<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, 1997
                                    ------------------

[ ]  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 October 31, 1997, the issuer had 5,861,639 shares of common stock
issued and outstanding.

Transitional Small Business Disclosure Format:
                              Yes         No   X
                                  -----      -----     

Total sequentially numbered pages in this document:  29.

                                       1
<PAGE>
 
                     FREMONT CORPORATION AND SUBSIDIARIES
                     ------------------------------------

                                     INDEX
                                     -----


PART I.  FINANCIAL INFORMATION

     Item 1.  Financial Statements

              Condensed Consolidated Balance Sheets (Unaudited) -
              December 31, 1996 and September 30, 1997
 
              Condensed Consolidated Statements of Operations
              (Unaudited) - Three Months and Nine Months Ended
              September 30, 1996 and 1997
 
              Condensed Consolidated Statements of Cash Flows
              (Unaudited) - Nine Months Ended September 30, 1996
              and 1997
 
              Notes to Condensed Consolidated Financial
              Statements (Unaudited) - Three Months and Nine
              Months Ended September 30, 1996 and 1997

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


PART II.  OTHER INFORMATION

     Item 5.  Other Information

     Item 6.  Exhibits and Reports on Form 8-K


SIGNATURES

                                       2
<PAGE>
 
                     FREMONT CORPORATION AND SUBSIDIARIES
               CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                 (Amounts in thousands, except for share data)
<TABLE>
<CAPTION>
 
 
                              December 31, 1996    September 30, 1997
                              -------------------  ------------------
                                 RMB        USD       RMB      USD
                              ---------   -------   -------   ------
<S>                           <C>         <C>       <C>       <C>
ASSETS
 
Current assets:
  Cash and cash
   equivalents                   4,806        579     4,616      556
  Accounts receivable,
   net                          51,812      6,242    79,275    9,551
  Inventories (Note 2)          60,403      7,277    44,272    5,334
  Due from SCH (Note 6)         62,258      7,501    66,558    8,019
  Due from Easy Keen
   (Note 6)                     35,158      4,236    29,415    3,544
  Prepayments and
   other current assets         26,151      3,151    41,651    5,018
                               -------     ------   -------   ------
    Total current assets       240,588     28,986   265,787   32,022
                               -------     ------   -------   ------
 
Property, plant and
 equipment                     130,658     15,742   132,902   16,012
Less accumulated
 depreciation                  (21,398)    (2,578)  (29,125)  (3,509)
                               -------     ------
                               109,260     13,164   103,777   12,503
                               -------     ------   -------   ------
Prepayment to SCH for
 property                       20,000      2,410    20,000    2,410
Rental deposit to SCH           25,600      3,084    23,500    2,831
Bank deposits                   19,319      2,328    19,319    2,328
Goodwill, net                   36,788      4,432    36,053    4,344
Other long-term assets           7,008        844     7,479      901
                               -------     ------   -------   ------
    Total assets               458,563     55,248   475,915   57,339
                               =======     ======   =======   ======
 
</TABLE>



                                  (continued)

                                       3
<PAGE>
 
                     FREMONT CORPORATION AND SUBSIDIARIES
         CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)(continued)
                 (Amounts in thousands, except for share data)
<TABLE>
<CAPTION>


                            December 31, 1996   September 30, 1997
                            -----------------   ------------------
                              RMB       USD        RMB      USD
                            -------    ------    -------   ------
<S>                         <C>       <C>      <C>       <C> 
LIABILITIES AND
SHAREHOLDERS' EQUITY
 
Current liabilities:
  Short-term borrowings        150,681    18,154   168,988   20,360
  Accounts payable              45,070     5,430    36,269    4,370
  Accrued expenses and
   other liabilities            41,137     4,956    41,164    4,959
  Taxes payable                  8,795     1,060    13,805    1,663
  Finance lease
   obligations, current
   portion                      12,469     1,502     9,421    1,135
                               -------    ------   -------   ------
    Total current
     liabilities               258,152    31,102   269,647   32,487
 
Finance lease
 obligations                     7,089       854     2,597      313
Loan from MTE (Note 3)          33,280     4,010    33,280    4,010
Other long-term payables         2,764       333     2,766      333
                               -------    ------   -------   ------
    Total liabilities          301,285    36,299   308,290   37,143
                               -------    ------   -------   ------
 
Minority interests              11,980     1,443    11,098    1,337
                               -------    ------   -------   ------
 
</TABLE>



                                  (continued)

                                       4
<PAGE>
 
                     FREMONT CORPORATION AND SUBSIDIARIES
         CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)(continued)
                 (Amounts in thousands, except for share data)

<TABLE>
<CAPTION>

                           December 31, 1996   September 30, 1997
                           -----------------   ------------------
                             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 -        
  5,821,639 shares at  
  December 31, 1996 and
  5,861,639 shares at  
  September 30, 1997             48        6        49        6
 Additional paid-in    
  capital                   117,247   14,126   118,142   14,234
 Dedicated capital           11,785    1,420    11,785    1,420
 Retained earnings           16,218    1,954    26,551    3,199
                            -------   ------   -------   ------
  Total shareholders'
   equity                   145,298   17,506   156,527   18,859
                            -------   ------   -------   ------
  Total liabilities
   and shareholders'
   equity                   458,563   55,248   475,915   57,339
                            =======   ======   =======   ======
 
</TABLE>



                           See accompanying notes to
                  condensed consolidated financial statements.

                                       5
<PAGE>
 
                     FREMONT CORPORATION AND SUBSIDIARIES
          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                 (Amounts in thousands, except for share data)
<TABLE>
<CAPTION>
 
                                       Three Months Ended September 30,
                                      -----------------------------------
                                         1996               1997
                                      ----------   ----------------------
                                         RMB          RMB          USD
                                      ---------    ---------    ---------
<S>                                   <C>          <C>          <C>
Sales
 - to related companies                   2,104        2,734          329
 - to others                             54,568       46,451        5,597
                                      ---------    ---------    ---------
                                         56,672       49,185        5,926
Cost of goods sold
 - purchases from related
    companies                             3,055        2,380          287
 - others                                42,472       35,446        4,271
                                      ---------    ---------    ---------
Gross profit                             11,145       11,359        1,368
Selling, general and
  administrative expenses                 4,796        5,706          687
Less:  shared by SCH                       (189)        (329)         (40)
Amortization of deferred
  pre-operating costs (Note 5)            2,134
Interest expense, net                     2,043        6,091          734
Interest income, 
  from SCH (Note 6)                                   (2,500)        (301)
Other income, net                           (84)        (430)         (52)
                                      ---------    ---------    ---------
  Income before income taxes              2,445        2,821          340
(Provision) benefit for
  income taxes                             (250)         304           36
                                      ---------    ---------    ---------
  Income before minority
   interests                              2,195        3,125          376
Minority interests                       (1,329)         (93)         (11)
                                      ---------    ---------    ---------
  Net income                                866        3,032          365
                                      =========    =========    =========
Net income per common share
  (Note 1)                                  .15          .51          .06
                                      =========    =========    =========
Weighted average number of
  common shares outstanding
  (Note 1)                            5,902,514    5,938,675    5,938,675
                                      =========    =========    =========
 
</TABLE>
                           See accompanying notes to
                  condensed consolidated financial statements.

                                       6
<PAGE>
 
                     FREMONT CORPORATION AND SUBSIDIARIES
          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                 (Amounts in thousands, except for share data)
<TABLE>
<CAPTION>
 
                                        Nine Months Ended September 30,
                                      -----------------------------------
                                         1996               1997
                                      ----------   ----------------------
                                         RMB          RMB          USD
                                      ---------    ---------    ---------
<S>                                   <C>          <C>          <C>
Sales
 - to related companies                  27,104       15,681        1,889
 - to others                            112,546      124,697       15,024
                                      ---------    ---------    ---------
                                        139,650      140,378       16,913
Cost of goods sold
 - purchases from related
    companies                            21,949        9,523        1,147
 - others                                90,035       99,100       11,940
                                      ---------    ---------    ---------
Gross profit                             27,666       31,755        3,826
Selling, general and
  administrative expenses                11,797       15,152        1,825
Less:  shared by SCH                     (1,658)      (2,606)        (314)
Amortization of deferred
  pre-operating costs (Note 5)            6,401
Interest expense, net                     4,957       11,365        1,369
Interest income, 
  from SCH (Note 6)                                   (2,500)        (301)
Other expense, net                           51           22            3
                                      ---------    ---------    ---------
  Income before income taxes              6,118       10,322        1,244
Provision for income taxes               (1,250)        (871)        (105)
                                      ---------    ---------    ---------
  Income before minority
   interests                              4,868        9,451        1,139
Minority interests                         (558)         882          106
                                      ---------    ---------    ---------
  Net income                              4,310       10,333        1,245
                                      =========    =========    =========
Net income per common share
  (Note 1)                                  .74         1.75          .21
                                      =========    =========    =========
Weighted average number of
  common shares outstanding
  (Note 1)                            5,829,150    5,912,818    5,912,818
                                      =========    =========    =========
 
</TABLE>

                           See accompanying notes to
                  condensed consolidated financial statements.

                                       7
<PAGE>
 
                     FREMONT CORPORATION AND SUBSIDIARIES
          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                            (Amounts in thousands)
<TABLE>
<CAPTION>
 
                                          Nine Months Ended September 30,
                                        ---------------------------------
                                            1996           1997
                                          -------    -----------------
                                             RMB       RMB        USD  
                                          -------    -------    ------ 
<S>                                       <C>        <C>        <C>    
Cash flows from operating                                              
 activities:                                                           
 Net income                                 4,310     10,333     1,245 
  Adjustments to reconcile net                                         
   income to net cash used in                                          
   operating activities:                                               
    Depreciation                            6,464      7,727       931 
    Amortization                            9,299      1,099       132 
    Minority interests                        558       (882)     (106)
    Rental expense offset                                             
     against due from SCH                              2,100       253
    Changes in operating                                               
     assets and liabilities:                                           
     (Increase) decrease in -                                          
      Accounts receivable                  (2,715)   (27,463)   (3,309)
      Inventories                         (22,513)    16,131     1,943 
      Due from SCH                        (12,202)    (4,300)     (518)
      Due from Easy Keen                               5,743       692           
      Prepayments and other                                            
       current assets                      (6,332)   (15,500)   (1,867)
      Other long-term assets                  183       (835)     (101)
     Increase (decrease) in -                                          
      Accounts payable                    (13,410)    (8,801)   (1,060)
      Accrued expenses and                                             
       other liabilities                     (153)        27         3 
      Taxes payable                           711      5,010       604 
      Other long-term payables              7,201          2           
                                          -------    -------    ------ 
       Net cash used in                                                
        operating activities              (28,599)    (9,609)   (1,158)
                                          -------    -------    ------ 
Cash flows from investing                                              
 activities:                                                           
  Additions to property, plant                                         
   and equipment                          (23,528)    (2,244)     (270)
                                          -------    -------    ------ 
       Net cash used in                                                
        investing activities              (23,528)    (2,244)     (270)
                                          -------    -------    ------ 
</TABLE>
                                  (continued)

                                       8
<PAGE>
 
                     FREMONT CORPORATION AND SUBSIDIARIES
          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                  (continued)
                            (Amounts in thousands)
<TABLE>
<CAPTION>
 
                                   Nine Months Ended September 30,
                                  ----------------------------------
                                     1996               1997
                                  -----------   --------------------
                                      RMB          RMB        USD
                                  -----------   ---------   --------
<S>                               <C>           <C>         <C>
Cash flows from financing
 activities:
 Net proceeds from short-term
  borrowings                         103,526      18,307      2,206
 Repayment of short-term
  borrowings                          (6,656)
 Repayment of long-term bank
  loans                              (27,726)
 Payments of finance lease
  obligations                         (6,628)     (7,540)      (909)
 Sale of common stock and
  warrants, net of costs               3,733
 Exercise of warrants, net
  of costs                               125         896        108
                                     -------      ------      -----
   Net cash provided by
    financing activities              66,374      11,663      1,405
                                     -------      ------      -----
Cash and cash equivalents:
 Net increase (decrease)              14,247        (190)       (23)
 At beginning of period                6,507       4,806        579
                                     -------      ------      -----
 At end of period                     20,754       4,616        556
                                     =======      ======      =====
</TABLE>





                           See accompanying notes to
                  condensed consolidated financial statements.

                                       9
<PAGE>
 
                     FREMONT CORPORATION AND SUBSIDIARIES
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
        THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997


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, a change of domicile merger was effected, the
result of which was that the Company changed its name to Fremont Corporation and
became incorporated in the State of Delaware.

     Reverse Acquisition - 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 all shares were issued and the 1-for-100 reverse stock split was
effected as set forth in the Share Exchange Agreement.  All common share and per
share data in the accompanying condensed 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

                                       10
<PAGE>
 
president and controlling shareholder, all of its operating 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.  For accounting purposes, the transaction 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.

     The 31% minority interest in SCB is owned by a company, the president
of which 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 conducts 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.  The
inability of the Company to continue to conduct a substantial portion of its
sales through related companies could have a material adverse effect on the
Company's results of operations and financial condition.

     Foreign Currency Translation - In preparing the consolidated financial
     ----------------------------                                          
statements, the financial statements of the Company are 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

                                       11
<PAGE>
 
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 "$") 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, 1997 of USD 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.

     Basis of Presentation - 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, 1997, the results of operations for the three months and nine
months ended September 30, 1996 and 1997, and the cash flows for the nine months
ended September 30, 1996 and 1997.  These adjustments are of a normal recurring
nature.  The consolidated balance sheet as of December 31, 1996 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.

     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 the Company's Annual Report on Form 10-
KSB for the fiscal year ended December 31, 1996, as filed with the Securities
and Exchange Commission.

     The results of operations for the three months and nine months ended
September 30, 1997 are not necessarily indicative of the results of operations
to be expected for the full fiscal year ending December 31, 1997.

     Certain prior period amounts have been reclassified to

                                       12
<PAGE>
 
conform with the current year presentation.

     Net Income Per Common Share - Net income per common share for the three 
     ---------------------------
months and nine months ended September 30, 1996 and 1997 is based on the
weighted average number of shares of common stock and common stock equivalents
outstanding during each respective period. Common stock equivalents consist of
outstanding common stock purchase warrants.


2.   INVENTORIES

     Inventories consisted of the following at December 31, 1996 and September
30, 1997:
<TABLE>
<CAPTION>
 
                              December 31, 1996     September 30, 1997
                            ---------------------   ---------------------
                                RMB       USD           RMB        USD
                            ----------  ---------   ----------  ---------  
<S>                         <C>         <C>         <C>         <C> 
Raw materials               31,736,000  3,824,000    6,537,000     788,000
Work-in-progress             5,232,000    630,000   14,837,000   1,787,000
Finished goods              23,435,000  2,823,000   22,898,000   2,759,000
                            ----------  ---------   ----------   ---------
                            60,403,000  7,277,000   44,272,000   5,334,000
                            ==========  =========   ==========   =========
</TABLE> 

3.   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.


4.   SALE OF SECURITIES

     On March 19, 1996, the Company completed the sale of 166,000 units to
Sangate Enterprises, Inc. ("Sangate") at a price of $3.00 per unit, which
represented gross proceeds of $498,000 and net proceeds of $448,200 (RMB
3,733,000).  Each unit consisted of one share of common stock and one warrant to
purchase one share of common stock at a price of $3.00 per share exercisable
through February 28, 1998.

     On August 7, 1996, Sangate exercised 5,000 common stock purchase warrants,
resulting in the issuance of 5,000 shares of common stock, which represented
gross proceeds of $15,000 and net proceeds of $13,500 (RMB 112,000). In
conjunction with this warrant exercise, the Company issued an additional 7,500
warrants to Sangate.

     On February 28, 1997, Sangate exercised 10,000 common stock

                                       13
<PAGE>
 
purchase warrants, resulting in the issuance of 10,000 shares of common stock,
which represented gross proceeds of $30,000 and net proceeds of $27,000 (RMB
224,000).

     On July 1, 1997, Sangate exercised 30,000 common stock purchase warrants,
resulting in the issuance of 30,000 shares of common stock, which represented
gross proceeds of $90,000 and net proceeds of $81,000 (R MB 672,000).

     Millennium Capital Partners, Ltd. received a 10% fee in conjunction with
the aforementioned transactions.


5.   DEFERRED PRE-OPERATING COSTS

     Deferred pre-operating costs represent organization and certain start-up
costs (excluding capital expenditures) related to the new production facility.
Through December 31, 1995, such deferred pre-operating costs aggregated RMB
8,534,000, and were amortized on the straight line basis over one year
commencing January 1, 1996, the date of commencement of commercial production
from the new production facility. Amortization expense was RMB 2,134,000 and RMB
6,401,000 for the three months and nine months ended September 30, 1996.


6.   DUE FROM RELATED PARTIES

     SCH - During the year ended December 31, 1996, SCBW charged SCH interest 
     ---                                                            
of RMB 4,300,000 on the amount due from SCH throughout the year at a
rate of 8.5% per annum, which was recorded in the fourth quarter of 1996.  The
amount due from SCH mainly represents balances arising from the sale of goods to
SCH by SCBW.  As a result of ongoing negotiations between SCBW and SCH, no
interest was charged to SCBW for the six months ended June 30, 1997.  During the
three months ended September 30, 1997, SCBW and SCH agreed that SCH will pay
interest on the amount due SCBW at a standard bank reference rate in China.
Accordingly, the Company recorded interest income of RMB 2,500,000 during the
three months and nine months ended September 30, 1997, and has included such
amount in the amount due from SCH as of September 30, 1997.

     Easy Keen - During the year ended December 31, 1996, SCBW had sales to
     ---------                                                             
Easy Keen of RMB 96,089,000 and had purchases of raw materials from Easy Keen of
RMB 60,822,000.  SCBW and Easy Keen had previously agreed that the amount due
from Easy Keen of RMB 35,158,000 at December 31, 1996 would be settled during
1997 by Easy Keen supplying raw materials of the same value to SCBW.  However,
as a result of adjusted raw material requirements related to SCBW's changing
product mix in 1997, SCBW and Easy Keen have amended their original agreement to
require a cash

                                       14
<PAGE>
 
payment of RMB 10,000,000 during 1997, and the repayment of the remaining
balance during the first half of 1998 by Easy Keen supplying raw materials of
the same value to SCBW.


7.   ANTI-DUMPING INVESTIGATION

     The Company manufactures bicycles in the People's Republic of China (the
"PRC" or "China") through its subsidiary, SCB, and exports to the United States
through various distributors and trade intermediaries.  Although there are other
markets for SCB's products, the United States market is considered an important
market for SCB.

     Pursuant to a petition filed by three United States bicycle manufacturers
in early 1995, the United States International Trade Commission (the "ITC")
launched an anti-dumping investigation against companies which manufacture
bicycles in the PRC for import into the United States.  In May 1995, the ITC
found a reasonable indication that "a U.S. industry is materially injured or
threatened with material injury by reason of imports of bicycles (from the PRC)
allegedly sold at less than fair value."  After the ITC's initial determination,
the United States Department of Commerce (the "Department of Commerce") began
its investigation of the PRC bicycle manufacturing industry, requesting
financial and other information from several Chinese bicycle manufacturers (not
including SCB), in order to calculate dumping margins and impose anti-dumping
duties.

     During November 1995, the Department of Commerce issued a preliminary
determination which calculated a 61.67% dumping margin on bicycles manufactured
by SCB and all but nine Chinese bicycle manufacturers.  As a result, each
Chinese bicycle manufacturer which continued to export product to the United
States was required to post a "single-entry bond" equal to the estimated
potential duty on bicycles exported to the United States from the date of the
preliminary notice until the date of the final determination.

     In April 1996, the Department of Commerce finalized this dumping margin and
the ITC began its investigation of Chinese bicycle manufacturers.  An
affirmative ITC injury or threat of material injury determination would have
resulted in the imposition of the Department of Commerce's dumping margin.
Throughout the investigations by the Department of Commerce and the ITC, SCB has
maintained that it has not engaged in "dumping" bicycles in the United States
market and has opposed the imposition of the anti-dumping duty.  In this regard,
SCB and other PRC bicycle manufacturers retained legal counsel to protect their
legal rights and to investigate and pursue several alternative solutions.

                                       15
<PAGE>
 
     On June 4, 1996, the ITC made a negative final determination in its anti-
dumping investigation on imports of bicycles from China.  The negative ITC
determination means that the ITC found that there is not a reasonable indication
that a United States industry is materially injured or threatened with material
injury by reason of imports of bicycles from China.  The negative ITC
determination allowed all Chinese bicycle manufacturers (including SCB) to
resume exporting to the United States without the imposition of an anti-dumping
duty.

     The United States bicycle manufacturers appealed the determinations of both
the Department of Commerce and the ITC in the United States Court of
International Trade on June 30, 1996 and July 19, 1996, respectively.  Legal
counsel for SCB responded to such appeals, and, in addition, filed its own claim
pursuant to the Lanham Act to challenge the Department of Commerce's calculation
methodologies with respect to the 61.67% dumping margin.

     All litigation regarding the anti-dumping investigation was settled during
March 1997. Pursuant to the settlement, the Lanham Act claim was dismissed on or
about March 4, 1997, and the Department of Commerce action was dismissed on or
about March 26, 1997, and the ITC action was dismissed on or about March 27,
1997.

8.   RECENT ACCOUNTING PRONOUNCEMENTS

     In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share," which is effective for financial statements
issued for periods ending after December 15, 1997. The Company will adopt this
statement and reflect its disclosures beginning with the Company's 1997
financial statements. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods presented. Under the new requirements, the Company will be required to
present "basic" earnings per share and "diluted" earnings per share. Basic
earnings per share does not include the dilutive effect of stock options and
warrants. The Company does not expect that adoption of this statement will have
a material effect on reported earnings per share.

     In February 1997, the Financial Accounting Standards Board issued Statement
No. 129, "Disclosure of Information about Capital Structure," which is effective
for financial statements issued for periods ending after December 15, 1997. The
Company will adopt this statement and reflect its disclosures beginning with the
Company's 1997 financial statements. The new standard reinstates various
disclosure requirements previously in effect under Accounting Principles Board
Opinion No. 15, which has been

                                       16
<PAGE>
 
superseded by this statement.  The Company does not expect that adoption of this
statement will have a material effect on its current disclosures and
presentation.

      In June 1997, the Financial Accounting Standards Board issued Statement
No. 130, "Reporting Comprehensive Income," which is effective for financial
statements issued for periods ending after December 15, 1997. Earlier
application is permitted. The Company will adopt this statement and reflect its
disclosures beginning with the Company's 1997 financial statements. This
statement establishes standards for the reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
Comprehensive income consists of net income and other comprehensive income.
Other comprehensive income refers to revenues, expenses, gains and losses that
under generally accepted accounting principles are included in comprehensive
income but are excluded from net income. The Company does not expect that
adoption of this statement will have a material effect on its current
disclosures and presentation.

     In June 1997, the Financial Accounting Standards Board issued Statement No.
131, "Disclosures about Segments of an Enterprise and Related Information,"
which is effective for financial statements issued for periods ending after
December 15, 1997. The Company will adopt this statement and reflect its
disclosures beginning with the Company's 1997 financial statements. This
statement discusses how to report operating segments and certain information
about a public company's products and services, the geographic areas in which it
operates, and its major customers. The Company does not expect that adoption of
this statement will have a material effect on its current disclosures and
presentation.

                                       17
<PAGE>
 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION


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.

     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.

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, 1997 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
capital expenditures and operations, 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 in this
quarterly report and those included in the Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1996 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 Developments:

     On June 4, 1996, the ITC made a negative final determination in its anti-
dumping investigation on imports of bicycles from China.  The negative ITC
determination means that the ITC found that there is not a reasonable indication
that a United States industry is materially injured or threatened with material
injury

                                       18
<PAGE>
 
by reason of imports of bicycles from China.  The negative ITC determination
allowed all Chinese bicycle manufacturers (including SCB) to resume exporting to
the United States without the imposition of an anti-dumping duty.  All
litigation regarding the anti-dumping investigation was settled during March
1997.  For additional information regarding this matter, see Note 7 of the Notes
to Condensed Consolidated Financial Statements.

     The Company introduced an exercise equipment product line during the third
quarter of 1996, and began manufacturing a bicycle with an automatic
transmission during 1997. The Company is a contract manufacturer for such
products on a purchase order basis for original equipment manufacturers that
market their products in the United States under various brand names through
infomercials, television home shopping networks and mass market retailers. The
Company does not own any rights with respect to these products or the names
under which they are marketed.

 
Consolidated Results of Operations:

     Three Months Ended September 30, 1996 and 1997 -

     Sales.  Sales for the three months ended September 30, 1997 were RMB
49,185,000, as compared to RMB 56,672,000 for the three months ended September
30, 1996, a decrease of RMB 7,487,000 or 13.2%.  Sales to related companies for
the three months ended September 30, 1997 were RMB 2,734,000 or 5.6% of sales,
as compared to RMB 2,104,000 or 3.7% of sales for the three months ended
September 30, 1996, an increase of RMB 630,000 or 29.9%.  Sales to unrelated
companies for the three months ended September 30, 1997 were RMB 46,451,000 or
94.4% of sales, as compared to RMB 54,568,000 or 96.3% of sales for the three
months ended September 30, 1996, a decrease of RMB 8,117,000 or 14.9%.  Sales to
related companies are both for domestic and export purposes.  Sales decreased in
1997 as compared to 1996 primarily as a result of a shortage of working capital,
which negatively impacted the Company's normal production cycle and the
Company's ability to provide timely shipments to customers.  In addition, the
working capital shortage has also caused the Company to utilize components
supplied by customers.

     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 sales.  For the three months ended September 30, 1996, PRC domestic sales
were RMB 6,477,000 or 11.4% of sales, and export sales were RMB 50,195,000 or
88.6% 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 three months
ended September 30, 1996, sales of bicycles and bicycles parts were RMB
52,660,000 or 92,2% of sales

                                       19
<PAGE>
 
and sales of exercise equipment were RMB 4,406,000 or 7.8% of sales.

     Gross Profit.  Gross profit for the three months ended September 30, 
1997 was RMB 11,359,000 or 23.1% of sales, as compared to RMB 11,145,000 or
19.7% of sales for the three months ended September 30, 1996. The improvement in
gross profit margin in 1997 as compared to 1996 was primarily a result of
increasing sales of higher margin exercise equipment and the resolution of the
anti-dumping investigation, during which period the Company had temporarily
accepted lower margin business.

     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses for the three months ended September 30, 1997 increased
by RMB 770,000 or 16.7%, to RMB 5,377,000 or 10.9% of sales, as compared to RMB
4,607,000 or 8.1% of sales for the three months ended September 30, 1996, net of
amounts assumed by SCH of RMB 329,000 and RMB 189,000, respectively, in 1997 and
1996.  Selling, general and administrative expenses increased in 1997 as
compared to 1996 as a result of additional sales promotion expenses incurred in
1997 to develop orders for 1998 and additional general and administrative costs
associated with the operation of a public company.  As a percentage of sales,
selling, general and administrative expenses increased in 1997 as compared to
1996 as a result of the increase in costs and the decrease in sales.

     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.

     Deferred Pre-Operating Costs.  Amortization of deferred 
pre-operating costs for the three months ended September 30, 1996 was RMB
2,134,000. Deferred pre-operating costs represent organization and certain 
start-up costs (excluding capital expenditures) related to the new production
facility. Through December 31, 1995, such deferred pre-operating costs
aggregated RMB 8,534,000, and were amortized on the straight line basis over one
year commencing January 1, 1996, the date of commencement of commercial
production from the new production facility.

     Interest Expense.  Interest expense for the three months ended 
September 30, 1997 was RMB 6,091,000 or 12.4% of sales, as compared to RMB
2,043,000 or 3.6% of sales for the three months ended September 30, 1996. The
increase in interest expense in 1997 as compared to 1996 was primarily a result
of an increase in higher cost short-term borrowings to support the Company's
working capital requirements, particularly with respect to increased sales of
the exercise equipment product line, since exercise equipment export sales
typically have a longer

                                       20
<PAGE>
 
collection cycle than bicycle export sales.

     Interest Income.  Interest income for the three months ended September
30, 1996 and the six months ended June 30, 1997 was not material.

     During the year ended December 31, 1996, SCBW charged SCH interest of
RMB 4,300,000 on the amount due from SCH throughout the year at a rate of 8.5%
per annum, which was recorded in the fourth quarter of 1996.  The amount due
from SCH mainly represents balances arising from the sale of goods to SCH by
SCBW.  As a result of ongoing negotiations between SCBW and SCH, no interest was
charged to SCBW for the six months ended June 30, 1997.  During the three months
ended September 30, 1997, SCBW and SCH entered into an agreement providing for
SCH to pay interest on the amount due SCBW at the standard bank reference rate
in China.  Accordingly, the Company recorded interest income of RMB 2,500,000
during the three months ended September 30, 1997, and has included such amount
in the amount due from SCH as of September 30, 1997.

     Net Income.  For the three months ended September 30, 1997, net 
income was RMB 3,032,000 (RMB .51 per share) or 6.2% of sales. For the three
months ended September 30, 1996, net income was RMB 866,000 (RMB .157 per share)
or 1.5% of sales, including the amortization of deferred pre-operating costs of
RMB 2,134,000.


     Nine Months Ended September 30, 1996 and 1997 -

     Sales.  Sales for the nine months ended September 30, 1997 were RMB
140,378,000, as compared to RMB 139,650,000 for the nine months ended September
30, 1996, an increase of RMB 728,000 or 0.5%.  Sales to related companies for
the nine months ended September 30, 1997 were RMB 15,681,000 or 11.2% of sales,
as compared to RMB 27,104,000 or 19.4% of sales for the nine months ended
September 30, 1996, a decrease of RMB 11,423,000 or 42.1%.  Sales to unrelated
companies for the nine months ended September 30, 1997 were RMB 124,697,000 or
88.8% of sales, as compared to RMB 112,546,000 or 80.6% of sales for the nine
months ended September 30, 1996, an increase of RMB 12,151,000 or 10.8%.  Sales
to related companies are both for domestic and export purposes.  Sales were
relatively unchanged in 1997 as compared to 1996 primarily as a result of a
shortage of working capital, which negatively impacted the Company's normal
production cycle and the Company's ability to provide timely shipments to
customers.  In addition, the working capital shortage has also caused the
Company to utilize components supplied by customers.

     For the nine months ended September 30, 1997, PRC domestic sales were
RMB 30,856,000 or 22.0% of sales, and export sales

                                       21
<PAGE>
 
were RMB 109,522,000 or 78.0% of sales.  For the nine months ended September 30,
1996, PRC domestic sales were RMB 34,973,000 or 25.0% of sales, and export sales
were RMB 104,677,000 or 75.0% 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.  For the
nine months ended September 30, 1996, sales of bicycles and bicycles parts were
RMB 135,244,000 or 96.8% of sales and sales of exercise equipment were RMB
4,406,000 or 3.2% of sales.

     Gross Profit. Gross profit for the nine months ended September 30, 1997 was
RMB 31,755,000 or 22.6% of sales, as compared to RMB 27,666,000 or 19.8% of
sales for the nine months ended September 30, 1996. The improvement in gross
profit margin in 1997 as compared to 1996 was primarily a result of increasing
sales of higher margin exercise equipment and the resolution of the anti-dumping
investigation, during which period the Company had temporarily accepted lower
margin business.

     Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the nine months ended September 30, 1997 increased
by RMB 2,407,000 or 23.7%, to RMB 12,546,000 or 8.9% of sales, as compared to
RMB 10,139,000 or 7.3% of sales for the nine months ended September 30, 1996,
net of amounts assumed by SCH of RMB 2,606,000 and RMB 1,658,000, respectively,
in 1997 and 1996. Selling, general and administrative expenses increased in 1997
as compared to 1996 as a result of additional sales promotion expenses incurred
in 1997 to develop orders for 1998 and additional general and administrative
costs associated with the operation of a public company. As a percentage of
sales, selling, general and administrative expenses increased in 1997 as
compared to 1996 as a result of the increase in 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.

     Deferred Pre-Operating Costs. Amortization of deferred pre-operating costs
for the nine months ended September 30, 1996 was RMB 6,401,000. Deferred pre-
operating costs represent organization and certain start-up costs (excluding
capital expenditures) related to the new production facility. Through December
31, 1995, such deferred pre-operating costs aggregated RMB 8,534,000, and were
amortized on the straight line basis over one year commencing January 1, 1996,
the date of commencement of commercial production from the new production
facility.

     Interest Expense.  Interest expense for the nine months

                                       22
<PAGE>
 
ended September 30, 1997 was RMB 11,365,000 or 8.1% of sales, as compared to RMB
4,957,000 or 3.5% of sales for the nine months ended September 30, 1996.  The
increase in interest expense in 1997 as compared to 1996 was primarily a result
of an increase in higher cost short-term borrowings to support the Company's
working capital requirements, particularly with respect to increased sales of
the exercise equipment product line, since exercise equipment export sales
typically have a longer collection cycle than bicycle export sales.

     Interest Income. Interest income for the nine months ended September 30,
1996 and the six months ended June 30, 1997 was not material.

     During the year ended December 31, 1996, SCBW charged SCH interest of RMB
4,300,000 on the amount due from SCH throughout the year at a rate of 8.5% per
annum, which was recorded in the fourth quarter of 1996. The amount due from SCH
mainly represents balances arising from the sale of goods to SCH by SCBW. As a
result of ongoing negotiations between SCBW and SCH, no interest was charged to
SCBW for the six months ended June 30, 1997. During the three months ended
September 30, 1997, SCBW and SCH entered into an agreement providing for SCH to
pay interest on the amount due SCBW at the standard bank reference rate in
China. Accordingly, the Company recorded interest income of RMB 2,500,000 during
the nine months ended September 30, 1997, and has included such amount in the
amount due from SCH as of September 30, 1997.

     Net Income. For the nine months ended September 30, 1997, net income was
RMB 10,333,000 (RMB 1.75 per share) or 7.4% of sales. For the nine months ended
September 30, 1996, net income was RMB 4,310,000 (RMB .74 per share) or 3.1% of
sales, including the amortization of deferred pre-operating costs of RMB
6,401,000.


Consolidated Financial Condition - September 30, 1997:

     Liquidity and Capital Resources -

     For the nine months ended September 30, 1997, the Company's operations
utilized cash resources of RMB 9,609,000, as compared to utilizing cash
resources of RMB 28,599,000 for the nine months ended September 30, 1996. a
reduction of RMB 18,990,000.  Although sales were relatively unchanged in 1997
as compared to 1996, cash utilized in operations decreased, primarily due to the
Company's working capital shortage.  The most significant components of the cash
utilized by operations in 1997 were the increases in accounts receivable of RMB
27,463,000 and in prepayments and other current assets of RMB 15,500,000, and
the decrease in accounts payable of RMB 8,801,000, which were

                                       23
<PAGE>
 
partially offset by the decrease in inventories of RMB 16,131,000.

     The Company's working capital deficit had decreased by RMB 13,704,000, to
RMB 3,860,000 at September 30, 1997, as compared to a working capital deficit of
RMB 17,564,000 at December 31, 1996. As a result, the Company's current ratio at
September 30, 1997 was .99:1, as compared to .93:1 at December 31, 1996.

     During the year ended December 31, 1996, SCBW had sales to Easy Keen of RMB
96,089,000 and had purchases of raw materials from Easy Keen of RMB 60,822,000.
SCBW and Easy Keen had previously agreed that the amount due from Easy Keen of
RMB 35,158,000 at December 31, 1996 would be settled during 1997 by Easy Keen
supplying raw materials of the same value to SCBW. However, as a result of
adjusted raw material requirements related to SCBW's changing product mix in
1997, SCBW and Easy Keen have amended their original agreement to require a cash
payment of RMB 10,000,000 during 1997, and the repayment of the remaining
balance during the first half of 1998 by Easy Keen supplying raw materials of
the same value to SCBW. During the nine months ended September 30, 1997, the
amount due from Easy Keen decreased by RMB 5,743,000, from RMB 35,158,000 at
December 31, 1996 to RMB 29,415,000 at September 30, 1997.

     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 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. The Company had no long-term bank borrowings at December
31, 1996 and September 30, 1997.

     During the nine months ended September 30, 1997, short-term borrowings
increased by RMB 18,307,000, which were utilized to fund operating requirements
of RMB 9,609,000, additions to property, plant and equipment of RMB 2,244,000,
and the payment of finance lease obligations of RMB 7,540,000.

     During March 1996, the Company sold 166,000 units, each unit consisting of
one share of common stock and one common stock purchase warrant, which provided
net proceeds of RMB 3,733,000 (USD 448,200). Each common stock purchase warrant
entitles the holder to purchase one share of common stock for $3.00 per share
through February 28, 1998. During August 1996, 5,000 common stock purchase
warrants were exercised, providing net proceeds of RMB 112,000 (USD 13,500),
which resulted in the issuance of 5,000 shares of common stock. In conjunction
with this warrant exercise, the Company issued an additional 7,500 warrants to

                                       24
<PAGE>
 
Sangate.  During February 1997, 10,000 common stock purchase warrants were
exercised, providing net proceeds of RMB 224,000 (USD 27,000), which resulted in
the issuance of 10,000 shares of common stock.  During July 1997, 30,000 common
stock purchase warrants were exercised, providing net proceeds of RMB 672,000
(USD 81,000), which resulted in the issuance of 30,000 shares of common stock.
Millennium Capital Partners, Ltd. received a 10% fee in conjunction with these
transactions.

     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 makes to SCBW are renewed so
long as SCBW's production and business operations continue to meet certain
operating and financial criteria. Management believes that the Bank of China
will continue to renew SCBW's existing borrowings and increase its borrowing
base as necessary to support operations at current levels.

     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, 1996 and September 30, 1997. The USD 4,000,000
note payable to MTE is unsecured, bears no interest and has no fixed repayment
terms. 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, 1996
and September 30, 1997. The Company believes that the terms of this loan will
continue until substantial full-scale production at the new facility is reached,
which is expected to take at least until 1998.

     Through the end of 1998, SCBW currently plans to expend approximately RMB
40,000,000 with respect to the second phase of development of the new production
complex, including the tube production line and the spare parts welding line.
Although the Company expects to fund the second phase of development through
long-term bank loans, to the extent available, and/or the sale of the Company's
debt or equity securities, there can be no assurances that the Company will be
successful in this regard. To the extent that the Company is unable to arrange
adequate financing under acceptable terms on a timely basis, the Company

                                       25
<PAGE>
 
will delay the second phase of development of the new production complex.  In
addition, during 1997, SCBW plans to add a new paint and assembly line for
exercise equipment, and to upgrade and relocate the steel tube factory to the
new production complex at an estimated cost of RMB 6,000,000.

     An important factor in the Company's ability to increase production levels
is the timely availability of sufficient operating capital at a reasonable cost.
Recently the Company has experienced working capital shortages as it has
attempted to expand production at the new production complex, which has hampered
the Company's ability to increase sales, and which has negatively impacted the
Company's normal production cycle and the Company's ability to provide timely
shipments to customers.

     The Company believes that its cash flow provided by operations, combined
with short-term and long-term borrowings, will be sufficient to support
operations at current levels. However, in order 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 available
from domestic Chinese sources. As a result of the Company's existing capital
structure and reliance on borrowings, such additional operating capital would
most likely be in the form of some type of an equity investment. The Company is
currently evaluating various financing alternatives, but there can be no
assurances that the Company will be successful in completing a financing.


     Inflation and Currency Matters -

     In recent years, the Chinese economy has experienced periods of rapid
economic growth as well as 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. During the year
ended December 31, 1996, the general inflation rate in China was in excess of
10% on an annualized basis. 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
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 controls, and
fluctuations in the relative value of currencies. Changes in the relative value
of currencies occur periodically and may, in certain instances, materially
affect the Company's results of operations.

                                       26
<PAGE>
 
     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, and could have material
adverse effects upon the results of operations and financial position. In
addition, a significant portion of revenues will need to be converted into USD
on a continuing basis to meet foreign currency obligations. Although prior to
1994 the RMB experienced significant devaluation against the USD, the RMB has
remained fairly stable since then. The swap center rate was USD 1.00 to RMB 8.70
at December 31, 1993, RMB 8.45 at December 31, 1994, RMB 8.32 at December 31,
1995, RMB 8.32 at December 31, 1996, and RMB 8.32 at September 30, 1997.

                                       27
<PAGE>
 
                          PART II.  OTHER INFORMATION
                          ---------------------------


ITEM 5.  OTHER INFORMATION

          Effective April 30, 1997, Robert N. Weingarten resigned as Chief
Financial Officer, Assistant Secretary and a Director of the Company.

          Effective May 1, 1997, Gao Wei Son and Zhen Da Qing were appointed 
to the Board of Directors.

          Effective September 1, 1997, Edward Ding (Ding Yuehua) was appointed
as Vice President and Chief Financial Officer of the Company.


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, 1997:

          (1)  July 1, 1997 - issuance of common stock pursuant
               to Regulation S upon exercise of common stock  
               purchase warrants (Item 9).

                                       28
<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 12, 1997           By:  /s/ WINSTON WU
                                        -------------------------
                                         Winston Wu
                                         President
                                         (Duly Authorized Officer)




Date:  November 12, 1997           By:  /s/ EDWARD DING
                                        -------------------------
                                         Edward Ding
                                         Vice President and Chief
                                          Financial Officer
                                         (Principal Financial 
                                          Officer)

                                       29