1998
                           -----------------  ------------------
                             RMB       USD       RMB      USD
                           -------    ------   -------   ------
<S>                        <C>        <C>      <C>       <C>

ASSETS
                    
Current assets:
  Cash and cash 
   equivalents               5,016       604     2,102      253
  Accounts receivable,
   net (Note 1)             72,600     8,747    79,638    9,595 
  Inventories (Note 2)      64,117     7,725    66,722    8,039
  Due from (payable to)
   SCH (Note 3)              8,338     1,005    (2,465)    (297)
  Due from Easy Keen
   (Note 3)                 17,370     2,093    16,191    1,950
  Prepayments and 
   other current assets     21,017     2,532    22,574    2,720
                           -------    ------   -------   ------
    Total current assets   188,458    22,706   184,762   22,260
                           -------    ------   -------   ------

Property, plant and
 equipment                 163,826    19,737   166,605   20,073
Less accumulated
 depreciation              (31,291)   (3,770)  (37,840)  (4,559)
                           -------    ------   -------   ------
                           132,535    15,967   128,765   15,514
                           -------    ------   -------   ------   
Rental deposit to SCH       22,800     2,747    20,700    2,494
Goodwill, net               35,811     4,315    35,076    4,226
Other long-term assets       6,631       799     6,535      788
                           -------    ------   -------   ------
    Total assets           386,235    46,534   375,838   45,282
                           =======    ======   =======   ======
</TABLE>


                                     (continued)


                                      3


<PAGE>


                         FREMONT CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED BALANCE SHEETS (UNAUDITED) (continued)
                               (Amounts in thousands,  
                     except number of shares and per share data)

<TABLE>
<CAPTION>

                           December 31, 1997  September 30, 1998
                           -----------------  ------------------
                             RMB       USD       RMB      USD
                           -------    ------   -------   ------
<S>                        <C>        <C>      <C>       <C>

LIABILITIES AND 
SHAREHOLDERS' EQUITY

Current liabilities:
  Short-term borrowings     75,041     9,041    73,752    8,886
  Accounts payable          32,662     3,935    35,125    4,232
  Accrued expenses and
   other liabilities        49,312     5,941    65,062    7,839
  Taxes payable             12,839     1,547    13,772    1,659
  Finance lease 
   obligations, current
   portion                   8,246       994     8,246      993
                           -------    ------   -------   ------
    Total current 
     liabilities           178,100    21,458   195,957   23,609 

Finance lease
 obligations, 
 non-current portion         2,363       284     1,655      199
Long-term bank loans         6,100       735     6,600      795
Loan from MTE (Note 3)      33,280     4,010    33,280    4,010
Other long-term payables     3,350       403     3,585      432
                           -------    ------   -------   ------
    Total liabilities      223,193    26,890   241,077   29,045
                           -------    ------   -------   ------

Minority interests          11,103     1,338    12,273    1,479
                           -------    ------   -------   ------
</TABLE>


                                     (continued)


                                      4


<PAGE>


                         FREMONT CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED BALANCE SHEETS (UNAUDITED) (continued)
                               (Amounts in thousands,  
                     except number of shares and per share data)

<TABLE>
<CAPTION>

                           December 31, 1997   September 30, 1998
                           -----------------   ------------------
                             RMB       USD        RMB      USD
                           -------    ------    -------   ------
<S>                        <C>        <C>       <C>       <C>

LIABILITIES AND 
SHAREHOLDERS' EQUITY

Shareholders' equity
 (Note 4):
 Common stock, par value
  US$ .001 per share;
  authorized - 
  100,000,000 shares;
  issued and 
  outstanding -
  5,861,639 shares at
  December 31, 1997 and
  September 30, 1998            49         6        49        6
 Additional paid-in 
  capital                  118,134    14,233   118,146   14,235
 Dedicated capital          11,785     1,420    11,785    1,420
 Retained earnings
  (deficit)                 21,971     2,647    (7,492)    (903)
                           -------    ------   -------   ------
    Total shareholders'
     equity                151,939    18,306   122,488   14,758
                           -------    ------   -------   ------
    Total liabilities
     and shareholders'  
     equity                386,235    46,534   375,838   45,282
                           =======    ======   =======   ======
</TABLE>


             See accompanying notes to consolidated financial statements.


                                      5


<PAGE>


                         FREMONT CORPORATION AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                                (Amounts in thousands,
                     except number of shares and per share data)

<TABLE>
<CAPTION>

                                Three Months Ended September 30,
                               ---------------------------------
                                 1997              1998        
                               ---------   ---------------------
                                  RMB         RMB         USD
                               ---------   ---------   ---------
<S>                            <C>         <C>         <C>

Sales
 - to related companies            2,734       4,700         566
 - to others                      46,451      24,032       2,896
                                  ------      ------       -----
                                  49,185      28,732       3,462
                                  ------      ------       ----- 
Cost of goods sold 
 - purchases from related
    companies                      2,380       3,900         470
 - others                         35,446      20,942       2,523
                                  ------      ------       -----
                                  37,826      24,842       2,993
                                  ------      ------       ----- 
Gross profit                      11,359       3,890         469
Selling, general and
  administrative expenses          5,706       4,200         506
Less:  Shared by SCH                (329)       (291)        (35)
Provision for bad debts
  (Note 1)                                    27,070       3,262
Interest expense, net              6,091       2,553         308
Interest income from SCH
  (Note 3)                        (2,500) 
Other income, net                   (430)       (106)        (13)
                                  ------      ------       -----     
  Income (loss) before
    income taxes                   2,821     (29,536)     (3,559)
Benefit from income taxes            304         523          63
                                  ------      ------       ----- 
  Income (loss) before
    minority interests             3,125     (29,013)     (3,496)
Minority interests                   (93)       (891)       (107)
                                  ------      ------       -----
  Net income (loss)                3,032     (29,904)     (3,603)
                                  ======      ======       =====
Net income (loss) per
  common share (Note 5):
  -Basic                             .52       (5.10)       (.61)
                                  ======      ======       =====
  -Diluted                           .51       (5.10)       (.61)
                                  ======      ======       =====
</TABLE>


             See accompanying notes to consolidated financial statements.


                                      6


<PAGE>


                         FREMONT CORPORATION AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                                (Amounts in thousands,
                     except number of shares and per share data)

<TABLE>
<CAPTION>

                                Nine Months Ended September 30,
                               ---------------------------------
                                 1997              1998        
                               ---------   ---------------------
                                  RMB         RMB         USD
                               ---------   ---------   ---------   
<S>                            <C>         <C>         <C>

Sales
 - to related companies           15,681      13,675       1,648
 - to others                     124,697      82,938       9,992
                                 -------      ------      ------
                                 140,378      96,613      11,640
                                 -------      ------      ------ 
Cost of goods sold 
 - purchases from related
    companies                      9,523      12,093       1,457
 - others                         99,100      64,233       7,739
                                 -------      ------      ------
                                 108,623      76,326       9,196
                                 -------      ------      ------ 
Gross profit                      31,755      20,287       2,444
Selling, general and
  administrative expenses         15,152      16,156       1,946   
Less:  Shared by SCH              (2,606)     (3,853)       (464)
Provision for bad debts
  (Note 1)                                    29,070       3,502
Interest expense, net             11,365       7,260         875
Interest income from SCH
  (Note 3)                        (2,500) 
Other (income) expense, net           22         (53)         (6)
                                 -------      ------      ------     
Income (loss) before
    income taxes                  10,322     (28,293)     (3,409)
Provision for income taxes          (871)                     
                                 -------      ------      ------ 
  Income (loss) before
    minority interests             9,451     (28,293)     (3,409)
Minority interests                   882      (1,170)       (141) 
                                 -------      ------      ------
  Net income (loss)               10,333     (29,463)     (3,550)
                                 =======      ======      ======
Net income (loss) per
  common share (Note 5):     
  -Basic                            1.77       (5.03)       (.61)
                                 =======      ======      ====== 
  -Diluted                          1.75       (5.03)       (.61)
                                 =======      ======      ======
</TABLE>


             See accompanying notes to consolidated financial statements.


                                      7


<PAGE>


                         FREMONT CORPORATION AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                (Amounts in thousands)

<TABLE>
<CAPTION>

                                Nine Months Ended September 30,
                               ---------------------------------
                                 1997              1998        
                               ---------   ---------------------
                                  RMB         RMB         USD
                               ---------   ---------   ---------
<S>                            <C>         <C>         <C>

Cash flows from operating 
 activities:
 Net income (loss)                10,333     (29,463)     (3,550)
  Adjustments to reconcile
   net income (loss) to net
   cash provided by (used in)
   operating activities:
    Depreciation                   7,727       6,549         789
    Amortization                   1,099       1,101         133
    Minority interests              (882)      1,170         141       
    Provision for bad debts                   29,070       3,502
    Rental expense offset
     against rental deposit
     to SCH                        2,100       2,100         253
    Fair value of warrant 
     issued as compensation                       12           1
    Changes in operating 
     assets and liabilities:
     (Increase) decrease in -
      Accounts receivable        (27,463)    (36,108)     (4,350)
      Inventories                 16,131      (2,605)       (314)
      Due from (payable to)
       SCH                        (4,300)     10,803       1,302
      Due from Easy Keen           5,743       1,179         142
      Prepayments and other
       current assets            (15,500)     (1,557)       (188)
      Other long-term assets        (835)       (270)        (32)
     Increase (decrease) in -
      Accounts payable            (8,801)      2,463         297 
      Accrued expenses and 
       other liabilities              27      15,750       1,898
      Taxes payable                5,010         933         112
      Other long-term
       payables                        2         235          28
                                  ------      ------      ------
       Net cash provided by
        (used in) operating
        activities                (9,609)      1,362         164
                                  ------      ------      ------
</TABLE>


                                     (continued)


                                      8


<PAGE>


                         FREMONT CORPORATION AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (continued)
                                (Amounts in thousands)

<TABLE>
<CAPTION>

                                Nine Months Ended September 30,
                               ---------------------------------
                                 1997              1998        
                               ---------   ---------------------
                                  RMB         RMB         USD
                               ---------   ---------   ---------   
<S>                            <C>         <C>         <C>

Cash flows from investing
 activities:
  Additions to property, 
   plant and equipment            (2,244)     (2,779)       (335)
                                  ------      ------      ------
       Net cash used in 
        investing activities      (2,244)     (2,779)       (335)
                                  ------      ------      ------

Cash flows from financing
 activities:
  Net proceeds from
   (repayments of)
   short-term borrowings          18,307      (1,289)       (155)
  Net proceeds from 
   long-term bank loans                          500          60
  Payments of finance
   lease obligations              (7,540)       (708)        (85)
  Exercise of warrants,
   net of costs                      896         
                                  ------      ------      ------ 
      Net cash provided by
       (used in) financing
       activities                 11,663      (1,497)       (180)
                                  ------      ------      ------

Cash and cash equivalents:
  Net decrease                      (190)     (2,914)       (351)
  At beginning of period           4,806       5,016         604
                                  ------      ------      ------ 
  At end of period                 4,616       2,102         253 
                                  ======      ======      ======
</TABLE>


             See accompanying notes to consolidated financial statements.


                                      9


<PAGE>


                         FREMONT CORPORATION AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                    NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1998
                                           

1.  ORGANIZATION AND BASIS OF PRESENTATION

ORGANIZATION - Fremont Corporation, a Delaware corporation (the "Company"), 
was incorporated in the State of Utah on April 22, 1955, as Fremont Uranium 
Corporation.  As of July 1, 1993, the Company reincorporated in the State of 
Delaware and changed its name to Fremont Corporation.

BUSINESS - From 1989 through April 28, 1995, the Company was engaged in 
acquiring interests in oil and natural gas properties and in seeking 
potential acquisition or merger opportunities.  The Company entered into a 
Share Exchange Agreement dated as of March 23, 1995, and as amended on March 
30, 1995, with Million Treasure Enterprises Limited ("MTE") and Winfill 
Holdings International Limited ("Winfill"), both of which are British Virgin 
Islands corporations. Pursuant to the Share Exchange Agreement, on April 28, 
1995, the Company acquired from MTE 41,000 shares of common stock of Winfill, 
representing all of the issued and outstanding capital stock of Winfill, in 
exchange for the issuance of 4,760,000 shares of the Company's common stock, 
together with a warrant which allows MTE and/or its designee to receive up to 
2,000,000 shares of Class B common stock in exchange for an equivalent number 
of shares of common stock.  The terms of the Class B common stock are 
identical to that of the common stock (which will be designated Class A 
common stock) except that the holder thereof will be entitled to three votes 
per share.  The warrant can be exercised after the Company's Certificate of 
Incorporation is amended to authorize the Class B common stock.  

Immediately prior to this transaction, after a 1-for-100 reverse stock split 
effective April 28, 1995, the Company had a total of 842,639 shares of common 
stock issued and outstanding, including 770,000 shares issued to certain 
consultants in conjunction with the reverse acquisition which were valued at 
RMB 6,405,000 and charged to operations.  The 4,760,000 shares of common 
stock represented approximately 85% of the outstanding shares of common stock 
of the Company, after the 1-for-100 reverse stock split and the issuance of 
the shares as set forth in the Share Exchange Agreement.  All common share, 
common share equivalent and per share amounts in the accompanying 
consolidated financial statements have been restated to reflect this reverse 
stock split.

Pursuant to the terms of the Share Exchange Agreement, the Company 
transferred to Joseph W. Petrov, the Company's former president and 
controlling shareholder, all of its operating 


                                      10


<PAGE>


assets existing immediately subsequent to the closing of the previously 
described transaction (excluding the shares of Winfill) in exchange for the 
assumption by Mr. Petrov of all of the liabilities of the Company as of the 
closing and the delivery of a release of all obligations owed by the Company 
to an affiliate of Mr. Petrov.  In addition, at the closing, each member of 
the Company's Board of Directors resigned, and was replaced by 
representatives of MTE and Winfill.

South China Bicycles Winfill Limited ("SCBW") is a Sino-foreign joint venture 
formed to engage in the design, manufacture and marketing of bicycles, 
bicycle parts and components and steel tubes.  Winfill owns a 98% equity 
interest in SCBW and South China Bicycles Company (Holdings) Limited ("SCH"), 
a state-owned enterprise incorporated in the People's Republic of China, owns 
the remaining 2% equity interest in SCBW.  Winfill and SCH formed SCBW 
effective July 1, 1994, to acquire and operate the bicycle, bicycle parts and 
components and steel tube manufacturing operations of SCH at a consideration 
of RMB 152,076,000.  Except for a 69% interest in South China Bicycles Co. 
Ltd. ("SCB"), SCBW owns 100% interests in its principal operating 
subsidiaries, all of which are organized in the People's Republic of China.  
The factory operations of SCBW's subsidiaries are located at several sites in 
Zhaoqing City, Guangdong Province, People's Republic of China.  SCB owns a 
99.99% interest in Fogance Industries Limited, which is the Hong Kong-based 
overseas purchasing and sales agent for the Company.  

The 31% minority interest in SCB is owned by a company whose president is a 
director of the Company.  The director is also a shareholder of Hong Kong 
Easy Keen Industries Ltd. ("Easy Keen") and of MTE, the controlling 
shareholder of the Company.  The Company has historically conducted a 
substantial portion of its sales and purchases through related parties (SCH 
and Easy Keen), and has additional significant continuing transactions with 
such related parties.  Sales to related companies are for both domestic and 
export purposes.  

A substantial portion of the Company's sales are made to a small number of 
customers on a open account basis and generally no collateral is required. 
These customers generally account for a substantial portion of total accounts 
receivable.  

BASIS OF PRESENTATION - For accounting purposes, the acquisition of Winfill 
by the Company has been treated as a recapitalization of Winfill with Winfill 
as the acquiror (reverse acquisition).  The consolidated financial statements 
have been prepared in accordance with generally accepted accounting 
principles in the United States of America.  

FOREIGN CURRENCY TRANSLATION - In preparing the consolidated financial 
statements, the financial statements of the Company are 


                                      11


<PAGE>


measured using Renminbi ("RMB") as the functional currency.  All foreign 
currency transactions are translated into RMB using the applicable floating 
rates of exchange as quoted by the People's Bank of China prevailing at the 
date of the transactions.  Monetary assets and liabilities denominated in 
foreign currencies are translated into RMB using the applicable exchange 
rates prevailing at the balance sheet dates.  The resulting exchange gains or 
losses are recorded in the consolidated statements of operations for the 
periods in which they occur.

The Company's share capital is denominated in United States dollars ("USD" or 
"US$") and the reporting currency is the RMB.  For financial reporting 
purposes, the USD share capital amounts have been translated into RMB at the 
applicable rates prevailing on the transaction dates.

Translation of amounts from RMB into USD for the convenience of the reader 
has been made at the noon buying rate in New York City for cable transfers in 
foreign currencies as certified for customs purposes by the Federal Reserve 
Bank of New York on September 30, 1998 of US$1.00 = RMB 8.3.  No 
representation is made that the RMB amounts could have been, or could be, 
converted into USD at that rate or at any other certain rate.  

COMMENTS - The accompanying consolidated financial statements are unaudited 
but, in the opinion of management of the Company, contain all adjustments 
necessary to present fairly the financial position at September 30, 1998, the 
results of operations for the three months and nine months ended September 
30, 1997 and 1998, and the changes in cash flows for the nine months ended 
September 30, 1997 and 1998.  Except as described below, these adjustments 
are of a normal recurring nature.  The consolidated balance sheet as of 
December 31, 1997 is derived from the Company's audited financial statements. 
The accompanying consolidated financial statements include the operations of 
the Company and its subsidiaries.  All significant intercompany accounts and 
transactions have been eliminated in consolidation.

During the three months and nine months ended September 30, 1998, the Company 
recorded a provision for bad debts of RMB 27,070,000 and RMB 29,070,000, 
respectively, primarily as a result of the bankruptcy of a major United 
States-based customer during September 1998.    

Certain information and footnote disclosures normally included in financial 
statements that have been prepared in accordance with generally accepted 
accounting principles have been condensed or omitted pursuant to the rules 
and regulations of the Securities and Exchange Commission, although 
management of the Company believes that the disclosures contained in these 
financial statements are adequate to make the information presented therein 
not misleading.  For further information, refer to the consolidated financial 
statements and notes thereto included in 


                                      12


<PAGE>


the Company's Annual Report on Form 10-KSB for the fiscal year ended December 
31, 1997, as filed with the Securities and Exchange Commission.

The preparation of financial statements in conformity with generally accepted 
accounting principles requires management to make estimates and assumptions 
that affect the reported amounts of assets and liabilities at the date of the 
financial statements and the reported amounts of revenues and expenses during 
the reporting period.  Actual results could differ from those estimates.  The 
results of operations for the three months and nine months ended September 
30, 1998 are not necessarily indicative of the results of operations to be 
expected for the full fiscal year ending December 31, 1998.

Certain prior period amounts have been reclassified to conform with the 
current year presentation.

2.  INVENTORIES

Inventories consisted of the following at December 31, 1997 and September 30,
1998:

<TABLE>
<CAPTION>

                     December 31, 1997      September 30, 1998
                   ---------------------   ---------------------
                      RMB         USD         RMB         USD
                   ----------  ---------   ----------  ---------
<S>                <C>         <C>         <C>         <C>
Raw materials      33,498,000  4,036,000   31,883,000  3,841,000
Work-in-progress    7,330,000    883,000   10,558,000  1,272,000
Finished goods     23,289,000  2,806,000   24,281,000  2,926,000
                   ----------  ---------   ----------  ---------
                   64,117,000  7,725,000   66,722,000  8,039,000
                   ==========  =========   ==========  =========
</TABLE>


3.  RELATED PARTY TRANSACTIONS

LOAN FROM MTE - The unsecured loan of RMB 33,280,000 from MTE, the parent 
company, is denominated in USD, bears no interest, and has no fixed repayment 
terms.     

EASY KEEN - As of December 31, 1997 and September 30, 1998, RMB 17,370,000 
and RMB 16,191,000, respectively, was due from Easy Keen.  A director of the 
Company is also a shareholder of Easy Keen and MTE.  SCBW and Easy Keen have 
agreed to settle the net amount due SCBW by Easy Keen supplying raw materials 
of the same value during 1998, or otherwise by payment in cash.

SCH - During the three months ended September 30, 1997, SCBW and SCH agreed 
that SCH would pay interest on its average outstanding balance due SCBW 
during 1997 at a standard bank reference rate in 


                                      13


<PAGE>


China.  SCBW did not recognize any interest income from SCH during the six 
months ended June 30, 1997.  Accordingly, the Company recorded interest 
income from SCH of RMB 2,500,000 during the three months and nine months 
ended September 30, 1997, and included such amount in the amount due from SCH.

During the nine months ended September 30, 1998, SCH made payments to the 
Company in excess of amounts owed, resulting in a net payable of RMB 
2,465,000 at September 30, 1998, as compared to a net receivable of RMB 
8,338,000 at December 31, 1997.

4.  SHAREHOLDERS' EQUITY

Pursuant to consulting service agreements dated August 1, 1997 and subsequent 
amendments, the Company engaged two consultants to provide corporate and 
financial consulting services for a period of three years commencing January 
1, 1998.  As consideration for their services, the Company agreed to issue to 
the consultants a total of 120,000 shares of common stock in 1998.  As of 
September 30, 1998, the shares of common stock had not been issued.

Pursuant to an agreement dated August 21, 1998, the Company engaged a 
consultant to provide marketing and public relations services through 
February 28, 1999. In conjunction with this agreement, the Company issued a 
stock purchase warrant for 20,000 shares of common stock exercisable at $2.50 
per share, vesting at the rate of one-sixth per month from September 1998 
through February 1999, and expiring on August 21, 2001.  The Company agreed 
to register the warrant at the end of the six month period.  

The Company accounts for warrants granted to non-employees in accordance with 
Statement of Financial Accounting Standards No. 123, "Accounting for 
Stock-Based Compensation" ("SFAS No. 123").  Under SFAS 123, the fair value 
of warrants is calculated according to the Black-Scholes pricing model and 
amortized to expense over the vesting period.  The fair value of the warrant 
of $8,400 is being amortized over the period from September 1998 through 
February 1999, and accordingly, the Company recorded non-cash compensation 
expense related to such warrant of $1,400 during the three months ended 
September 30, 1998.

5.  NET INCOME (LOSS) PER COMMON SHARE
   
Effective December 31, 1997, the Company adopted Statement of Financial 
Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"), which 
establishes standards for computing and presenting earnings per share.  SFAS 
No. 128 replaces the presentation of primary earnings per share and fully 
diluted earnings per share with basic earnings per share and diluted 


                                      14


<PAGE>


earnings per share, respectively.  Basic earnings per share excludes the 
dilutive effects of options and convertible securities, if any, and is 
computed by dividing net income (loss) available to common shareholders by 
the weighted average number of common shares outstanding during the period.  
Diluted earnings per share is computed assuming the exercise or conversion of 
common equivalent shares, if dilutive, consisting of unissued shares under 
stock options, stock purchase warrants and debt instruments.  In accordance 
with SFAS No. 128, all prior periods presented have been restated to conform 
to the new presentation.

At September 30, 1998, potentially dilutive securities representing 76,000 
shares of common stock were outstanding, consisting of a warrant to purchase 
56,000 shares of common stock at US$2.50 per share exercisable through May 
31, 2000, and a warrant to purchase 20,000 shares of common stock at US$1.50 
per share exercisable through August 21, 2001 (see Note 4).  
 
The following tables present the components of basic and diluted earnings 
(loss) per share for the three months and nine months ended September 30, 
1997 and 1998:


                                      15


<PAGE>

<TABLE>
<CAPTION>

                             Three Months Ended September 30,
                            ----------------------------------
                                    1997              1998
                            ---------   ----------------------
                               RMB         RMB          USD
                            ---------   ---------    ---------
<S>                         <C>         <C>          <C>
Basic Earnings (Loss)
Per Share Computation
---------------------
                            
Net income (loss) - as
  reported                  3,032,000  (29,904,000) (3,603,000)
                            =========   ==========   =========

Weighted average number
  of shares of common
  stock outstanding         5,861,639    5,861,639   5,861,639
                            =========    =========   =========

Net income (loss) per
  common share - Basic            .52        (5.10)       (.61)
                            =========    =========   =========


Diluted Earnings (Loss) 
Per Share Computation
-----------------------

Net income (loss) - as
  reported                  3,032,000  (29,904,000) (3,603,000)
                            =========   ==========   =========

Weighted average number
  of shares of common
  stock outstanding         5,861,639    5,861,639   5,861,639 

Net shares of common 
  stock issuable upon
  exercise of warrants         77,036        -- (1)      -- (1)
                            ---------    ---------   ---------
Weighted average number
  of shares of common
  stock and common 
  stock equivalents
  outstanding               5,938,675    5,861,639   5,861,639
                            =========    =========   =========

Net income (loss) per
  common share - Diluted          .51        (5.10)       (.61) 
                            =========    =========   =========
</TABLE>

(1) Not calculated, as effect would be anti-dilutive.

                                      16


<PAGE>

<TABLE>
<CAPTION>

                              Nine Months Ended September 30,   
                            ----------------------------------
                                     1997              1998
                            ---------   ----------------------
                               RMB         RMB          USD
                            ---------   ---------    --------- 
<S>                         <C>         <C>          <C>
Basic Earnings (Loss)
Per Share Computation
---------------------
                            
Net income (loss) - as
  reported                 10,333,000  (29,463,000) (3,550,000)
                           ==========   ==========   =========  

Weighted average number
  of shares of common
  stock outstanding         5,839,417    5,861,639   5,861,639
                            =========    =========   =========

Net income (loss) per
  common share - Basic           1.77        (5.03)       (.61)
                            =========    =========   =========


Diluted Earnings (Loss) 
Per Share Computation
-----------------------

Net income (loss) - as
  reported                 10,333,000  (29,463,000) (3,550,000)
                           ==========   ==========   =========

Weighted average number 
  of shares of common
  stock outstanding         5,839,417    5,861,639   5,861,639 

Net shares of common
  stock issuable upon
  exercise of warrants         73,401        -- (1)      -- (1)
                            ---------    ---------   ---------   
Weighted average number
  of shares of common 
  stock and common
  stock equivalents
  outstanding               5,912,818    5,861,639   5,861,639
                            =========    =========   =========

Net income (loss) per
  common share - Diluted         1.75        (5.03)       (.61) 
                            =========    =========   =========
</TABLE>

(1) Not calculated, as effect would be anti-dilutive.

                                      17


<PAGE>


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Cautionary Statement Pursuant to Safe Harbor Provisions of the Private 
Securities Litigation Reform Act of 1995:

     This Quarterly Report on Form 10-QSB for the quarterly period ended 
September 30, 1998 contains "forward-looking statements" within the meaning 
of the Federal securities laws.  These forward-looking statements include, 
among others, statements concerning the Company's expectations regarding 
sales trends, gross margin trends, the availability of short-term bank 
borrowings to fund operations and capital expenditures, the repayment of 
loans, facility expansion plans, and other statements of expectations, 
beliefs, future plans and strategies, anticipated events or trends, and 
similar expressions concerning matters that are not historical facts.  The 
forward-looking statements contained in this Quarterly Report on Form 10-QSB 
for the quarterly period ended September 30, 1998 are subject to risks and 
uncertainties that could cause actual results to differ materially from those 
results expressed in or implied by the statements contained herein. 

Recent Development:

     As a result of the Company's common stock having failed to maintain a 
closing bid price greater than or equal to $1.00 per share, The Nasdaq Stock 
Market, Inc. notified the Company that its common stock was subject to 
delisting from The Nasdaq SmallCap Market, effective October 8, 1998.  The 
Company is evaluating its alternatives, and has filed an appeal of the 
delisting action, however, there can be no assurances that the Company will 
be successful in preventing its common stock from being delisted.  If the 
Company's common stock is delisted from The Nasdaq SmallCap Market, the 
Company expects that its common stock will subsequently be traded on the OTC 
Electronic Bulletin Board.    

Overview:

     Effective April 28, 1995, the Company acquired Winfill.  Winfill owns a 
98% interest in SCBW, a Sino-foreign joint venture engaged in the design, 
manufacture and marketing of bicycles, bicycle parts and components, steel 
tubes, and exercise equipment.  Winfill commenced operations effective July 
1, 1994.  Except for a 69% interest in SCB, SCBW owns 100% interests in its 
principal operating subsidiaries, all of which are organized in the People's 
Republic of China.  The factory operations of SCBW's subsidiaries are located 
at several sites in Zhaoqing City, Guangdong Province, People's Republic of 
China. SCB owns a 99.99% interest in Fogance Industries Limited, which is the 
Hong Kong-based overseas purchasing and sales agent for the Company.        


                                      18


<PAGE>


For accounting purposes, the transaction has been treated as a 
recapitalization of Winfill with Winfill as the acquiror (reverse 
acquisition). The consolidated financial statements include the accounts of 
Winfill and its majority owned and controlled subsidiaries.  

     The Company has historically conducted a substantial portion of its 
sales and purchases through related parties, and has additional significant 
continuing transactions with such related parties.  Sales to related 
companies are for both domestic and export purposes.   

     A substantial portion of the Company's sales are made to a small number 
of customers on a open account basis and generally no collateral is required. 
These customers generally account for a substantial portion of total accounts 
receivable.  

Consolidated Results of Operations - Three Months and Nine Months Ended 
September 30, 1997 and 1998:

Sales:

     Sales for the three months ended September 30, 1998 were RMB 28,732,000, 
as compared to RMB 49,185,000 for the three months ended September 30, 1997, 
a decrease of RMB 20,453,000 or 41.6%.  Sales to related companies for the 
three months ended September 30, 1998 were RMB 4,700,000 or 16.4% of sales, 
as compared to RMB 2,734,000 or 5.6% of sales for the three months ended 
September 30, 1997, an increase of RMB 1,966,000 or 71.9%.  Sales to 
unrelated companies for the three months ended September 30, 1998 were RMB 
24,032,000 or 83.6% of sales, as compared to RMB 46,451,000 or 94.4% of sales 
for the three months ended September 30, 1997, a decrease of RMB 22,419,000 
or 48.3%.    

     Sales for the nine months ended September 30, 1998 were RMB 96,613,000, 
as compared to RMB 140,378,000 for the nine months ended September 30, 1997, 
a decrease of RMB 43,765,000 or 31.2%.  Sales to related companies for the 
nine months ended September 30, 1998 were RMB 13,675,000 or 14.2% of sales, 
as compared to RMB 15,681,000 or 11.2% of sales for the nine months ended 
September 30, 1997, a decrease of RMB 2,006,000 or 12.8%.  Sales to unrelated 
companies for the nine months ended September 30, 1998 were RMB 82,938,000 or 
85.8% of sales, as compared to RMB 124,697,000 or 88.8% of sales for the nine 
months ended September 30, 1997, a decrease of RMB 41,759,000 or 29.7%.

     For the three months ended September 30, 1998, PRC domestic sales were 
RMB 9,459,000 or 32.9% of sales, and export sales were RMB 19,273,000 or 
67.1% of sales.  For the three months ended September 30, 1997, PRC domestic 
sales were RMB 7,511,000 or 15.3% of sales, and export sales were RMB 
41,674,000 or 84.7% of 


                                      19


<PAGE>


sales.  For the three months ended September 30, 1998, sales of bicycles and 
bicycle parts were RMB 26,558,000 or 92.4% of sales, and sales of exercise 
equipment were RMB 2,174,000 or 7.6% of sales.  For the three months ended 
September 30, 1997, sales of bicycles and bicycles parts were RMB 29,038,000 
or 59.0% of sales, and sales of exercise equipment were RMB 20,147,000 or 
41.0% of sales.

     For the nine months ended September 30, 1998, PRC domestic sales were 
RMB 41,152,000 or 42.6% of sales, and export sales were RMB 55,461,000 or 
57.4% of sales.  For the nine months ended September 30, 1997, PRC domestic 
sales were RMB 30,856,000 or 22.0% of sales, and export sales were RMB 
109,522,000 or 78.0% of sales.  For the nine months ended September 30, 1998, 
sales of bicycles and bicycle parts were RMB 73,836,000 or 76.4% of sales, 
and sales of exercise equipment were RMB 22,777,000 or 23.6% of sales.  For 
the nine months ended September 30, 1997, sales of bicycles and bicycles 
parts were RMB 83,861,000 or 59.7% of sales, and sales of exercise equipment 
were RMB 56,517,000 or 40.3% of sales.
    
     SCBW began to manufacture an exercise equipment product line during 1996 
and a bicycle with an automatic transmission during 1997.  SCBW manufactures 
such products on a purchase order basis for original equipment manufacturers 
("OEMs") that market their products in the United States under various brand 
names through infomercials, television home shopping networks and mass market 
retailers.  As a contract manufacturer, SCBW does not own any rights with 
respect to these products or the names under which they are marketed.        

     The decrease in sales in 1998 as compared to 1997 was primarily 
attributable to the following factors:

ASIAN FINANCIAL CRISIS - During late 1997, the Company began to suffer from 
the effects of the Asian financial crisis.  Although China was not directly 
affected by the turmoil in South Korea and other Asian countries, the 
devaluation of currencies in those countries had the effect of undermining 
the competitiveness of China's basic steel, petrochemical and textile 
industries, and reducing one of the Company's main competitive advantages, 
its low labor cost.  Manufacturers in Taiwan, which represent the Company's 
primarily competition, have reduced their prices over the last several 
months, thus decreasing demand for the Company's products and increasing 
pressure on the Company's revenues and gross margin.  Industrial production 
in China has decreased by one-third and retail sales have dropped by half in 
1998 as compared to 1997.  Export sales, which are a critical part of the 
Chinese economy, have been negatively impacted by these factors, and have 
been exacerbated by the central government of China's policy of maintaining a 
strong currency and refusing to devalue its currency.  The significant 
reduction in the Company's export 


                                      20


<PAGE>


sales reflects this trend.  In addition, as a result of the turmoil and 
uncertainty in the Chinese economy, short-term bank credit has been 
restricted by the central government of China. 
     
WORKING CAPITAL REQUIREMENTS - The completion of the new production facility 
at the end of 1995 substantially increased the Company's production capacity. 
However, the Company's ability to increase production is dependent on 
adequate working capital.  The Company has not been successful in completing 
a substantial long-term debt or equity financing to provide the working 
capital necessary to support increased production levels at the new facility. 
The Company's ability to utilize short-term bank debt to support its 
operations has been impaired as a result of the Asian financial crisis, as 
short-term bank debt is now subject to restrictions imposed by the central 
government of China.  As a result, during the latter part of 1997, the 
Company began to experience a shortage of working capital, which has caused 
the Company to decline orders that under normal conditions it would have 
accepted.  In addition, the Company's normal production cycle and its ability 
to provide timely shipments to customers was negatively impacted.  As a 
result of this working capital shortage, the Company has instituted a change 
in the way it acquires certain out-sourced parts.  The Company has arranged 
for certain customers to purchase, pay for and deliver specific parts, such 
as bicycle pedals and derailleurs, to the Company's production facility that 
in the past the Company would have purchased directly from the manufacturer.  
Sales of approximately RMB 7,782,000 and RMB 33,290,000 during the three 
months and nine months ended September 30, 1998, respectively, were recorded 
under this new policy.  This policy allows the Company to maintain a higher 
level of unit sales than it could otherwise maintain under the current 
operating conditions.  In addition, in order to remain competitive, during 
1998 the Company began to grant extended credit terms to certain export 
accounts, which has also negatively impacted the Company's operating cash 
flow. Accordingly, the Company expects that it will continue to experience 
working capital shortages during the remainder of 1998 and 1999, which could 
continue to have a material adverse effect on results of operations.  

DOMESTIC SALES OF PARTS - The Company is a major supplier of parts to other 
Chinese bicycle manufacturers which are significant exporters of finished 
bicycles to the United States.  The domestic sales of parts decreased in 1998 
as compared to 1997 as a result of the Asian financial crisis, which had the 
effect of reducing the export of finished bicycles from China to the United 
States.  

BANKRUPTCY OF MAJOR CUSTOMER - The Company's export sales of exercise 
equipment decreased by RMB 17,973,000 or 89.3% during the three months ended 
September 30, 1998 as compared to the three months ended September 30, 1997, 
as a result of the 


                                      21


<PAGE>


bankruptcy of a major United States-based customer of the Company, which 
accounted for a substantial portion of the Company's exercise equipment 
sales.  The Company had also manufactured a bicycle with an automatic 
transmission for this customer. This customer had accounted for approximately 
RMB 53,465,000 or 31% of the Company's sales for the year ended December 31, 
1997.  As a result of the bankruptcy filing, the Company recorded a provision 
for bad debts with respect to this customer of RMB 24,070,000 during the 
three months and nine months ended September 30, 1998.  The Company 
anticipates that its sales of exercise equipment, as well as sales of the 
bicycle with an automatic transmission, will be negatively impacted during 
the remainder of 1998 and during 1999 as a result of the bankruptcy of this 
customer.       

     As a result of the foregoing factors, the Company expects that its 
operations will continue to be adversely affected during the remainder of 
1998 and during 1999.  

Gross Profit:

     Gross profit for the three months ended September 30, 1998 was RMB 
3,890,000 or 13.5% of sales, as compared to RMB 11,359,000 or 23.1% of sales 
for the three months ended September 30, 1997.  Gross profit for the nine 
months ended September 30, 1998 was RMB 20,287,000 or 21.0% of sales, as 
compared to RMB 31,755,000 or 22.6% of sales for the nine months ended 
September 30, 1997.

     The decrease in gross profit as a percentage of sales in 1998 as 
compared to 1997 was a result of the substantial decrease in sales, resulting 
in less efficient utilization of fixed manufacturing costs.  Also 
contributing to the decrease in gross profit was the significant reduction in 
sales of exercise equipment, as well as bicycles with the automatic 
transmission, both of which have higher margins than standard bicycles, as a 
result of the bankruptcy of the customer described above.  

Selling, General and Administrative Expenses:

     Selling, general and administrative expenses for the three months ended 
September 30, 1998 decreased by RMB 1,468,000 or 27.3%, to RMB 3,909,000 or 
13.6% of sales, as compared to RMB 5,377,000 or 10.9% of sales for the three 
months ended September 30, 1997, net of amounts assumed by SCH.  Selling, 
general and administrative expenses for the nine months ended September 30, 
1998 decreased by RMB 243,000 or 1.9%, to RMB 12,303,000 or 12.5% of sales, 
as compared to RMB 12,546,000 or 8.9% of sales for the nine months ended 
September 30, 1997, net of amounts assumed by SCH.  During the three months 
and nine months ended September 30, 1998, the Company recorded a provision 
for bad debts of RMB 27,070,000 and RMB 29,070,000, respectively.  Of such 
amounts, RMB 24,070,000 was specifically related to the bankruptcy of the 


                                      22


<PAGE>


customer described above.  No provision for bad debts was recorded during the 
three months and nine months ended September 30, 1997. 

     Selling, general and administrative expenses decreased on an absolute 
basis in 1998 as compared to 1997 as a result of the decrease in sales, which 
caused a decrease in certain sales-related expenses, as well as a reduction 
in the number of employees in response to declining sales.  General and 
administrative expenses increased as a percentage of sales in 1998 as 
compared to 1997 as a result of lower sales over which to allocate fixed 
costs. 
  
     Pursuant to a cost-sharing agreement between SCBW and SCH effective 
January 1, 1995, SCH agreed to bear 40% of certain selling, general and 
administrative expenses incurred by SCBW, which represents its share of 
management and selling activities incurred by SCBW on SCH's behalf.  For the 
three months ended September 30, 1998 and 1997, such amounts aggregated 
approximately RMB 291,000 and RMB 329,000, respectively.  For the nine months 
ended September 30, 1998 and 1997, such amounts aggregated approximately RMB 
3,853,000 and RMB 2,606,000, respectively.       
      
Interest Income and Interest Expense:

     Interest expense for the three months ended September 30, 1998 was RMB 
2,553,000 or 8.9% of sales, as compared to RMB 6,091,000 or 12.4% of sales 
for the three months ended September 30, 1997.  Interest expense for the nine 
months ended September 30, 1998 was RMB 7,260,000 or 7.5% of sales, as 
compared to RMB 11,365,000 or 8.1% of sales for the nine months ended 
September 30, 1997. Interest expense decreased in 1998 as compared to 1997 as 
a result of a reduction in short-term borrowings.  The reduction in 
short-term borrowings was accomplished through an agreement between SCBW and 
SCH pursuant to which SCH assumed SCBW's short-term borrowings of RMB 
49,997,000 effective October 1, 1997, as settlement of amounts due SCBW by 
SCH.      

     Interest income for the three months and nine months ended September 30, 
1998 was not material.  During the three months and nine months ended 
September 30, 1997, the Company recorded approximately RMB 2,500,000 of 
interest income on amounts due from SCH primarily for the purchase of goods, 
which was calculated at a rate of 8.0% per annum.  Due to the significant 
reduction in the balance due from SCH, the Company does not expect interest 
income from SCH to be material during 1998.  

Net Income (Loss):

     For the three months ended September 30, 1998, net loss was (RMB 
29,904,000), as compared to net income of RMB 3,032,000 for 


                                      23


<PAGE>


the three months ended September 30, 1997.  

     For the nine months ended September 30, 1998, net loss was (RMB 
29,463,000), as compared to net income of RMB 10,333,000 for the nine months 
ended September 30, 1997.  

Consolidated Financial Condition - September 30, 1998:

     Liquidity and Capital Resources -   

     For the nine months ended September 30, 1998, the Company's operations 
provided cash resources of RMB 1,362,000, as compared to utilizing cash 
resources of RMB 9,609,000 for the nine months ended September 30, 1997.  The 
most significant components of the cash provided by operations in 1998 were 
the decrease in due from (payable to) SCH of RMB 10,803,000 and the increase 
in accrued expenses and other liabilities of RMB 15,750,000, which was offset 
by the increase in accounts receivable of RMB 36,108,000.  The significant 
increase in net accounts receivable between December 31, 1997 and September 
30, 1998 was primarily a result of extended credit terms that the Company 
began to grant to certain export accounts beginning in 1998.  As a result of 
the recent bankruptcy of a significant customer, the Company is reviewing its 
credit evaluation procedures in order to control its credit risk. 

     During the nine months ended September 30, 1998, SCH made payments to 
the Company in excess of amounts owed, resulting in a net payable of RMB 
2,465,000 at September 30, 1998, as compared to a net receivable of RMB 
8,338,000 at December 31, 1997.

     Operating cash flow is adversely affected by the long collection cycle 
that is typical of Chinese companies that have a substantial proportion of 
their customers in China.  Accordingly, to the extent that the Company's 
business in China increases, the Company expects that its operating cash flow 
will be negatively impacted.

     The Company had a working capital deficit of (RMB 11,195,000) at 
September 30, 1998, as compared to working capital of RMB 10,358,000 at 
December 31, 1997. As a result, the Company's current ratio at September 30, 
1998 was .94:1, as compared to 1.06:1 at December 31, 1997.  The decrease in 
working capital was caused primarily by increases in the provision for bad 
debts and in accrued expenses and other liabilities, and the decrease in due 
from (payable to) SCH.  

     Except with regard to the initial transaction pursuant to which SCBW was 
organized and capitalized, the Company's primary method of financing its 
capital requirements has been borrowings.  Short-term borrowings consist 
primarily of bank loans, are 


                                      24


<PAGE>


unsecured, repayable within one year, have interest rates ranging from 7.63% 
to 21.6%, and have been utilized for working capital purposes and, prior to 
1996, to finance the expansion of the production facility and the purchase of 
equipment.    

     During the nine months ended September 30, 1998, short-term borrowings 
decreased by RMB 1,289,000, and long-term borrowings increased by RMB 
500,000. As of September 30, 1998, short-term borrowings were RMB 73,752,000 
and long-term borrowings were RMB 6,600,000.  

     SCBW is considered by the government of China as an important component 
of the bicycle production and exporting base of China, and has been 
designated for continuing financial support by the Zhaoqing Branch of the 
Bank of China.  SCBW has utilized borrowings from the Bank of China to 
support increases in production and sales, and to finance the expansion of 
the production facility and to purchase equipment.  Pursuant to guidelines 
issued by the government of China, SCBW increased its short-term borrowings 
during 1995, 1996 and 1997 from the Bank of China with loans having 
maturities ranging from one to two months. The working capital loans that the 
Bank of China has made to SCBW are renewed, and new loans have historically 
been available, as long as SCBW's production and business operations have 
continued to meet certain operating and financial criteria.  Management 
believes that the Bank of China will continue to renew SCBW's existing 
borrowings.  However, increases to SCBW's borrowing base, although granted in 
the past, are now subject to restrictions imposed by the central government 
of China. 

     In connection with the formation of SCBW as a Sino-foreign joint venture 
between SCH and Winfill in June 1994, Winfill issued a note payable to MTE 
for USD 5,000,000.  MTE assigned USD 1,000,000 of such note to a third party, 
which is included in accrued expenses and other liabilities in the 
consolidated balance sheets at December 31, 1997 and September 30, 1998, and 
which became due and payable on June 30, 1998, at which time it became a 
demand note.  The USD 4,000,000 note payable to MTE is unsecured, bears no 
interest, has no fixed repayment terms, and is expected to remain outstanding 
for the indefinite future.  There have been no payments on this note, which 
is presented as loan from MTE of RMB 33,280,000 in the consolidated balance 
sheets at December 31, 1997 and September 30, 1998.   

     Additions to property, plant and equipment totalled RMB 2,779,000 during 
the nine months ended September 30, 1998.  SCBW does not expect to make any 
major capital expenditures during the remainder of 1998, and had no 
significant capital expenditure commitments outstanding at September 30, 1998.

     As a result of the recent operating losses and the decrease in net 
working capital, the Company intends to commence a review 


                                      25


<PAGE>


of the useful life of goodwill and assess whether there has been any 
permanent diminution in value.  The Company is currently unable to predict 
the results of such review and the potential effect on the Company's results 
of operations and financial position.  
      

     As of December 31, 1997 and September 30, 1998, RMB 17,370,000 and RMB 
16,191,000, respectively, was due from Easy Keen.  A director of the Company 
is also a shareholder of Easy Keen and MTE.  SCBW and Easy Keen have agreed 
to settle the net amount due SCBW by Easy Keen supplying raw materials of the 
same value during 1998, or otherwise by payment in cash.  The Company is 
reviewing various alternatives in an attempt to resolve this matter by 
December 31, 1998.

     The Company believes that its operations will be constrained during the 
remainder of 1998 and during 1999 as a result of reduced sales and operating 
margins, and the reduction in working capital available to fund operations.  
As a result, although the Company expects that it will be able to continue to 
operate, it may have to reject certain purchase orders, reduce operating and 
employee levels, delay payments to suppliers, and rely on advances from SCH 
for working capital.  However, the inability of the Company to significantly 
increase sales and maintain acceptable gross margins in 1999 may result in 
insufficient working capital resources available to fund operations, and 
accordingly, the Company may have to substantially curtail operating 
activities.

     In order for the Company to increase sales and fully utilize the 
expanded production capacity of the new production complex, the Company will 
require operating capital substantially in excess of that normally available 
from domestic Chinese sources.  The Company has been unsuccessful to date in 
arranging a substantial long-term debt or equity financing, and there can be 
no assurances that the Company will be successful in completing such a 
financing in the future.  

     Inflation and Currency Matters - 

     In recent years, the Chinese economy has experienced periods of rapid 
economic growth as well as relatively high rates of inflation, which in turn 
has resulted in the periodic adoption by the Chinese government of various 
corrective measures designed to regulate growth and contain inflation.  Since 
1993, the Chinese government has implemented an economic program designed to 
control inflation, which has resulted in the tightening of working capital 
available to Chinese business enterprises.  The recent Asian financial crisis 
has resulted in a general reduction in domestic production and sales, and a 
general tightening of credit, throughout China.  The success of the Company 
depends in substantial part on the continued growth and development of the 
Chinese economy.

     Foreign operations are subject to certain risks inherent in conducting 
business abroad, including price and currency exchange 


                                      26


<PAGE>


controls, and fluctuations in the relative value of currencies.  A 
substantial portion of the Company's revenues are denominated in RMB.  As a 
result, devaluation of the RMB against the USD would adversely affect the 
Company's financial performance when measured in USD.  Although prior to 1994 
the RMB experienced significant devaluation against the USD, the RMB has 
remained fairly stable since then.  In addition, the RMB is not freely 
convertible into foreign currencies, and the ability to convert the RMB is 
subject to the availability of foreign currencies.  Effective December 1, 
1998, all foreign exchange transactions involving the RMB must take place 
through authorized banks in China at the prevailing exchange rates quoted by 
the People's Bank of China.  

     The continuing Asian financial crisis has inhibited the growth and 
general level of activity of the Chinese economy, with respect to both 
Chinese domestic sales and export sales, which has had a negative impact on 
the Company's results of operations, financial condition and cash flows.  In 
addition, as a result of the Asian financial crisis, China recently tightened 
foreign exchange controls. However, the Company does not expect that the 
recently tightened foreign exchange controls will affect the Company's 
ability to fund its activities outside of China.

     Although the central government of China has recently indicated that it 
does not intend to devalue its currency in the near future, devaluation still 
remains a possibility.  Should the central government of China decide to 
devalue its currency, the Company believes that such an action would have a 
positive impact on operations by stimulating export sales, which are 
denominated in USD. As of September 30, 1998, the Company's only 
USD-denominated debt, which would be more expensive to repay in the event of 
a devaluation, are the capital lease obligations of RMB 9,901,000 and the MTE 
loan of RMB 33,280,000.  However, MTE is the Company's parent, owning 
approximately 80% of the Company's outstanding common stock, and the loan is 
not currently scheduled for repayment.  

Year 2000 Issue:

     The Year 2000 Issue is the result of computer programs being written 
using two digits rather than four digits to define the applicable year.  
Computer programs that have sensitive software may recognize a date using 
"00" as the year 1900 rather than the year 2000.  This could result in a 
system failure or miscalculations causing disruptions of operations, 
including, among other things, a temporary inability to process transactions, 
send invoices or engage in similar normal business activities.

     The Company does not rely on computers with respect to most 


                                      27


<PAGE>


aspects of its operations.  Accordingly, based on a recent internal 
assessment, the Company does not believe that the cost to modify its existing 
software and/or convert to new software will be significant.  


                                      28


<PAGE>


                   PART II.  OTHER INFORMATION


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

    (a)  Exhibits:

         27   Financial Data Schedule (electronic filing only)

    (b)  Reports on Form 8-K -

         Three Months Ended September 30, 1998:  None.  


                                      29


<PAGE>


                                      SIGNATURES


     In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.



                                        FREMONT CORPORATION
                                        -------------------
                                            (Registrant)



Date:  November 11, 1998           By:  /s/ WINSTON WU
                                        -------------------------
                                        Winston Wu (Wu Fa Pei)
                                        President
                                        (Duly authorized officer)
                                        


Date:  November 11, 1998           By:  /s/ EDWARD DING
                                        -------------------------
                                        Edward Ding (Ding Yuehua)
                                        Vice President and Chief
                                         Financial Officer
                                        (Principal financial
                                         officer)


                                      30